President William Ruto is among the foreign leaders expected in Beijing for the Belt and Road Initiative conference in the week of October 16 to mark 10 years of the BRI.
This will be President Ruto’s first visit to China since coming to office a year ago, a period he is seen to have oriented his foreign policy towards the West, unlike predecessors Uhuru Kenyatta and Mwai Kibaki.
It also comes at a time when Kenya and China are marking 60 years of diplomatic relations later in December.
During the visit, President Ruto is expected to hold talks with his Chinese counterpart, President Xi Jinping, and among the likely issues in the agenda include infrastructure development – roads, rail and ports -, trade and investment, digital economy and the debt burden.
In July this year, Ruto held talks with China’s Foreign Minister Wang Yi in Nairobi, and the two sides committed to enhancing cooperation in the BRI.
Ruto emphasised Kenya’s interest in prioritising road development bilaterally and within the Forum on China-Africa Cooperation framework, saying Nairobi aims to work with Beijing to upgrade roads, develop a new Greenfield terminal and a new runway at JKIA and expansion of the ports of Mombasa and Lamu.
During the talks, it also emerged that China might have snatched the PPP contract to expand the 232km Mau Summit- Rironi highway from France, an agreement that was almost settled during Uhuru’s tenure.
The deal is likely to be settled in Beijing following a meeting between Infrastructure CS Kipchumba Murkomen and a Chinese delegation led by Deng Li, the Vice Minister of Foreign Affairs, in July.
Their discussions were centred on “pending projects in the roads and transport sector as discussed with President Ruto”, setting the stage for the escalation of the deliberations at the highest level during Ruto’s visit.
On July 28, Murkomen announced Kenya and Uganda had signed a deal to extend the SGR to Uganda, starting from Naivasha, through Kisumu to the Malaba border, connecting to the Malaba-Kampala route on the Ugandan side.
Phase 2B from Naivasha to Kisumu is expected to cost Sh380 billion, while phase 2C, from Kisumu to Malaba, will take another Sh122.9 billion.
There is also a plan within the Lapsset project to have the line move from Mariakani in Mombasa to Lamu and Isiolo. From Isiolo, the SGR will be connected to the northeastern town of Moyale, which borders Ethiopia.
But these expectations are on the backdrop of a drop in Chinese financial support to Kenya, with latest estimates for the 2023-24 showing a fall to just Sh1.74 billion, the lowest since 2008. This is a significant drop from the Sh29.5 billion Kenya received in 2021-22 and Sh71.2 billion in 2017.
Where does this leave ongoing infrastructure projects being financed by the Chinese, even as Ruto prioritises PPP funding?
The high-level engagements in Beijing will thus be useful in enhancing the bilateral relations following the change of government in September 2022 based on the Kenya Kwanza’s Bottom-Up Economic Transformation Agenda policies and diplomatic priorities and identifying areas of alignment.
China Foreign Ministry Spokesperson Wang Wenbin on August 31 said the main theme of the conference will be connectivity, and will demonstrate how BRI will provide a new platform for international economic cooperation, and add impetus to participating countries’ development and world economic growth.
“Over the past decade, it [BRI] has become a popular global public good and international cooperation platform....This is not only the highlight in commemorative events to mark the BRI’s 10th anniversary, but also an important platform for all partners to plan high-quality Belt and Road cooperation,” Wang said.
Chinese Foreign Ministry has said at least 90 countries have confirmed participation, at a time when the BRICS (Brazil, India, China and South Africa) bloc, of which China is an integral member, is expanding and gaining global influence.
China’s geopolitical dominance in Africa has largely been fronted through BRI projects, and the Foreign ministry says the country has signed Belt and Road cooperation documents with more than 150 countries and over 30 international organisations. It has established more than 3,000 cooperation projects and galvanised nearly $1 trillion of investments.
Among the countries Beijing has heavily engaged in the region in the last 10 years is Kenya.
The Export-Import Bank of China financed 90 per cent of the Standard Gauge Railway project, while Kenyan contributed the other 10 per cent.
The state-owned China Road and Bridge Corporation did the installation, and has been involved in other projects such as the Lamu port, Kipevu Oil Terminal, four bypasses in Nairobi, the Expressway from JKIA to Westlands business hub and the Sh1.5 billion Likoni floating bridge.
The Chinese have also been involved in the construction of the 453-km Lamu-Garissa Road and at least 300km of informal settlement roads in Nairobi.
The stalled dualing of the 84-km Kenol-Sagana-Marua highway, jointly financed by the Africa Development Bank and Kenya, is undertaken in two phases by Chinese firms Jiangxi Transportation Engineering Group and China Wu Yi Co., Ltd.
The road is part of the 800km-“Great North Road” from Mombasa, through Nairobi and on to Moyale.
Loan repayment terms
While SGR revenues grew 6.9 per cent last year to Sh15.3 billion buoyed by a strong performance in freight business, they remain below the operating costs estimated at Sh18.5 billion, meaning SGR is still struggling to make enough to meet the loan obligations to China.
In October last year, Business Daily reported that Kenya had defaulted on repayment of the SGR loans and the Chinese banks fined Kenya Sh1.312 billion in the year ended June for the defaults, according to Treasury documents it had access to.
The Exim Bank and Kenya had agreed to a five-year grace period (2015 to 2020), after which Kenya would repay the loan in increments over 15 years.
According to the National Treasury’s Expenditure data, Kenya’s debt repayments towards China-funded infrastructure projects more than doubled to Sh73.48 billion in 2021-22, 81.4 per cent of amounts paid out to bilateral lenders during the period.
The President was particularly vocal about Chinese loans during the campaigns and has been voicing his concerns about the debt challenge.
It is thus expected that the repayment terms will be discussed as Nairobi seeks softer terms after the request for deferment by another six months to December 2021 was declined.
Other pertinent issues include the balance of trade, which is currently in favour of Beijing, even as Nairobi seeks to export more fresh produce, cooperation in digital economy, climate change and investments in green energy.