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The push for absorption of capital and lazy African administrations

By Francis Karugu | September 4th 2018
President Uhuru Kenyatta and US President Donald Trump lead their respective delegations in bilateral talks during the official visit by the President and the First Lady to the White House in Washington DC, USA. The Kenyan delegation had no notebooks during the talks. [PSCU]

In one week, President Uhuru Kenyatta visited the United States of America, hosted British Prime Minister Theresa May in State House Nairobi, before jetting out to China. This globe-trotting profile of President Kenyatta has earned him a regional and international profile as “The Foreign Affairs President” and with it praise and criticism in equal measure.

This tight schedule of international engagements shows the level of competition among global powers. This plays out in the guise of international trade and cooperation, but this is just a veiled race for dominance and relevance. I have in the past discussed China’s activities around the world, while giving the example of Sri Lanka and Venezuela, which have now become satellite states of China; have literally given up their sovereignty to China due to massive debts that they have been unable to service.

Both China’s and the West’s approach to Africa are not in Africa’s interest. China’s bottomless State Capitalism has been used to lure governments in Africa, Asia and Latin America to a debt trap that will take ages to undo. The West’s approach is best described by President Kenyatta’s US visit and Theresa May’s Nairobi visit.

In the first instance, a local American TV station reported the visit to White House by Uhuru Kenyatta with a caption that read “President of Africa.” This is a mistake that Europeans and Americans annoyingly continue to make, assuming that Africa is one place.

Investment destinations

In the second instance, when Theresa May visited Kenya, she was captured on camera dancing with school children in what was the most uncoordinated jig yet. The dance was perhaps an illustration of how uncoordinated and uninformed Europe and America’s policy toward Africa has increasingly become.

These two events amount to the mis-comprehension of Africa, upon which decisions by governments and multinationals are made. When investors decide to come to Africa to invest, they are cautioned against a factor christened “Africa Risk,” which is meant to differentiate Africa from other investment destinations.

There can only be country risk, and never Africa risk. I am yet to see an analysis of Europe Risk, America Risk or Asia Risk. African countries have different risk profiles. It is wrong and unschooled to bucket Morocco and South Sudan, Ethiopia and Zimbabwe under one heading of “Africa Risk.”

It is on these deluded premises that America and Europe make decisions on Africa. It is true that surplus capital is still concentrated in Europe and America, and capital will always look to be deployed. The surplus capital nations of Europe and America have christened deficit states of Africa, Asia and Latin America as “the expansion markets.”

But due to prejudices of superiority complexes, they end up making decisions that are misinformed. This is partly why China has in one decade entrenched her position in world economy and politics. The casualty in all instances has always been African States like Kenya, which are either forced to absorb capital based on false premises, or are victims of competition between the West and China.

Nairobi Expressway

In Kenya, many analysts have belabored the meaningless white elephant projects funded by Chinese debt. Before the dust could settle, it was announced that cooperation between Kenya and the United States would actualize the Nairobi Expressway or the Nairobi, a proposed four-lane toll highway connecting Mombasa and Nairobi. We have not even figured out what to do with the Standard Gauge Railway, which sunk Sh600 billion in less than three years.

This is yet another project that will be funded through public debt, which will now cross over the 70 percent mark against our GDP. The government and the policy makers don’t look bothered as the country’s indebtedness rises. They seem to take comfort in the fact that if either China or America think these are good deals, then they must be good deals. This explains why international delegations that accompany President Kenyatta are laidback, and they treat these international trips as holiday experiences.

Mundane as it may seem, President Kenyatta’s delegation has been captured several times on camera in meetings without notebooks, while their counterparties are busy capturing the deliberations of the meetings. But the buck stops at President Kenyatta’s doorstep, as these are the consequences of having political consorts as holders of public offices.

This is a twin misfortune, where foreign cooperation is built on the quicksand of misdiagnosis and global geopolitical competition, and on the other hand aided and abated by lazy African administrations such as Kenya under President Kenyatta. The result is an overcapitalization of our economy, funded by debt, with massive capital misallocation.

Mr. Karugu is a strategy and analytics consultant based in Nairobi. [email protected]

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