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Fact Checker: Trade with China skewed against Kenya

By Frankline Sunday | April 2nd 2019 at 09:24:32 GMT +0300

Foreign Affairs Chief Administrative Secretary Ababu Namwamba (second left) flanked by Chinese Economic and Commercial Counsellor Guo Tse (left), Charge d’Affaires Li Xuhang mark 55th anniversary of Kenya-China relations last year. [David Njaaga, Standard]

China’s engagement with Kenya has been a subject of much debate over the past decade dating back to 2012 when then President Mwai Kibaki signed a deal to build the Standard Gauge Railway (SGR).

In the following years, the project was hyped by government officials who said it would increase Kenya’s Gross Domestic Product (GDP) by almost Sh100 billion upon completion. So far, this promise has not materialised.

Instead, Kenyan taxpayers are forking out Sh1 billion monthly to subsidise the railway that has also failed to persuade the majority of traders in the region to shift from the costly but convenient trucking options.

Nevertheless, China is keen to paint its relationship with Kenya as one of mutual benefit. China’s Economic and Commercial Counsellor Prof Guo Tse underscored this point when he met business leaders in Nairobi last month.

“China’s nonfinancial direct investment to Kenya more than doubled in 2018 to $520 million (Sh52 billion),” he said. Tse noted that trade volumes between the two countries have reached $3.74 billion (374 billion) and that “China is Kenya’s largest trading and investment partner.”

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This is not accurate.

Data from the Kenya National Bureau of Statistics (KNBS) indicates in the last six years, Chinese exports to Kenya have shot up from Sh167 billion to Sh390 billion - representing an average annual growth of Sh37 billion. Kenya’s exports to China, on the other hand, have grown at a more subdued rate from Sh4.1 billion in 2013 to Sh9 billion in 2017 representing an average annual growth of Sh1 billion. The bulk of the imports from China involve materials used in the construction of the SGR as part of the deal signed by Mwai Kibaki.

This has robbed Kenya’s local manufacturing sector the opportunity to plug into the giant infrastructure project for example through the revival of the dormant Numerical Machining Complex (NMC) that was expected to provide steel for the SGR.   

The World Bank states that Kenya’s contribution to the global manufacturing output has declined drastically by 900 per cent in the last three decades partly due to irregular tariffs and high production costs.

In 2015 for example, the World Bank states that the average Kenyan exporter exported just Sh15 million worth of goods annually — less than other African economies such as Egypt (Sh58 million), South Africa (Sh26 million) and even Tanzania (Sh16 million).

Recent trends in boosting the volume of Chinese imports in commodities such as fish that can be farmed locally indicate the trade balance is projected to widen or at best, remain skewed in favour of China.   

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