Warning. President Museveni accompanied by senior Kenyan and Ugandan
officials tours parts of Mombasa port recently. Experts warn that
failure to pay loans could lead to take over of large facilities such as
Mombasa port. FILE PHOTO
Kampala.
Uganda and other African countries could reap net benefits from Chinese
investment, but that favourable outcome hinges on whether host
countries adopt effective oversight and accountability mechanisms,
according to a US Defence Department think tank.
Chinese infrastructure loans, the Washington-based Africa Centre for Strategic Studies warns, are primarily intended to extend China’s political influence and military reach.
China’s $900b One-Belt One-Road initiative, which now helps finance 1,700 infrastructure projects in more than 60 countries, “is first and foremost a Chinese geopolitical project designed to advance China’s grand strategy,” the Africa Centre said.
Chinese infrastructure loans, the Washington-based Africa Centre for Strategic Studies warns, are primarily intended to extend China’s political influence and military reach.
China’s $900b One-Belt One-Road initiative, which now helps finance 1,700 infrastructure projects in more than 60 countries, “is first and foremost a Chinese geopolitical project designed to advance China’s grand strategy,” the Africa Centre said.
The agenda
The strategy seeks to establish China as a “great power,” militarily as well as economically within the next three decades, adds the analysis prepared by Africa Centre for Strategic Studies research associate Paul Nantulya.
“The challenge for Africa is in establishing where its interests converge with China’s, where they diverge, and how areas of convergence can be shaped to advance African development priorities,” he said
Mr Nantulya also notes that in the past decade, imports from China to Uganda, just like in many other African countries, have grown to as much as 60 per cent yet those from traditional source markets such as Kenya have either slowed or stagnated to about 6 per cent over the same time period.
The strategy seeks to establish China as a “great power,” militarily as well as economically within the next three decades, adds the analysis prepared by Africa Centre for Strategic Studies research associate Paul Nantulya.
“The challenge for Africa is in establishing where its interests converge with China’s, where they diverge, and how areas of convergence can be shaped to advance African development priorities,” he said
Mr Nantulya also notes that in the past decade, imports from China to Uganda, just like in many other African countries, have grown to as much as 60 per cent yet those from traditional source markets such as Kenya have either slowed or stagnated to about 6 per cent over the same time period.
The report also highlights mega infrastructure
projects such as Kenya’s $3b Mombasa-Nairobi standard gauge railway,
financed by Chinese lenders under the One-Belt One-Road initiative.
The project is the biggest investment in the East African region funded by China.
The standard gauge railway has been planned to stretch across East Africa but is yet to take off in some countries.
According to a study by the United Nations Economic Commission for Africa, the railway link is expected to improve the East African Community’s annual exports by $192b.
The project is the biggest investment in the East African region funded by China.
The standard gauge railway has been planned to stretch across East Africa but is yet to take off in some countries.
According to a study by the United Nations Economic Commission for Africa, the railway link is expected to improve the East African Community’s annual exports by $192b.
Economic deficits
However, the Africa Centre for Strategic Studies notes that whereas it is projected to benefit Kenya, it is already producing economic deficits for the country.
According to a World Bank report East Africa’s economies, especially Kenya are increasingly becoming uncompetitive due to large volume of Chinese imports.
However, the Africa Centre for Strategic Studies notes that whereas it is projected to benefit Kenya, it is already producing economic deficits for the country.
According to a World Bank report East Africa’s economies, especially Kenya are increasingly becoming uncompetitive due to large volume of Chinese imports.
However, the sharp increase, according to some experts, has been seen as an “offloading of Chinese excess capacity in Africa.
“Manufacturers have blamed their declining market share of industrial products on Chinese firms, which they also accuse of importing raw materials from China and hiring Chinese labour,” Mr Nantulya says.
East Africa’s heavy indebtedness to China for railway project and other infrastructure projects has prompted speculation of a possible takeover of some key facilities to repay debts.
“Manufacturers have blamed their declining market share of industrial products on Chinese firms, which they also accuse of importing raw materials from China and hiring Chinese labour,” Mr Nantulya says.
East Africa’s heavy indebtedness to China for railway project and other infrastructure projects has prompted speculation of a possible takeover of some key facilities to repay debts.
For instance,
the Africa Centre for Strategic Studies notes, there has been
speculation suggesting that China might take over the port of Mombasa as
a result of contingency stipulations in the lending agreement.
In 2017, a Chinese-state owned company took over management of one of its national ports after the country defaulted on a loan.
“Sri Lanka handed over Hambantota port to Chinese state-owned companies on a 99-year lease after defaulting on an infrastructure loan. Pakistan handed over Gwadar port on a 40-year lease in an arrangement where the Chinese partner also retained 90 per cent of its revenues,” the report states.
In 2017, a Chinese-state owned company took over management of one of its national ports after the country defaulted on a loan.
“Sri Lanka handed over Hambantota port to Chinese state-owned companies on a 99-year lease after defaulting on an infrastructure loan. Pakistan handed over Gwadar port on a 40-year lease in an arrangement where the Chinese partner also retained 90 per cent of its revenues,” the report states.
The report also warned that East African
countries must seek to protect their national interests by making its
deals with China more transparent.
“The opaque nature of many negotiations prevents public and private sector scrutiny. China is sensitive to how host nations perceive it. When the public is aware, vigilant and active, negotiators can become more responsive to local demands,” the study says.
“The opaque nature of many negotiations prevents public and private sector scrutiny. China is sensitive to how host nations perceive it. When the public is aware, vigilant and active, negotiators can become more responsive to local demands,” the study says.
Debt burden
According to a Moody’s Investor Services released in January, six African economies were listed to have a negative economic outlook for 2019, largely due to unpredictable policies, which have made the investment climate unfavourable for doing business.
The report mentioned Tanzania among East African economies but went on to give other member states a stable but not positive outlook because of the increasing debt burden, which was expected to weigh down their growth prospects editorial@ug.nationmedia.com
According to a Moody’s Investor Services released in January, six African economies were listed to have a negative economic outlook for 2019, largely due to unpredictable policies, which have made the investment climate unfavourable for doing business.
The report mentioned Tanzania among East African economies but went on to give other member states a stable but not positive outlook because of the increasing debt burden, which was expected to weigh down their growth prospects editorial@ug.nationmedia.com
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