Why West will struggle to keep pace with China on infrastructure projects

The ongoing construction of Nairobi Expressway to the Jomo Kenyatta International Airport, along Mombasa Road in this picture taken on November 8, 2020. PHOTO | DENNIS ONSONGO | NMG

By GEORGE WACHIRA
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Summary

• Belatedly, Western countries are now showing interest in Africa, concerned about the ongoing Chinese ascendancy to global economic dominance, accompanied by evident political and even military ambitions.
• This is happening at a time when African nations, and Kenya in particular, are feeling the weight of accumulated Chinse debts.

Driving to Nyeri last week, I witnessed the Kenol-Sagana-Marua dual carriageway project by Chinese in full progress. Then driving around the county, I saw as many as three ongoing Chinese road projects. In Nairobi we have the Chinese “upstairs” Expressway and Western by-pass projects. All over Kenya, many other Chinese road projects are ongoing.

Kenyans joke that the hardworking “Mu-China” is quite busy building our country, as we merrily feast in politics. It is a fact that Chinese road projects are usually delivered on time, on specification, and on cost. And this has been the case since the Chinese delivered Thika Superhighway and the by-passes around Nairobi during Kibaki’s presidency. Indeed, the Chinese have entrenched themselves in infrastructure construction all over Africa.

In the early 2000s, the Chinese came to Africa looking for energy and natural resources to feed their factories which were overwhelmed by an insatiable global export market for consumer goods. Infrastructure was not on Chinese initial agenda for Africa.

Then the African nations realised that they could swap the natural resource rights for long term funding and development of infrastructure. That is how the Chines became simultaneous funders and builders of African infrastructure providing financing, Chinese materials and labor all packaged in long term government to government deals.

During this time, Western multilateral and bilateral development funding had virtually ceased as stringent governance conditionalities were imposed on African counties. Further, the West was pre-occupied with the more urgent threat of global terrorism and could not pay much attention to Africa. Western backed construction companies gradually wound up from Africa.

Belatedly, Western countries are now showing interest in Africa, concerned about the ongoing Chinese ascendancy to global economic dominance, accompanied by evident political and even military ambitions. This is happening at a time when African nations, and Kenya in particular, are feeling the weight of accumulated Chinse debts.

Kenya has come up with the PPP model of road infrastructure financing to specifically address the debt challenge, with the road users directly paying tolls to private investors (concessionaires). Ownership of the infrastructure will revert from the investor to the government after 20 years.

If concession agreements sufficiently protect the interests of the country and those of road users, the PPP model is an effective way of funding major public infrastructure. And this appears to be the entry point chosen by Western countries, either through competitive bidding or through negotiated bilateral arrangements.

Under the PPP toll model, the Chinese are already developing the Nairobi Expressway; the Americans are understood to be planning for the Mombasa/Nairobi Expressway, while the French have committed the Rironi to Molo superhighway. The Lapsset highway from Lamu to Isiolo is also under a PPP financing Model.

When and if competitive sourcing for PPP and non-PPP projects is used, it may prove difficult for Western companies to beat Chinese firms, unless other over-riding bilateral considerations prevail. The Chinese have customised African projects making them low-cost and competitive, mostly with cheap state supported credit; materials sourced from China at reasonable costs; and low-cost project management and supervision by Chinese nationals.

Chinese projects are usually delivered at relatively low budgets, making it difficult for Western firms to compete with the Africa-seasoned Chinese.

What about the Kenyan road contractors who have been missing in action for nearly twenty years? I am a very keen supporter of local content and I will be a happy person when I see Kenyan contractors back and delivering projects on time, on specification and on cost. They may wish to consider re-entering national projects through partnerships with foreign companies.

Local contractors are a debate that will need to take place, revisiting the issues that made them collapse in the first place. However, for the time being, and with limited government budgets, I guess Kenya’s priority is cost-effective project implementation, more than local content.

Changing the discussion, road projects have continued to employ many Kenyans giving them useful transferable technical skills. Specifically, during the Covid-19 downturn, road construction across Kenya has maintained thousands of jobs, making the sector a credible economic stimulus.