Home » Katiba Corner » Is Kenya a beneficiary or victim of Chinese Belt and Road Initiative?
Is Kenya a beneficiary or victim of Chinese Belt and Road Initiative?
President Uhuru Kenyatta, supported by his friend Raila Odinga and some
civil servants, set forth to Beijing early this week.
What will happen there is as puzzling as the title of the gathering, of over 40 states and a larger number of corporations under – the Belt and Road Initiative
China is ostensibly helping states all over the world to improve the living standards of its people.
India and numerous Western states rejected the generous offer of
China’s Life President, Xi Jinping, to take advantage of unique offers
to improve the lot of their citizens (as Chinese citizens were
experiencing, short of the small matter of their rights and freedoms).
However, while our leaders, ever optimistic, are confident of huge
largesse from Xi Jinping (after all he has frequently and openly
promised our “leaders” of his generosity), most Kenyans, I am told, are
hoping that our leaders would return empty handed.
But why? Because though at one stage many Kenyans thought that we
were the beneficiaries of Xi’s kindness, not long ago a number of
journalists, business people, and scholars have found out the harm that
Kenya has suffered and is suffering from the mode of the dispensation of
Xi Jinjin’s generosity and largesse. why?
The more I read studies by those who have seen contracts under of the Belt and Road, the more I am persuaded that the intention of Xi Jinjin and his team contradicts their publicly stated benevolent motives.
The most obvious instance was the crude way that the Chinese took
over for 99 years for its own use, a harbour built by it for Sri Lanka
for which that country (I assume temporarily) it could not fully pay.
Now China has taken over assets in about 8 counties, including Zambia.
WHAT ARE WE RISKING?
Up until now, Kenyans are worried that
Mombasa Port which, it has been suggested, would make a good military
base for China, was at risk of seizure by China if we could not pay our
debts. But more recent leaks show that any Kenyan asset can be seized.
Kenyan President Uhuru Kenyatta and Chinese President Xi Jinping attend
the meeting at the Great Hall of People in Beijing, China on April 25,
Image: Kenzaburo Fukuhara/Pool via REUTERS
leaked document refers to the two huge loans from China for the Mombasa
to Nairobi Standard Gauge Railway were to be paid from SGR revenue, but
that has been far below the original estimates (despite the
government’s efforts to forcing importers to use the SGR).
Clause 5.5 of the “Preferential Buyer Credit Loan Agreement on the
Mombasa-Nairobi SGR” says: “Neither the borrower (Kenya) nor any of its
assets is entitled to any right of immunity on the grounds of
sovereignty or otherwise from arbitration, suit, execution or any other
legal process with respect to its obligations under this Agreement, as
the case may be in any jurisdiction.”
None of the news reports I have seen provides a list of foreign
assets that might be vulnerable, except to suggest that all of them are.
According to legal experts, in case of default, China can take over
many critical resources – anything from airports and natural resources
to embassies abroad – just as if individuals cannot pay debts their
assets may be seized to satisfy a court judgment.
It is no bad thing for countries to have to respect the contracts they make, and this is the modern legal trend.
But the great irony is that, a few years ago, Hong Kong’s highest
court, under great pressure from Beijing, accepted the Chinese view that
sovereign immunity of states was complete.
The same immunity that China denies to Kenya in these contracts.
OTHER UNFAIR CLAUSES IN KENYA-CHINA CONTRACT
Other clauses of the leaked contract include that Kenya must keep the contract secret.
And “Without the prior written consent of the lender [China], the
borrower shall not disclose any information hereunder or in connection
with this agreement to any third party unless required by applicable
This seems to allow Kenyan law to force disclosure but seems to prevent the government from voluntarily disclosing it.
Kenya’s government has repeatedly promised to publicly release the
contract but has always stalled, presumably because doing so would
violate the contract with China and would also expose massive corruption
and incompetence among Kenyan government officials.
agreement is governed by Chinese law. One Kenyan lawyer said, “The
agreement is being made in Kenya, the railway is built in Kenya and the
assets they are talking about are in Kenya, so why is it being governed
by the laws of China?”
Any disputes can be resolved only by the China International Economic and Trade Arbitration Commission.
to the agreement, “The arbitration award shall be final and binding on
both parties. The arbitration shall take place in Beijing.”
would be greater confidence if neutral law applied. For example, in 2017
Kenya signed a pipeline security commercial contract with Israel, and
disputes will be submitted to an arbitrator in London.
the China Road and Bridge Corporation (CRBC) $10 million per month to
run the railway. Such clauses are apparently common in CBR contracts.
has not helped that CRBC has been accused of treating Kenyans badly,
and of “neo-colonialism, racism, and blatant discrimination.”
on study comments that “Kenya’s Auditor General, Edward Ouko, has
repeatedly violated Kenya’s laws by not releasing regular reports on
payments to CRBC.”
China loans a huge amount of money to a country
like Kenya, but it is very much like Western aid agreements that
countries often complain about — a country gives “aid” but much of it
has to be spent on experts and services from the donor country.
of the money Kenya borrows must be used to pay Chinese workers and buy
goods, technology, and services from China, and it does not benefit
Kenyan factories and workers.
Another commentary says, “China is
charging considerably more for the project than would be standard in
other countries. This is a sign of corruption.”
Kenyans are well
aware of that phenomenon – we all know that contract prices are inflated
to accommodate the bribes paid to Kenyan officials to award the
contract. By China too?
These reports also say that Kenya must pay
off the loan from the agreed sources. If true – and those sources like
the SGR proceeds – cannot meet the debt, this would seem to be
structured to ensure Kenya defaults.
Kenyans, a survey shows, believe that China constitutes the biggest
threat to the country’s economic and political development – bigger than
the US. A recent survey by Ipsos showed that 26 per cent Kenyans rank
China highest and only 12 per cent giving the US.
The things that
worried Kenyans were cheap goods, undermining the local industry, and
job losses as a result, and fear of corruption. Increasingly, Kenyan are
becoming worried about the size of the debt that the government is
A study of the Institute of Economic Affairs (in Kenya) this week has exposed the financial affairs of the state.
it says that it would take the government two years by a large group of
workers “ to repay the Sh5.39 trillion Kenya much of which has been
accumulated since President Kenyatta took power in 2013”.
buoyant economy, this would be less of a worry, but reality seems to be
very different. Recent reports suggest the economy has slowed recently,
demand has dropped, and exports fell.
Meanwhile, the Treasury plans to issue a third Eurobond – to raise $2.5 billion to pay debts.
Soon our distinguished team (including the Attorney General) will return home -full of triumph?
keeping with the Constitution, the President and his team should
exercise their powers and responsibilities for the well-being and
benefit of the people of Kenya.
And what has happened to the
general principle of the consultation of state institutions with the
people before executive decisions are made.
Uhuru owes us a detailed and prompt explanation of the transactions conducted in China.
Yash Ghai grateful to Jill Ghai for her assistance in the writing of this article.
Thia Article was first published by the Star Newspaper on 28th April, 2019