Kenya well-positioned to reap rewards from US-China rivalry

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By Patricia Rodrigues, Control Risks

US senators in November 2018 raised the alarm over a Chinese company’s involvement in the management of the port of Djibouti, a move that would bring Chinese and US interests in the East African nation in extremely close proximity to one another. A month later, Kenyan media reported that leaked internal government documents suggested that the Chinese government could be entitled to revenues from Mombasa port should the Kenyan government fail to service debt obligations on the loan for the Standard Gauge Railway (SGR).

“Debt trap” narrative

This came as part of growing concerns among international media over Beijing’s so-called “debt-trap diplomacy”. The term is loosely defined as burdening developing countries with “predatory” loans with clauses that also reportedly involve the mortgaging of key sovereign assets such as ports and power stations. In this context, US diplomats have stated that not only are loans from China likely to saddle African countries with unsustainable debt burdens, but will also threaten US interests on the continent.

Washington has grown wary that China has made inroads in Africa over the last decade, using massive funding for mega infrastructure projects, particularly under the multi-trillion-dollar Belt and Road Initiative (BRI). In Kenya, projects such as the SGR, the expansion of the port of Lamu, and several critical road projects have largely fallen under the BRI.

US response

In a bid to counter the influence of China on the continent, US National Security Adviser John Bolton in December 2018 announced a new Africa policy. In his speech, Bolton referred to China at least 17 times, in a strong indication that countering Chinese influence on the continent was driving the new policy. African governments responded to the policy announcement with some scepticism. However, governments across the continent looking to attract wider investment will have welcomed its shift in focus away from security, development assistance and human rights, and towards commercial ties.

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US-China rivalry in Kenya?

Kenya is in a good position to benefit from the expected increase in US commercial interest. Building on their extensive security relationship, Kenya and the US are likely to step up trade-related talks in the coming years, In addition, US companies also likely to be incentivised and supported to invest further in the Kenya.

Meanwhile, China has been an important infrastructure development partner for Kenya in recent years. In the year ahead we are likely to see attempts by China to diversify away from infrastructure projects. Amid a growing requirement for Chinese firms to demonstrate a return on investment, and given the plethora of existing and planned infrastructure projects with unclear financial returns, companies will look for other sectors to invest in. In this regard, manufacturing and information technology are likely to be a priority. This will tie in well with President Uhuru Kenyatta’s “Big Four” agenda, which places a new focus on manufacturing as key to job creation.  

Given these existing relationships, Kenya is in a prime position to leverage ties with both countries to attract investment.  The main challenge for Kenya’s government will be to avail well-thought out projects for investors from both the US and China, while balancing an investor-friendly regulatory environment with local concerns over employment opportunities.