No Kenyan Asset is Mortgaged for Railway Loans -Chinese Ambassador


Recently, Chinese Ambassador to Kenya H.E. Mr. Wu Peng had an interview with Daily Nation’s journalist Macharia Gaitho on China-Kenya relationship and cooperation. The following is the transcript of the interview.

Tbere were expectations that President Kenyatta’s recent visit to China would secure funding for the Naivasha-Kisumu phase of the railway. It did not happen, and the government later clarified that the issue was not even on the agenda. At what stage was that funding dropped from the agenda?

Amb Peng-I really don’t know where those expectations came from. I can confirm that funding for Naivasha-Kisumu SGR was not on the agenda. Kenya government is now focused on operations of Mombasa-Nairobi SGR, I believe this is very smart and responsible move from your government.

SGR was from inception planned to extend across Uganda border, and maybe even cross over and extend to serve Rwanda and eastern DR Congo. Might terminating at Naivasha effectively kill the project vision and also make it less viable?

China supports Kenyan efforts to improve infrastructure connectivity. This is of vital importance to economic development. In the annex of joint communiqué of the Leaders Roundtable of the recent Belt and Road Forum,Northern Corridor in Africa linking the maritime port of Mombasa to countries of the Great Lakes region of Africa and Trans-Africa Highway is included. However, Rome was not built in a day. I believe SGR will not stop in Naivasha.

Does that mean you will eventually fund extension to Kisumu and beyond it?

Of course China fully respects Kenya government opinion and decision on when to start Naivasha-Kisumu SGR line. I can say we believe SGR is economically viable. Note that in first full year of operations, Mombasa Nairobi SGR has already earned Sh10.3 billion, which is close to operating cost of Sh12 billion. It’s never easy to achieve nearly break-even in just one year. We are very proud of it. Kenya and Chinese operators deserve credit for that achievement. I would emphasize that China has full confidence in Kenya’s ability to make profits from SGR.

The Kenyan public has been concerned that the agreements with China on the SGR financing, construction and operations have not been made public. Do the agreements have secrecy clauses? If so, would that raise suspicion that that there is something to hide? Would China object to the documents being made public?

Let me declare this solemnly and seriously for this once. There is no secret between Chinese government and Kenyan government. Any loan agreements between China and Kenya are in line with common international practice. None of Kenyan national assets has been mortgaged for the loan of SGR, neither would any single Kenyan national asset be seized or controlled by China, even in a situation of default.

There have been fears that in the event of Kenya defaulting on the loans, key national assets such as Kenya Ports Authority and Kenya Railways Corporation could be seized.

I don’t think that will happen. These kind of assumptions are groundless and I don’t think Kenya will default. I mentioned earlier that so far the commercial earnings of SGR are very good. They can get even better, but it depends on everyone joining together to make the operation of SGR to be successful.

Sometimes I think we should have some common sense. Kenya is a sovereign state. Any asset in your country is protected by international law and should be respected by any other country. Why are you worried about foreigners seizing your properties? Really unnecessary worries.

There is lots of debate in Kenya about the trade imbalance between the two countries. Any concrete steps on how this can be redressed?

This is a sensitive issue we know raises a lot of concern. It’s important to point out that Kenya-China trade is determined by the markets. The current economic situation and industrial structure of each country influences the trade imbalance. I know there’s imbalance, but we do not pursue trade surplus with Kenya as policy. China’s total foreign trade in 2018 reached $4.62 trillion, of which China-Kenya trade volume was $5.3 billion, that is about 0.1 percent of our total foreign trade volume. Actually we are paying great attention to Kenya’s desire to expand exports. 
President Kenyatta was absolutely right to put industrialisation as a priority of Big 4 development agenda. Only through industrialisation can Kenya reduce imports and promote exports. If Chinese government and Chinese companies can contribute, we are ready. For instance a Chinese company put up a building tiles factory with investment of $80 million, and output is already meeting 85 percent of Kenyan market needs. Those tiles would otherwise be imported, but are now made in Kenya, and even being exported to neighbouring countries and earning foreign exchange income for your country. The lesson is that we can’t only rely on a government if we want to reduce the trade imbalance, but encourage private sector to play roles.

President Kenyatta’s recent visit to China actualised the phytosanitary agreement by opening the Chinese market for Kenyan avocadoes. Does it open prospects for other Kenyan horticultural products (Fruits, Vegetables, Cut flowers) to enter Chinese market?

Yes, and we are working on it. As brothers we understand how important agriculture export is to Kenya. Last year as outcome of President Kenyatta’s visit to China, China and Kenya signed agreement on export of stevia, a sugar substitute, to China, and the phytosanitary MOU which paves way for access of Kenyan horticultural produce. Within four months, China Customs Authority sent an inspection team here on avocados, and both side signed agreement on export of frozen avocado, which was witnessed by the two heads of State at the 2nd BRF. This will make Kenya the first African country to export avocado to China. Just yesterday our embassy commercial counsellor visited a frozen avocado processing factory in Nakuru, We are very proactive to turn the agreement into real export, and both sides are working closely to seal a deal on export of fresh avocado and also other products. There’s growing need in China for high quality agricultural products and Kenya has prime opportunity. The market and policies are there, now both sides need to engage the right market players so that these agreements bear fruits.

Kenya media could play a key role in establishing bridges between producers and consumers by publishing information on producer base in Kenya and market opportunities in China.

The common belief is that most Chinese aid to Kenya is tried to expensive commercial loans. Are there examples of significant projects financed through grants?

You must be aware of the Kasarani Stadium, Moi International Sports Centre. It was completed in the 1980s entirely funded by Chinese government grants. You may not realise that in 1980s China was still a relatively poor country, yet used taxpayer funds, more than 200 million RMB, to build Kasarani. It was not easy for China. That is just one example. From Kenya’s independence in 1963, China has implemented over 100 projects in Kenya under grants and interest-free loans. In last five years, seven construction aid projects and 13 material aid projects have been implemented, and five are in progress. These are all grant projects. Note also that half of all loans from China are on preferential export buyers credit and government concessional loans with very low interest, which is just a quarter or even less than the prevailing international financial market rates. 
According to World Bank definition,the concessional loans have strong grant elements. If interested, there’s a formula you can use to calculate the grant element in the longer grace periods and lower interest rates loan. Criticisms on these issues are groundless and come from those who don’t understand the economics. These kind of loans help African countries to develop.

Railways, roads and other big infrastructural projects supported by China in the wider East African region are seen as components of the Belt and Road Initiative, a key Chinese strategic objective. Should China then not meet most of the cost?

This is a biased question. Let me correct you. You say that BRI is a Chinese strategic objective. No, BRI comes from China but belongs to the world. Opportunities and achievements are for the world to share. More than 150 countries and international organisations have joined BRI based on their own judgement and assessment of benefits. The principle of BRI has always been extensive consultations, joint contributions and shared benefits. China is always ready to engage with other countries for mutually beneficial cooperation, and offer support within our capacity.

Kenya is a cosmopolitan country with settlers, business people and expatriates from India, Europe, the Arab world and the United States are already well-established and accepted, yet Chinese living, working and doing business here seem to attract resentment.
 What can be done to address such issues? Do the Embassy and employers run specific programmes to help Chinese coming to Kenya adjust?

As a new ambassador the first thing on my schedule was to visit as many Chinese communities and companies in Kenya as possible. I wanted to see for myself their achievements and challenges, and set clear rules for them to obey the laws of Kenya and respect the local culture and people. I believe culture and language barriers can be conquered with mutual respect and understanding. I think the Chinese community in Kenya is doing better to get along with the host communities. That’s not a one-off for me, but I will continue educating our Chinese people to respect Kenyan laws and people.

In 2015 I found a large Kenyan and African community in Guanghzou. They had complaints about the difficulty in getting work and residence permits and long-term or multiple-entry visas despite the fact that they were doing legitimate business. They also had problems getting rental housing, opening bank accounts, getting driving licences or enrolling their children in school. They blamed this on discrimination and pointed out that Chinese in Kenya did not have similar restrictions. Have these issues been addressed?

You mentioned Kenyans in China facing difficulties, I noticed that as well. But same as in Kenya, foreign workers and businessmen—whether Kenyan, Ethiopians, Europeans or Asians—are required to go through legal procedures to get work permits. I know there are many Kenyans living and working in Guanghzou, but now they don’t have many problems as long as their status is legal. If you find any individual facing problems, you are welcome to bring it to the attention of our embassy, to my attention. I promise you we will try our best to help. However we don’t want generalisations, but can respond on case by case.

We have seen Britain, the US and other western nations publicly express concern about growing Chinese engagement in Africa. Are we seeing the continent becoming a theatre for competition between China and the West as seen during the US-Russia Cold war?

There are some concerns, but not always in that way. For instance British Foreign Secretary visited Kenya recently, and if you noticed what he said, it’s not always China and western countries competing in Africa.

We see support for African peace and development as a common responsibility shared by the international community.

For us, we always approach international community cooperation in Africa with a very open attitude. We welcome greater input from all members of international community to support Africa’s development, but we maintain that such cooperation shall fully respect Africa’s wishes and needs, refrain from interference in domestic affairs and come with no political strings.

China’s growing economic and military clout is seeing it a globally challenges western dominance, yet it still refers to itself as a Developing country. Should it now be called a Superpower?

This question is always asked by others countries as well, and I can understand. My answer is very clear: China’s total economic volume is huge, but GDP per capita is just a little over $9000 ranking only 72nd in the world. China still belong to the group of developing nations. You laugh, but I can understand. We will join hands with other developing nations in formally safeguarding our basic rights. As the worlds biggest developing country China is ready to assume obligations compatible with its own development level and capacity. Yes we are still developing, but we try our best to help others developing. And we are not a superpower.

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