How China is filling the investment vacuum in Africa
After living with my family in the UAE for six years, it was high time to take advantage of the reach of Gulf airlines and pursue an African safari.
The goal was a simple one, to see the “Big Five”: Lions, cheetahs, leopards, rhinos and elephants. The destinations were two of Kenya’s natural treasures: The Maasai Mara National Reserve and Lake Nakuru in the heart of the sprawling Rift Valley.
Our journey, thanks in large part to our highly knowledgeable guide, was a success. We spotted all five at both locations and took in more than one could imagine when it comes to other animals, birds and plants.
While I certainly enjoyed what Mother Nature had to offer, I also witnessed firsthand what I had only read about in detail before, China’s presence in Africa, especially in Kenya.
On the road to Lake Nakuru, two hours out of Nairobi, one could not miss the rail and road construction work being conducted by the China Road and Bridge Co. (CRBC).
Most of that work is linked to the first section of a near $14 billion railway project to be completed this year, going from Mombasa on the east coast to the capital city with an extension planned to the market town of Naivasha.
Back in late 2013, Kenya’s President Uhuru Kenyatta declared that this project would define his legacy, promising to transform not only his country “but the whole eastern Africa region.” Voters will have their say this summer, as they go to the polls in what may shape up to be a divisive election, with locals hoping to avoid a repeat outbreak of violence seen a decade ago.
The big picture taking shape is an impressive one if all can be delivered. The standard gauge track, meant to handle much larger cargoes, will shorten the journey between Mombasa and Nairobi by two-thirds down to just four hours. When completed, the East Africa Railway will include Uganda and South Sudan. Similar work is being executed between those two cities on road arteries as well.
On the tail end of our weeklong journey, I passed two expansive dry ports poised to handle goods from Kenya’s farm belt. I was told construction is set to begin on transforming what is now an unpaved 60-kilometer stretch of road leading up to Massai Mara.
One can see how Beijing’s work on the continent ties into the ‘One Belt, One Road’ strategy, driven by the recently established Asian Infrastructure Investment Bank.
John Defterios
There had been an infrastructure-spending deficit in Africa. According to consultancy Deloitte, that has changed with more than $130 billion spent on transportation infrastructure last year with another $200 billion anticipated between now and 2025.
One Belt, One Road
Having recently spent nearly a month in China, one can see how Beijing’s work in Africa ties into the “One Belt, One Road” (OBOR) strategy driven by the recently established Asian Infrastructure Investment Bank (AIIB). With targeted working capital of $100 billion, the AIIB will help 66 countries build up their infrastructure, which will eventually lead to import demand growth for Chinese products, but more importantly in the near term, it will eat up excess capacity for steel and a range of industrial goods.
“For China, looking to reduce its trade dependence on the West, these regions are key to further its objectives. With Chinese investment leading the way, they will see vast development over the next two decades,” said Kenneth Courtis, chairman of Starfort Investments and former chairman of Goldman Sachs Asia.
Courtis added that China is establishing key hubs for commerce. The UAE is one and Kenya is another. He cited a long list of attributes for the latter including its port, strong manufacturing and agricultural sectors with room to grow and high literacy rates.
China, many believe, is filling a vacuum created by the West. As one prominent Kenyan businessman suggested over coffee in the capital, if one looks beyond the public proclamations, it is clear Beijing is being highly opportunistic, in what some said borders on neo-colonialism.
Western polices were a key driver for Kenya to rethink its alliances, after years of what businessmen described as “finger-wagging” by the US and Europe on issues ranging from human rights to corruption. Beijing makes it a practice to stay out of domestic politics, is flush with $3 trillion of surplus capital and has China’s Export-Import Bank at the ready to lend funds.
To that end, China has committed to invest $60 billion and that was reinforced by President Xi Jinping at the end of 2015 when he outlined 10 China-Africa investment plans.
His Kenyan counterpart is staking a great deal on his newfound support to remain in office. The backbone of the election campaign is based on efforts to modernize East Africa’s trade hub. His election-year budget — announced during my week in Kenya — included more funding for ports, rails, roads, fishery production and tourism expansion.
And China it is fair to say, is eager to see its new partner stay right where he is.
• John Defterios, CNNMoney emerging markets editor and CNN anchor, is the host of “Marketplace Middle East.”
