Road construction. FILE PHOTO | NMG 

Kenya, just like many other African countries, has found itself signing multi-billion credits from China. This has generated a heated debate about the mounting debt and the mega infrastructure projects. Where did the country go wrong?

Kenya will pay Sh122 billion as interest between now and 2021, translating to Sh40 billion annually. The actual loan repayment is only marginally different at Sh139 billion, confirming that China is assured of reaping big in the long-term.

The proposed 466km six-lane Mombasa-Nairobi highway that is expected to cost Sh450 billion and the extension of the SGR from Naivasha to Malaba at a cost of Sh380bn will worsen a situation that is bad. Already the Mombasa Nairobi SGR that was put up at Sh327bn is an express loan from China.

The Treasury figures show Kenya’s total outstanding debt is Sh5.011 trillion as at May 2018 and there are projections it will rise to Sh7 trillion by 2022. How did Kenya get here? What is the way out? What is China doing differently in terms of legislation or governance to have excess income to lend to nations?

Many accounts have shown that in 1963 when Kenya got Independence, and Singapore merged with Malaysia, Kenya’s GDP was $926.6 million while Singapore’s was $917.2 million. By 2013, Kenya’s was $55.24 billion while Singapore’s was $297.9 billion.Today the economy of Singapore is a highly developed free-market economy and has been ranked as the most open in the world, 7th least corrupt, most pro-business, with low tax rates and has the third highest per-capita GDP in the world in terms of Purchasing Power Parity .

To preserve its international standing and further its economic prosperity, Singapore promotes innovation, encourages entrepreneurship and re-trains workforce while encouraging saving and investment.

While China has been criticized for using debt to increase its footprint in emerging markets, it has ensured jobs for its masses using its soft power to gain unfettered market access and craft predatory trade agreements that have encouraged importation from its factories at the expense of local factories.


One of the challenges and threats to Kenya’s economy is corruption. One wonders how government officials find it difficult to explain sources of their wealth. The office of the Director of Public Prosecutions (DPP) is working hard to bring sanity.

Banks that are guided by CBK regulations have also been slammed with hefty penalties for non-compliance. How these banks moved National Youth Service (NYS) fraudulent cash without raising suspicion is in itself suspicious.

Sri Lanka, for instance, had to hand over Hambantota Port and parts of the surrounding industrial estate built through opaque Chinese loans after the country was unable to make repayments. Djibouti is already in debt distress and considering handing over several assets to China for a part waiver of loans that are equal to the tiny country’s GDP.

Surprisingly, despite the huge profits earned from lending to Africa’s poorer countries, there are hardly any grants and donations from China.

Ethiopia is the second most indebted country to China in Africa, with millions of dollars invested in mega projects, including an electric railway line and power generation plants. Angola and South Sudan are among the African countries struggling to repay Chinese loans.

How then is Kenya expected to repay these huge debts? Are the kind of investments we make with the loans able to generate profit/interest that can support the monthly or annual repayment of these loans and also cushion the country from economic crunch?

Kenya could be banking on its nascent crude oil production to lift it from economic doldrums in the near future. However, economists are warning that the country could be indebted to the Asian dragon for decades.

President Kenyatta who signed on an additional Sh230 billion in loans and grants at a sitting, sought to downplay the new loans, stating the funds would be disbursed through public-private partnerships. We don’t need to borrow more, let us pay the loans first then borrow later only if and when necessary.

Doreen Odhiambo, strategic management consultant.

Source link