We have been sounding the alarm over China’s neo-colonial playbook for years. Now, it seems like a Chinese-funded project in Africa is about to be confiscated by China, which will appoint Chinese management, upstream all revenues to China, and provide China with its very own port in east Africa.
The African Stand reports that China is likely to take over Kenya’s lucrative Mombassa port if Kenya Railways Corporation defaults on its loan from the Exim Bank of China.
The Dark Side of Chinese Investment
China’s aggressive strategy emerged when a leaked audit report showed that the Kenyan government had inexplicably waived its sovereign immunity on the Kenya Ports Asset when signing the agreement, thus exposing the Kenya Port Authority to foreclosure – and confiscation – by China’s Exim Bank.
The report said that “the payment arrangement agreement substantively means that the Authority’s revenue would be used to pay the Government of Kenya’s debt to China Exim bank if the minimum volumes required for [rail] consignment were not met”, auditor F.T Kimani wrote. “The China Exim bank would become a principal over Kenya Port Authority if KRC defaults in its obligations, reports Africa Stand and All Africa news.
KRC accepted the multi-billion dollar loan from the Chinese institution to build the Mombassa-Nairobi Standard Gauge Railway (SGR), with construction services provided by China Roads and Bridges Corporation (CRBC), a division of state-owned conglomerate China Communications Construction Company (CCCC), which is why some have said the loan was a low-risk, full recourse vendor financing, one where it is China who gets all the upside while sticking the naive natives with all the potential downside, as the “worst-case scenario” now confirms.
The China-built, China-funded standard gauge railway, also known as the Madaraka Express, is a diesel-powered passenger and freight rail service connecting Nairobi and Mombassa. It construction was plagued by cost overruns, and outside observers questioned its economic viability, but China was not worried: after all, if the 80%-China funded project failed, Beijing would have full recourse.
Sure enough, Mombassa-Nairobi Standard Gauge Railway reported a 10 billion Kenyan shilling loss in its first year of operation, with current estimates that the railway generates about 600 billion Kenyan shilling (US $5.8 Billion) in revenue.
Meanwhile, in addition to putting the port at risk for a Chinese takeover, at stake is also the Inland Container Depot in Nairobi, which receives and dispatches freight hauled on the new cargo trains from the sea port.
Some suspect that backdoor financial dealings may have been involved because as African Stand writes, it is “indiscernible” how the Kenya Port Authority signed the loan agreement as a borrower, in one of the toxic clauses subsequently exposing its assets to the Chinese clamp.
“…any proceeding(s) against Kenya Port Authority assets by the lender would not be protected by sovereign immunity since the Government waived the immunity on the Kenya Ports Assets by signing the agreement,” the auditor wrote.
In other words, palms were greased and there were likely payouts for the officials who agreed to the loan.
The ‘Worst Case Scenario’
If you think this wont happen in Kenya, think again: In December 2017, the Sri Lankan government lost its Hambantota port to China for a lease period of 99 years after failing to show commitment in the payment of billions of dollars in loans. The transfer, according to the New York Times, gave China control of the territory just a few hundred miles off the shores of rival India.
More recently, in September 2018 Zambia lost Kenneth Kaunda International Airport to China over failure of debt repayment. It should also be mentioned that the Chinese currently own 60% shares of the Zambian National Broadcasting corporation giving the Chinese influence over what can and will be produced in the media.
If China goes through with a takeover, thousands of port workers who would be forced to work under the Chinese lenders. Management changes would immediately follow the port seizure since the Chinese would naturally want to secure their interests.
More importantly, revenues from the port would be directly sent to China for the servicing of an estimated Sh500 billion (US $4.9 Billion) lent for the construction of the two sections of the Standard Gauge Railway.
Slowly but surely China’s neocolonial hegemony is being achieved. And it seems like Africans are powerless to stop it.