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Indebtedness to China raises questions about Kenya’s sovereignty

By Francis Karugu | July 25th 2018

The tired cliché says that history repeats itself. At the tail-end of the 19th Century, an unholy assemblage known as the Berlin Conference was called by Otto Von Bismarck to decide how Africa would be divided among European powers. Soon after, over 90 per cent of Africa was occupied by Europeans who claimed ownership of lands and natural resources.

Some of these Europeans claimed that they had entered into sale and lease agreements with local chiefs. Perhaps the dubious nature of these agreements is best illustrated by the case of John Boyes, whose evidence before the Carter Land Commission of 1932 claimed ownership of Mount Kenya.

He claimed that Chief Wang’ombe Waihora, as leader of the Kikuyu who lived next to the snow-capped mountain, had sold it to him. Even though the Commission dismissed this claim, Boyes wasn’t any different from the pedigree settlers such as Hugh Cholmondeley, The Third Baron Delamere, and Colonel Ewart Grogan. The common denominator is that these settlers used the permission of local leaders to entrench their underhand acquisition of national treasures.

Wealth accumulation

Fast-forward today and the script is the same, where the plunder continues. The conspiracy today, however, is between the Chinese while the role of “local chiefs” has been taken by top political leadership whose raw capitalist wealth accumulation is music to the Chinese expansionist advances in Kenya. The Chinese have replaced the colonialists, in a slow, subtle but sure way that the level of entanglement and indebtedness that the “local chiefs” are mortgaging the country will be so hard to undo.

Just a few days ago, Senator Mutula Kilonzo Junior warned fellow senators that Kenya has become indebted to China in return for substandard projects whose socio-economic viability cannot be verified. To drive the point home, Senator Mutula mentioned the case of Sri Lanka, which has now ceded its most lucrative port to China. Struggling to pay its debt to Chinese firms, Sri Lanka formally handed over the strategic port of Hambantota to China on a 99-year lease in a deal that analysts have said threatens the country’s sovereignty. But the story behind the story is that just like Kenya; Sri Lanka took the bait when its politicians allowed expensive loans and commitments while dumping money into white elephant projects. This has now come to haunt them as the projects for which they borrowed cannot now finance their debt obligations.

There have been very many critics of Chinese activities, and their fervent lending to Kenya, with some of the projects they are funding raising eyebrows as to their commercial viability. Perhaps, the most talked-about project is the Standard Gauge Railway, whose main critic is world acclaimed, Oxford-trained economist Dr David Ndii, who has in very simple terms broken down cost and revenue structures of the Standard Gauge Railway.

Sounds surreal

By now, it is not a matter of discussion as to whether The Standard Gauge Railway is an economically viable project. What is worrying is the fact that the financing by China of the Standard Gauge Railway was secured by the port of Mombasa! It sounds surreal, but this is what Kenyans should know.

There have been many questions as to who did the feasibility study, in a process that was hurriedly put in place. The other question is, if the Chinese financiers were convinced of the viability of the Standard Gauge Railway, why did they cleverly demand that project be secured by the port of Mombasa? It is not an intricate equation to decipher that from the start; this was a vanity project whose other role was to be a cash cow. On April 2, 2017, the Standard’s headline read: “How President Uhuru Kenyatta snatched Sh500 billion SGR deal from Raila Odinga man.” It was public knowledge who the players in the deal were, and this sheds light on the top dollar dealings by political racketeers in the Chinese funded projects.

Probably, the SGR is only the tip of the iceberg of how deep the Kenyatta-Ruto administration has mortgaged Kenya’s sovereignty for the benefit of tender barons in their favour. As of the first quarter of 2018, Kenya’s public debt stood at Sh5 trillion, which is 66 per cent of our GDP. Much of that lending has come from China during the Kenyatta-Ruto administration. Kenya’s obligations to Beijing go much deeper than many ordinary Kenyans realize. China is now by far Kenya’s largest lender, accounting for 72 per cent of bilateral debt by the end of March, according to the Treasury. In distortion of finance language, it can be said that today China is the “biggest shareholder” in Kenya. The commercial viability of these Chinese-funded projects is highly doubtful and, like in Sri Lanka, it is just a matter of time before China comes to collect.

Mr Karugu is a management consultant (strategy and analytics) based in [email protected]

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