Li Keqiang and Ethiopian Prime Minister Hailemariam Dessalegn inspect a railway project in Addis Ababa

Chinese Premier Li Keqiang’s arrival in Nairobi in May on the last leg of a four-nation Africa trip seemed to be a bail-out for Kenya economically. Kenya was in need of funds to build a new railway line, improve energy production, boost water supply to homes, protect endangered wildlife and establish a research center.

Premier Li’s visit addressed these and other issues after three days of bilateral talks in Nairobi, a safari at the Nairobi National Park and multilateral talks with leaders from Uganda, South Sudan and Rwanda. In the process, many agreements and MoUs on infrastructure, an Africa-wide research center to be based in Nairobi and environmental cooperation were signed. The agreements involved China’s promise to help finance and provide expertise in infrastructure development.

Despite Kenya getting the lion’s share of investment, the impact of these agreements was regional. For a start, it means East Africa’s vision of a modern railway line will now become a reality, starting this October, when the China Road and Bridge Corp. (CRBC) embarks on building 609 km of metallic road from Mombasa.

Vital infrastructure

The construction of this $3.8 billion line, dubbed the “standard gauge railway” (SGR), is a result of an agreement signed in May before Premier Li’s first ever visit to Africa.

Consequently, leaders from Uganda, Kenya, Rwanda and South Sudan signed what they called Protocol on the Development and Operation of the SGR which will be a guide on the timeline, coordinate policy and ensure sufficient resource allocation to the project.

The first phase of the project will cover 609 km from the Coastal city of Mombasa to Nairobi, while the entire project, said to run from Mombasa to Kisumu, and then on to Kampala of Uganda, Kigali in Rwanda and Juba in South Sudan, will be completed in 2018. The new line is expected to speed up cargo and passenger transportation in the region.

“This agreement breathes life into the commercial contracts relevant to the project,” said Steven Xiong, Deputy Managing Director for CRBC charged with the SGR project.

“We will partner with Kenyan suppliers, national and county governments and communities to deliver a high quality product within set timelines and with the highest standards of accountability.”

This means that trade in the region will be easier in five years or so, but local observers are seeing effects beyond ease of doing business.

“It has helped President Kenyatta to deliver on one of his key pledges especially after others had gone into a lot of problems. This visit will also tilt the way the West deals with Kenya and Africa in general. That is, they will reduce the conditions so they can have a share of trade on the continent,” Stephen Mutoro, Secretary General of the Consumer Federation of Kenya, told ChinAfrica in Nairobi.

“The signing of these agreements has demonstrated the Chinese seriousness in uplifting Kenya’s development, because for Kenya to develop and move to Vision 2030, infrastructure is key,” said Javas Bigambo, a consultant at Interthoughts Consulting, a regional think-tank on public policy and governance. Bigambo was referring to Kenya’s economic blueprint set to make the country a middle-income earner by 2030. Bigambo thinks China is a vital role player in African development.

“China is very important in economic matters, but that is not enough, we should see that it is involved in every other aspect that affects the continent.” Indeed Li also pledged $10 million to help fight poaching and protect wildlife. Given that tourism is the second highest income earner for Kenya, wildlife campaigners were excited with this announcement.

“It is a welcome gesture by the Chinese Government. We appreciate it because it demonstrates the commitment by the government to help combat poaching which is now a global problem,” Josephat Ngonyo, Chief Executive of the Africa Network for Animal Welfare, told ChinAfrica.

Trade balance needed

As China’s role in development grows in Africa, there are those who still think there is a need to better balance trade. Premier Li, who also toured Ethiopia, Nigeria and Angola, clarified that his country was keen on mutual respect and would rectify the mistakes committed earlier.

“Kenya is the last stop of my trip to four African countries and we in China believe that the best is saved for the last,” he told reporters at a joint press conference with his host President Uhuru Kenyatta.

He used the occasion to clarify China’s ambitions in engaging with Africa, insisting that any obvious imbalance in trade is bad for the Chinese economy, too.

“It is true there is a trade imbalance between our two countries, but let me say here that China has no intentions to deliberately pursue a trade surplus with Kenya. Rather China has been taking steps to balance trade with Kenya,” he told journalists in Nairobi.

“If trade imbalance persists, it will make sustainable growth of trade very difficult, and from our Chinese perspective, the overall trade surplus on our products has already exerted significant pressure on the Chinese Government’s exercise of micro-economic regulation.”

The premier’s response was hinged on figures released by the Chinese Embassy in Nairobi that indicated Kenya had imported from China goods worth $3.2 billion and exported $50 million to China in the past year. Kenya’s sales to China mainly included tea, coffee, leather and horticultural products, and imports consisted mainly of electrical and mechanical equipment from China.

Official figures indicate trade between Kenya and China has grown from $137 million in 2000 to $3.27 billion last year. Yet the Chinese Premier told media his country had learned from earlier mistakes.

“Honestly speaking, the substantial foreign exchange reserves in China have already become a burden for the Chinese Government because it needs to be reflected in the increase of money based in the country and that will add on the inflationary pressure,” said Premier Li.

China’s model of creating more trade balance would be based on two points: providing convenience marketing for African (Kenyan) products in the Chinese market, as well as helping Kenyan businesses keep up with the quality demands of Chinese consumers. The second point will be encouraging Chinese companies to collaborate with Kenyan firms to raise competitiveness in both Chinese and global markets through what he called industrial parks.

Some economists though think Kenya should not complain for now about the trade imbalance since China’s industrial development is beyond Kenya’s reach at the moment.

“We should understand that Kenya is a net importer of goods so we have to buy more from China. Our economy is basically agricultural,” Paul Gachanja, an economist at Kenyatta University, told ChinAfrica. “Let us boost our agriculture and target China’s large markets. We may not see that currently, but the future is bright if we boost our agricultural economy.”

Kenya’s real benefit arises from the fact that China’s contracted direct investment to Kenya has reached $537 million. Besides, China is now Kenya’s second largest financier with loans totaling $750 million, excluding the deals Premier Li signed in May.

President Uhuru Kenyatta told a joint media briefing in Nairobi after signing the 17 deals with China that China’s assets could have a big impact on East Africa. “China possesses substantial political, diplomatic and financial assets which, if fully applied, would be a game-changer in the region’s peace and security effort,” he said. CA

(Reporting from Kenya)