China’s Belt And Road Initiative In Kenya – Analysis

By Phebe Wilson-Andoh*

(FPRI) — Through trade, investment, and strategic diplomacy, China is re-shaping sub-Saharan Africa. Beijing has growing economic ties with Africa’s largest economies and Chinese firms dominate infrastructure construction projects. In 2020, nearly one-third of infrastructure projects in Africa worth at least $50 million were built by Chinese companies. In addition, China is, in many areas, replacing the United States and Europe as trade partners with Africa. Beijing has translated China’s growing economic footprint in Africa into geopolitical influence.  

Some Western commentators have observed China’s growing economic footprint in Africa — especially its Belt and Road Initiative (BRI)—with skepticism and concern. They argue that Chinese investments are debt traps that will eventually lead to neo-colonialism. Despite this criticism, China’s influence on the continent continues to rise.

Is it true that Chinese infrastructure projects malicious are debt traps? Or is the BRI merely an extension of a partnership where China supports the economic development of African countries? Or is it some combination of both? While African elites are supportive of the BRI, the allegations of its use by China as a debt trap and the failure to communicate its benefits to the average African citizen continue to raise concerns about China’s true motives.

China’s relations with Kenya are a good case study in how the BRI can function in Africa and offer some answers to these thorny questions. Kenya, a gateway to East Africa and one of the continent’s largest economies, is an excellent platform for China to broaden its reach into the rest of the continent. As one of the first major economic powers to invest significantly in Africa instead of just focusing on extracting resources, China has stolen a march on the rest of the world and gained advantages in Africa that will take patience, creativity, and political will to match.

The United States has a lot at stake in Africa. The continent is home to fast-growing economies, and Africa’s 54 countries make up the largest single voting bloc in the U.N. General Assembly. Taking stock of how China is engaging with Africa can inform and improve American strategy in the region. While there are serious issues with Chinese business practices in Africa, much of the concern about Chinese influence on the continent is overblown. Rather than lament China’s presence in Africa, American and European policymakers need to take a sober look at what the country is doing, how it’s going about advancing its interests, and how Africans are responding. There is also a need to accept that African countries are independent players—not pawns of Beijing—that act in what they see as their self-interest.

Is the Belt and Road a Debt Trap?

China’s engagement with Kenya is a good example of how Beijing approaches economic diplomacy in Africa. Moreover, it’s a revealing case study of how BRI works on the continent.

Kenya needs better infrastructure to meet its development needs, and China has been willing to help. The project to upgrade the Standard Gauge Railway (SGR) is China’s flagship investment project in Kenya. The SGR connects Mombasa, the largest port city in Kenya, to its capital, Nairobi. The Export-Import Bank of China financed 90 percent of the SGR project, while the Kenyan Government contributed the other 10 percent. The China Road and Bridge Corporation led the SGR installation process. This was supposed to signal a contribution to Kenya’s developmental goals and directly spur growth in the construction sector.

The SGR created around 30,000 new jobs for locals and, in the first year, transported 5.4 million passengers and 1.3 million twenty-foot equivalent units (known as TEUs) of shipments across Kenya. If this performance had continued African exports would have increased significantly. The chief economist in the State Department of Infrastructure in the Kenyan Ministry of Transportation and Infrastructure claimed that the SGR would increase trade and investment and further employment opportunities to enhance the people’s livelihoods in the East African Community.

But almost from the beginning, the project has been beset with problems. Despite the jobs created for locals during the project’s first year, and the fact that from 2015 to 2016 wages of SGR employees more than doubled, many young Kenyans complained that most of the jobs created were unskilled and low-paying. The SGR operated at a loss from the beginning and has hemorrhaged more than $200 million over the last three years.

Deficiencies in initial planning, including an overly optimistic prediction of profitably and inflated construction costs, combined with the economic disruptions of the COVID-19 pandemic, have all contributed to the problem, and have raised the prospect of Kenya suffering a major debt burden. A May 2019 article in the Kenya Star reported that Kenya’s public debt was 55.5 percent of gross domestic product. SGR has also been unable to compete with truck transport, which allows point-to-point delivery and less handling of cargo. This is a shortcoming that should have been noted in the project’s early stages. Because of all this, there seems to be minimal potential for the SGR to ever recover its losses or become profitable, forcing Kenyan taxpayers to bridge the gap in order to sustain its operations.

African Countries Have Agency

Some critics of China’s lending practices in Africa seem to view countries like Kenya as passive actors who are susceptible to possible debt default. Kenya, however, has been a willing participant in Chinese financing of its infrastructure projects and is reportedly at a lower risk of credit fault than many other African countries, despite its heavy borrowing from China.

There were unsubstantiated claims, for instance, that Kenya was at risk of losing Mombasa Port to China over the huge debt from the SGR project loans. An April 2022 study issued by the China Africa Research Initiative at Johns Hopkins University School of Advanced International Studies, however, showed that the previous reports concluding that Mombasa Port was collateral for the SGR loan were wrong. In fact, the SGR loan contains a waiver of sovereign immunity which protects Kenya’s national assets, a standard feature in international commercial project financing.

Kenya has already taken steps to protect its sovereign interests in commercial dealing with China. The Kenyan government, in 2008, promulgated an ambitious infrastructure development plan, Vision 2030, which is the long-term development blueprint for the country that was, according to the description, the product of participatory consultations among national and international stakeholders as well as ordinary Kenyans from across the country. Kenya also has a National Quality Infrastructure Policy, promulgated in 2019, which is designed to address issues of good governance in order to better integrate Kenya with the international economy and enable the enterprises and manufacturers of Kenya better access markets in the more developed economies.

SGR is not the first major Chinese infrastructure project on the continent. In the 1970s, China built the Tazara railway line, a 1,100-mile railway from the copper mines of Zambia to Dar Es Salaam, Tanzania. This was the first major pan-African infrastructure project. Tazara was paid for mostly with Chinese aid money, while the new projects under BRI are mainly funded by Chinese commercial loans, raising concerns that borrowing countries will become vulnerable to debt distress.

Critical infrastructure is key to Africa’s economic development and in the absence of loans or assistance from European or American governments, countries like Kenya have adopted a “Look East” policy. Kenya has deliberately favored China, India, and Iran, rather than traditional American and European trade partners.  

The Export-Import Bank of China provided two subsidized loans for the SGR railway. China offered these loans far below market value. Both parties agreed to a five-year grace period (from 2015 to 2020). After this, Kenya would repay the loan in increments over fifteen years. This initiative is characterized by both sides as a win-win alliance. While Chinese firms control approximately 70 percent of infrastructure projects in Kenya, they are not the only significant investor in these initiatives. Over 60 major Indian companies have invested in various sectors in Kenya.

Contrary to widely reported rumors, according to Kenyan government officials, Kenya did not blindly jump into the SGR contract. In 2021, Kenyan Treasury cabinet secretary Ukur Yatani said that Kenya did not offer their port as collateral for the loan from the Export-Import Bank of China to complete the SGR project. He stated such an action would violate their agreements with other bilateral creditors. Kenya has remained committed to treating all loans equally.

When the final decision was negotiated in 2014, the Kenyan Treasury expressed optimism about the SGR, claiming it would reduce the cost of transportation and protect the environment by lowering carbon emissions. In addition, it was forecast that it would increase industrialization, increasing Kenya’s economic output by 1.5 percentage points annually. This rosy forecast failed to consider that railways in developing nations like Kenya have historically struggled to make a profit. Because the government overestimated profitability, and the construction costs were higher than normal, the SGR has become a source of discontent among Kenyan citizens who feel they are having to shoulder a burden caused by the Chinese and Kenyan governments’ overly rosy estimates and inflated costs of the project.

This SGR project has created a situation where the interests of African elites and China’s bottom line appear to be at odds with Kenya’s citizens. Poor leadership, corruption, governance gaps, and weak financial foundations make major transport initiatives like the SGR risky ventures.

Sino-African Relations Are Complicated

China has a lot to gain in Africa. The continent is rich in resources, has a young population, and contains some of the world’s fastest-growing economies. While China’s overseas direct investment is largely concentrated in Asia (mainly in Hong Kong), in 2012, Africa was the second-largest overseas market for Chinese infrastructure investment. In 2015, Africa had dropped to number three, behind Latin America, but Chinese companies were still dominant in infrastructure projects on the continent. Many outside Africa question China’s motives because they offer infrastructure projects with no apparent regard for how African states would use those projects to develop into self-sufficient economies.

China, on the other hand, claims that its funding and BRI investments center around local necessities in a spirit of win-win cooperation. But most of the Chinese investment is paid not to local Kenyan companies but to Chinese firms. In August 2018, China’s trade surplus with Africa exceeded $27.91 billion. If African countries are to truly benefit from trade with China, this trade imbalance should be addressed. The BRI, if properly used by both sides, could address this trade deficit.

The failure to address such issues as the trade deficit and the perceived ill-treatment of Kenyan laborers, however, cannot be laid entirely at China’s feet. Corruption by Kenyan elites constantly undermines the needs of the Kenyan people. Nineteen of the Kenyans involved in the management of the SGR and public land have been indicted on suspicion of corruption, allegedly siphoning taxpayer money through fictitious compensation claims. Bribery and corruption, unfortunately, are still the norms when doing business in Kenya. Most recently in a COVID-19 corruption scandal, Kenyan government officials allegedly misused the $2 billion grants and aid funds intended to help fight the pandemic, causing hospital overcrowding, lack of protective equipment, and avoidable deaths

A Kenyan court of appeal ruling that the procurement of the SGR was flawed caused public outrage toward government officials accused of corruption. Newspapers branded the $3.2 billion railway a “white elephant.” Kenyan taxpayers realized that the burden of this unprofitable railway fell solely on them and saw little prospect of positively transforming the Kenyan economy. 

While Beijing’s investments in Kenya have improved the country’s infrastructure, it has also highlighted tensions between Chinese and Africans. Anti-African sentiment is not uncommon in China. Anti-African riots erupted in Nanjing in 1988. In 2020, hundreds of Africans in China were mistreated in the wake of the pandemic. In the Chinese city of Guangzhou, for example, Africans faced abuse from landlords, local restaurants, hotel managers, and officials. They were subject to random COVID-19 tests and forced into 14-day quarantines without receiving the results of those tests. While the central government’s apology might have appeased African elites who benefit from China’s largesse, it likely did little to allay the ill feelings of many in the population. Nor, in fact, have Chinese actions on the ground done much to address the issue.

During the construction of the SGR, many Kenyan locals reported being subject to discrimination by China Road and Bridge Corporation staff. This included a racist segregation policy. The corporation gave Kenyan team members separate accommodation, travel, eating areas, and toilets. In addition, managers were accused of tasking highly qualified Kenyans with menial jobs and severely underpaying Kenyan staff. Workers testified to seeing a Chinese manager assault a Kenyan colleague.

Chinese migrants in Kenya also reported an uptake in xenophobia in 2020, including an incident of crowds verbally accosting an innocent Chinese couple. Xenophobic attacks are not new, as Chinese citizens have historically been scapegoats for the African governments’ failings. Many locals fear change, and to some, the inflow of Chinese migrants represents a shift in which they are not accounted for and prioritized by their own governments. There is a disconnect between the interests of the elites (both Chinese and African) and their citizens. In the minds of many Africans, Sino-Africa relations have failed to be as optimistic, cooperative, and fruitful as initially intended.

Implications for the United States

The United States can learn lessons from the BRI and Sino-Africa relations. Africa has a wealth of economic opportunities for those nations willing to put in the effort. With its flair for bilateral and multilateral diplomacy and a long track record of attempting to forge meaningful relationships with African states, China has in many places supplanted the United States and Europe, at least in the minds of the leadership elites of many African countries.

A 2020 study found that although African citizens are concerned about being indebted to China, 63 percent considered China’s presence to be a positive influence in Africa compared to 60 and 57 percent who supported the American and the U.N. presence on the continent.

The BRI, with allegations of using it as a vehicle to engage in debt-trap diplomacy, and the questions often raised about China’s true motives, while still supported by African elites, is problematic due to the failure of Chinese and African elites to communicate its benefits to the average African.

The United States has a large diplomatic stake in Africa. The 54 countries of Africa make up the largest single voting bloc in the UN General Assembly. Providing practical alternatives to BRI, such as incentives to US companies to compete for African infrastructure projects, offer the best prospects for prevailing in the U.S.-China competition in the region.

African scholars and government officials, when asked about the Sino-American rivalry say, for the most part, that many Africans would like to have positive relations with both countries. Indeed, many would prefer to have more participation by American companies in infrastructure development projects, but this would require the U.S. government to implement incentive programs that make such participation attractive and profitable to American firms. In addition, the United States should keep its Africa policy focused on Africa, and not the activities of countries like Russia and China.

In order to prevail in the competition for influence in Africa, the United States should focus on making itself a consistent and reliable partner to those countries with which it can work, especially Ghana, Botswana, Kenya, and even Nigeria. Moreover, Washington can distinguish itself from Beijing by being a steady voice for freedom and democracy, especially in countries that routinely violate human rights.

The approach that will not work is the “us or them” strategy of the previous American administrations. Forcing African nations, even those who tend to be pro-American, to choose between the United States and China risks alienating countries who would rather deal with both countries. The global competition between the United States and China is a fact of life, as is the BRI presence in Africa.

Dealing with Africa on its own terms is essential. In a recent Foreign Policy article, “It’s Africa’s Century—for Better or Worse,” historian Adam Tooze argued, “The days are gone in which anyone could confidently recommend one particular development model.” African countries like Kenya are undergoing a demographic revolution, with the continent’s population estimated to reach 2.4 billion by 2050, up from 1.3 billion today. For U.S. foreign policy, failing to take Africa into account and continuing to view it as peripheral to world affairs is the route to failure.

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The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities. 

*About the author: Phebe Wilson-Andoh is an intern at the Foreign Policy Research Institute.

Source: This article was published by FPRI