Recently, the government listed Kenya Ports Authority among the many parastatals it intends to privatise. FILE PHOTO | NMG
In 2007, Democratic Republic
of Congo (DRC) entered into a $10 billion resource-financed
infrastructure agreement with China where copper and cobalt mining
licences would be allocated to a Chinese consortium. In exchange, the
consortium would secure financing of $6.56 billion worth of
infrastructure projects and invest $3 billion in mining projects.
The
agreement only came to the limelight after international financial
institutions flagged it saying DRC did not have the overhead to take $10
billion in debt, its debt-to-GDP was standing at 73 percent.
China
and DRC were forced to renegotiate the deal to $3 billion and three
years later the latter found itself cornered. China EXIM Bank rescinded
the agreement saying the 25-year reimbursement period agreed upon was
too long and demanded the remaining stake in the mines’ deal held by the
DRC government, whilst the other stake held by a Chinese consortium be
mortgaged until the loans were reimbursed.
Moving on to
Ghana, in 2010 the government informally secured $3 billion loan from
China without parliamentary scrutiny and in the deal a 15 year-off taker
agreement was to be given to a Chinese firm for supply of 750 million
barrels (13,000 barrels per day) of crude oil for servicing the debt.
Three
years later during the sharp drop in global oil prices, China EXIM Bank
renegotiated for an increase in barrels of oil collateralised for debt
service from 13,000 to 15,000 barrels a day, and also demanded that the
agreed fixed price paid for crude oil going for debt service be reduced
from $100 to $85 per barrel. According to Ghana’s then Finance minister,
that $15 difference would have seen Ghanaians pay $6.4 billion to repay
a $3 billion loan. Ghana decided to cancel half of the agreed $3
billion loan.
These two anecdotes are always used to
herald the lack of transparency in Chinese contracts entered by African
governments which later unravel and hurt China-Africa investment
relations.
Kenya seems to be creating its own page of
anecdotes after a document purported to be a leaked letter from the
Auditor- General’s office detailed that Kenya Ports Authority (KPA)
assets risk being seized by the Chinese in the event of a default.
The
government when securing the SGR debt financing collateralised Kenya
ports assets and waived the port’s sovereign immunity giving China EXIM
Bank the power to step in as principal shareholder of Kenyan ports in
the event of a loan default.
Now for the Kenyan case, it seem to have entered into a Chinese dungeon we will not be getting out of anytime soon.
Recently,
the government listed Kenya Ports Authority among the many parastatals
it intends to privatise. Unfortunately, this can’t happen without an
agreement with China EXIM Bank since the sovereign immunity waiver
technically gives it powers to veto any privatisation deal. And if
government is really desperate to privatise KPA, then it’s the Chinese
who will get first priority because any other bidder stands vetoed by
China EXIM Bank.
The auditor-general has refused to
deny or confirm the authenticity of the document. But the letter whether
fake or not is already a Pandora’s box. The SGR loan dominates more
than 60 percent of China-Kenya’s debt and is expected to go up with the
extension to Kisumu and Malaba making it the largest Chinese investment
in Africa and pushing Kenya’s debt-GDP up by five points.
This
means that the risk of port seizure is actually real if the letter is
true and unless government makes the agreements public, this storm is
not going away anytime soon. It’s worth noting that there is no reliable
database, even in China, listing Chinese-funded projects with the terms
and conditions attached to the bilateral loans.
This
paucity of data is one of a major concern, making it difficult for
general public in Africa to appraise sustainable Chinese projects.
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