28 June 2017

Kenya: Are Chinese Investors in SGR Project Neo-Colonial Predators?

Photo: Daily Nation
President Uhuru Kenyatta launches the cargo freight services of the standard gauge railway at the Port Reitz station in Mombasa (file photo).
analysis

Chinese investors in Kenya's standard gauge railway (SGR) project generally responded fairly to challenges, and should not be regarded as "neo-colonial predators," a study by US-based researchers has found.

The Kenyan government and the country's political culture are seen, in contrast, as the source of many of the problems and conflicts that arose during construction of the Nairobi-Mombasa rail line.

Government decisions on the planning, financing and contracting of the SGR "were made with little concern for economic benefits or for maintaining accountability to the public at large," says the study published on Monday by the Washington-based China Africa Research Initiative.

It is affiliated with the Johns Hopkins University School of Advanced International Studies.

CONCERNS

"In most places, the ethnic and neo-patrimonial political culture is behind the controversies and the occasional violence," the assessment states. "This is compounded by a deeply entrenched problem of corruption, rent-seeking and nepotism."

Officials of the Chinese Road and Bridge Corporation, the builder of the Sh327 billion railway, "made a visible effort to set up mechanisms to help them engage with local communities and address their concerns," says the 33-page "working paper."

The Chinese corporation hired liaison officers and established a vocational training facility. "But the company has demonstrated less flexibility on the main contract provisions, explained in part by the Kenyan government's pressure to finish construction on time and within budget," the paper adds.

UNILATERAL DECISION

The study is entitled "African Politics Meets Chinese Engineers: The Chinese-built Standard Gauge Railway Project in Kenya and East Africa."

The authors are Dr Uwe Wissenbach, an official with the European Union's European External Action Service, and Yuan Wang, holder of a degree from Harvard University's Kennedy School who has worked in China and Kenya.

Dr Wissenbach and Ms Wang reviewed project documents and conducted what they say were "in-depth interviews" during three visits to SGR construction sites in 2014 and 2015.

The contract for initial maintenance and operation of the SGR was awarded to the China Communications Construction Company (CCCC) "without a tender, which was apparently made possible by a unilateral decision by the Kenyan president," the authors write.

POLITICAL ELITES

"The award of the contract to CCCC is not surprising," they add. "Without a new Chinese credit line, financing costs would have had to be found from the national budget in an election year."

Kenyan political elites are widely perceived as having "pocketed large sums as kickbacks from the SGR," the paper observes.

"Controversies surrounding the planning, financing and implementation of the SGR, albeit rooted in the Kenyan political culture, in turn reflect negatively on Chinese developers who are often seen as colluding with corrupt politicians."

Chinese employees sometimes encountered hostility from local communities, the authors report. They suggest, however, that this may have been due to insufficient Kenyan government budget allocations for resettlement and compensation related to the project.

"In general terms," the paper states, "local communities were often not informed about the SGR."

LOCAL LABOUR

Chinese overseers of SGR construction hired large numbers of Kenyans to work on the project, Dr Wissenbach and Ms Wang point out.

They cite figures compiled by the China Road and Bridge Corporation indicating that Chinese management and technical personnel numbered 2,000, while nearly 20,000 Kenyans were employed as ordinary labourers, technical workers and managers.

Steel parts such as the rails, railway engines and construction machines were imported from China, as were "many other products that cannot currently be produced in Kenya," the report notes.

China agreed to reverse a previous decision to import cement for the project after Kenyan cement manufacturers successfully pressured President Uhuru Kenyatta to ensure supplies would come from local sources, the working paper says.

BULGING BUDGETS

Some construction services, as well as the telecom, banking and additional service aspects of the project, were also sourced locally. But the Chinese corporation "had to cope with frequent lack of capacity among local providers," the paper notes.

As a broad finding, the authors warn that unless Kenya overhauls its governance framework on issues cited in their report, "infrastructure projects risk overshooting initial budgets and reducing the willingness of neighbouring countries or foreign investors to engage in future initiatives in Kenya."

This observation "counters widespread rhetoric that cites China's assumed predatory behaviour as to blame for many problems," Dr Wissenbach and Ms Wang comment.

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