Business Daily (Nairobi)
Allan Odhiambo
31 March 2008
Faced with an economy growing at a neck-break speed, China and--now India--are turning their eyes on Africa for resources to boost their industrial growth.
Firms from these Asian nations are now boosting their presence in Kenya through multi-million shilling acquisition deals or green field targeting industries as diverse as telecommunication, tourism, energy, technology, commodities and construction.
As diplomatic relations between China and India reach an all-time high, their volume of trade with Kenya is booming.
In the last five years, Kenya's imports from India have risen from Sh14 billion in 2002 to Sh38 billion in 2006 and China's has risen from Sh6 billion to Sh27 billion making them an increasingly important trading partners. Kenya's exports to these countries remains under Sh4 billion.
Last year, this drive into Kenya culminated in multibillion shillings bidding war for 50 per cent stake in the Mombasa-based Kenyan National Petroleum Refineries that attracted Reliance Industries and Essar Oil and Gas, both India firms.
Reliance Industries also acquired Gapco, a fast growing oil marketer, gaining a foothold in the Kenyan economy for an undisclosed amount.
This year, Essar Communications Holdings is also expected to invest heavily in helping Econet Wireless International roll the third mobile phone licence in Kenya after they acquired 49 per cent stake in the Zimbabwean firm.
Other Indian firms that have entered the Kenyan market in a big way include: Tata Group, which bought Magadi Soda and the motor vehicle assembly plant in the Industrial Nairobi and Brahat Petroleum which is partnering with Kenya Pipeline to build a liquefied petroleum gas (LPG) plant. The LPG project will cost $50 million.
In the past year, a Chinese company and a Kenyan firm announced Sh9 billion joint venture that will establish the first solar panel factory in the region. Beijing's Tianpu Xianxing Enterprises and Electrogen Technologies started construction of the facility in October with a planned completion date of March, this year, in fresh efforts aimed at providing a solution to Kenya's power shortfall.
Between September-November 2007, three Chinese companies bagged three major road projects worth Sh15.3 billion that includes the reconstruction works on the Namanga-Athi River (Sh6.2 billion), Isiolo-Merille (Sh4.9 billion) and Loitoktok-Emali Road.
As global multinationals are abandoning their African outposts, Indian and Chinese firms are seizing the opportunities aggressively. Kenya is particularly attractive because of its unique geographic advantages and well developed business hub that is acting as a springboard into the rest of the sub-Sahara Africa by these Asian firms.
It is has become ironic that while many American and European firms consider their Kenyan subsidiaries to be lemons, Asian firms are making lemonades out of these situations and in some cases turning them into star performers.
These firms are also gaining entry into African markets without stirring as much animosity as the South African continental invasion has attracted.
The key to this success stems from the investment that India and China are making to understand the contours of both political and business power on the continent, taking advantage of the hunger for investment in most African countries.
Governments in the continent have also been weary of the global democracy promotion agenda of the West and the bellicose posture of the overloads at the World Bank and the International Monetary Fund and their grating rhetoric of good public governance.
The Indian and Chinese governments-despite opposition from the West-are now engaging Africa in a diplomatic charm offensive to cement business ties with the continent.
For instance, to highlight this growing diplomatic engagement India will be hosting Kenya and other African nations for special summit talks that organizers said are intended to strengthen the ties between the two partners in key growth areas.
The conveners of the talks have also taken into consideration the important role of political goodwill in securing deals and in effect ensured key political figures have representation.
Kenya's President Mwai Kibaki has been invited to the summit alongside nine heads of States from South Africa, Libya, Uganda, the Democratic Republic of Congo, Burkina-Faso, Zambia, Algeria, Ethiopia, Nigeria, Senegal and Egypt as a way of roping together diverse political voices and opinion shapers including religion.
Analysts said the up coming summit, so soon after the China Africa summit last year, was an indicator of the renewed scramble for Africa by nations seeking to buttress their respective industrial growth.
Asian economic tiger China has particularly made a grand entry into Africa in search of raw material and market share to the consternation of most western nations that had for decades enjoyed unrivaled access to resources to build the lavish economies and push their products.
"This is purely as a result of competition for resources. China has in place an elaborate strategy to mop up resources and access Africa's markets and India will try to position itself for this competition," James Gathii, a Professor of Commercial Law at the Albany Law School told Business Daily.
China has conveniently bought into key growth sectors in Africa including finance, manufacturing, mining and telecommunications to consolidate markets for its finished goods and ensure steady supply of raw materials for its industries.
In the financial front China recently pulled a fast one when its China Industrial and Commercial Bank of China (ICBC) forked out an estimated Sh375 billion (US$5.6 billion) to acquire a stake 20 per cent in Standard Bank, the largest bank in Africa by assets.
China has also won significant stakes in the oil sectors of Nigeria, Angola and Sudan. The Asian powerhouse further has a significant presence in South Africa's iron ore and platinum industries as well interests in firms dealing in timber from Cameroon, Congo-Brazzaville and Gabon.
In Kenya particularly, Chinese President Hu Jintao has signed an oil exploration contract with President Kibaki in a series of deals designed to keep Africa's natural resources flowing to China's booming economy.
Under the agreement, China's state-controlled offshore oil and gas company, CNOOC, is to prospect for oil in Kenya's coastal waters even though there is no formal estimate of the possible reserves. China has also interests in the Kenyan cement industry where a group of its nationals under the Catic group are seeking to set up a cement factory near Athi River upon approval by the National Environment Management Authority (NEMA).
Prof Gathii said this steady clamour for raw material and market slots in Africa by China could have stoked India out of its slumber amid mind-bogging realities of the effects of an economy growing at more than triple the speed of Britain's.
Analysts said such break-neck speed economic growth demands a steady and reliable source of raw materials and out lets for finished goods, a position that will force India to push dependence for raw materials from its already dilapidated home environment to off shore sources such as Africa in order to consolidate this growth.
Critics said China had make a rather successful entry into Africa by doing away with conditional aid policies that western nations insisted on and continues to pay a blind eye to corruption on the continent.
As part of its policy for Africa, the Chinese Government said it encourages and supports Chinese enterprises' investment in Africa and will continue to provide preferential loans and buyer credits to this end.
Taking after the Chinese strategy, India has also promised to invest in Africa. "The Africa-India Forum Summit would create an opportunity to give a new dimension to the Africa - India cooperation through a concrete plan of action and declaration to be adopted during the Summit in New-Delhi,"
Prof Gathii however said African nations should approach the talks cautiously to avoid being short-changed through dubious pacts.
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