8 April 2019

Kenya: Port of Kenya Takeover Sparks Neo-Colonialism Outcry

Nairobi — REPORTED plans by China to take over Kenya's main port are giving some credence to concerns of the Belt and Road Initiative (BRI) being a form of neo-colonialism by the Asian nation that is a global economic powerhouse.

Such plans also send a harsh warning to other countries as to the hardline stance by China on countries that default on loan repayments.

It has emerged Kenya risks losing the lucrative Mombasa port to China should the East African country fail to repay significant loans advanced by Chinese lenders.

The loans were granted for the development of the corruption-riddled Standard Gauge Railway (SGR).

Built at a cost of US$3,6 billion (R50.95 billion) and connecting the large Indian Ocean city of Mombasa with Nairobi, the country's capital and largest city, SGR is the most expensive infrastructure project since Kenya's independence in 1963.

China Road and Bridge Corporation was the prime contractor.

Late last year, a leaked report by the Auditor-General's office indicated that the government of President Uhuru Kenyatta had in 2013 waived the Mombasa port's sovereign immunity in order to use it as a security for the Chinese loan.

Another audit indicated that Kenya Ports Authority (KPA's) assets, including the Mombasa facility, could be taken over if the SGR did not generate enough cash to pay off the debts secured from the China Exim Bank.

"The China Exim Bank would become a principle in KPA if Kenya Railways Corporation (KRC) defaults in its obligations and China Exim Bank exercises power over the escrow account security," reads part of the audit report.

The Inland Container Depot in Nairobi is also at stake.

Panic thus as gripped Kenya as the grace period of five years given by the China Exim Bank expires. The race period covers May 2014 to July 2019.

SGR is a hugely loss-making venture and is struggling to generate enough money to repay loans.

Kenya, East Africa's largest economy, is itself searing in debt. Its public debt is estimated to be over Sh5 trillion ($49,65 billion), which is more than 56 percent of its gross domestic product (GDP).

Last September, Moody's, the rating agency listed Kenya among some countries at the highest risk of losing strategic assets to China over the rapidly increasing debts.

Trade Mark East Africa (TMEA), which promotes trade in the region, expressed doubt at Kenya repaying the loans. It predicted 2019 to be a "scary" year for Kenya.

"Question remains, which is the next surety for the country's next loan from China?" TMEA quipped.

President Kenyatta, during an interaction with local media, dismissed the reports of the Mombasa port's takeover by China.

"We are ahead of our payment schedule for the SGR loan. There is no cause for alarm," Kenyatta assured.

However, a hardliner stance by China over countries defaulting on loan repayments suggests there is indeed cause for panic.

Kenya is set to join the likes of Sri Lanka and Zambia in the unenviable list of borrowers to lose key assets to China after defaulting.

In 2017, Sri Lanka lost its Hambantota port after a lack of commitment to repay.

Last year (2018), Zambia lost the Kenneth Kaunda International Airport to China over debt repayment.

These seizures and the imminent takeovers in Kenya has revived sentiment around BRI as being a form of neo-colonialism by China, which is increasingly exerting its influence on African economies.

The scheme comes against a backdrop of China seeing resources for its growing consumption and African countries seeking funds to develop their infrastructure.

Unveiled by Chinese paramount leader, Xi Jinping, in 2013, the development strategy involves infrastructure development and investments in 152 countries and international organisations in Europe, Asia, Middle East, Latin America and Africa. State-owned companies are the dominant investors.

Some Western governments have accused the initiative of being neocolonial amid allegations of China's practice of debt trap diplomacy to fund the initiative's infrastructure projects.

There have also been objections from China's fellow Asian nations like India and Malaysia.

The Chinese government calls the initiative "a bid to enhance regional connectivity and embrace a brighter future."

"It indeed heralds a brighter future for China, which would help itself to key assets in Africa as the countries battle to service their debts. It is a vicious cycle for the debt-ridden poor nations," said Nairobi-based economist, Bernard Obara.

He said the developments equally raised concerns around the risks for countries borrowing from the Chinese to finance their infrastructure projects.

"By seizing key assets in countries that renege on loan repayments, China has sent out a stern warning that it will not hesitate to crack the whip on countries defaulting on loan repayments," Obara said.

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