How China's investments drive Kenya's development

China's financial assistance to Kenya has been instrumental in driving development. [File, Standard]

The concept of a "debt trap" has been a topic of intense debate regarding China's engagement with Kenya and other developing nations. Critics argue that China's lending practices lead to unsustainable levels of debt, resulting in a loss of sovereignty for borrowing nations.

However, a closer look at the facts and figures reveals a different story, showing that China's financial assistance to Kenya has been instrumental in driving development across various sectors. The evidence suggests that China’s engagement has provided significant benefits, far outweighing the concerns about debt dependency.

China's involvement in Kenya has been pivotal in transforming the country's infrastructure landscape, which is a cornerstone for economic growth. One of the most notable projects is the Standard Gauge Railway (SGR), which connects Mombasa to Nairobi and beyond. Completed at a cost of approximately $3.8 billion, the SGR has significantly reduced travel time between Kenya’s largest city and its busiest port, thereby enhancing the movement of goods and people. The railway has facilitated trade and opened up new economic opportunities, contributing an estimated 1.5 percent to Kenya's Gross Domestic Product since its completion.

Additionally, China's support has been critical in the development of key infrastructure projects like the Lamu Port-South Sudan-Ethiopia-Transport Corridor. This initiative, with a projected investment of over $25 billion, aims to create an integrated transport network that will boost interregional trade and position Kenya as a strategic hub for commerce in East Africa. 

China’s engagement has also significantly boosted Kenya’s energy sector, addressing one of the country's most pressing development challenges. Through the construction of numerous power projects, including hydroelectric plants like the Olkaria V Geothermal Power Station, China has helped Kenya increase its energy production capacity. These initiatives have played a crucial role in achieving Kenya's target of universal electricity access, which stood at 75 percent in 2023, up from about 30 percent in 2013.

This increase in energy production has not only improved the quality of life for millions of Kenyans but has also provided the necessary power supply to fuel industrial and technological development, fostering a conducive environment for local and foreign investments.

China's investments have contributed significantly to Kenya’s industrialisation. Chinese companies operating in Kenya have set up manufacturing plants, industrial parks, and Special Economic Zones, such as the Kenya-China Economic and Trade Cooperation Zone in Athi River. These developments have led to the creation of thousands of jobs for Kenyans, addressing one of the country's most critical issues - youth unemployment. 

Moreover, the transfer of skills and technology from Chinese firms to local industries has empowered Kenyan workers and entrepreneurs, equipping them with knowledge and expertise to drive the country’s industrial growth.

Contrary to the narrative that Chinese loans are predatory, data shows that the terms of China’s credit to Kenya are often more favourable compared to those of Western financial institutions. Chinese loans tend to have lower interest rates and longer repayment periods, making them more manageable for developing nations. For instance, the loans for the SGR project came with an interest rate of about three percent, which is considerably lower than commercial rates. 

Moreover, China has shown flexibility in restructuring debt for African nations, including Kenya, when they face financial challenges. This approach is in stark contrast to the rigid conditions often imposed by international financial institutions like the International Monetary Fund and the World Bank.

The idea of a "debt trap" suggests that China lends money with the intention of seizing assets if the recipient nation defaults on its loans. However, no evidence supports the claim that China has taken over strategic assets in Kenya or other African countries due to loan defaults. 

Kenya’s debt to China constitutes only a portion of its total debt portfolio, standing at approximately 10 percent of the country's total external debt of $35.4 billion as of 2023. This clearly indicates that Kenya's debt burden is not solely due to Chinese lending but is a result of borrowing from multiple sources.

Moreover, China's debt management strategy involves working with debtor nations to find mutually beneficial solutions rather than resorting to asset seizures, thereby disproving the notion that these loans are designed to trap countries into unsustainable financial obligations. 

The narrative of a "debt trap" in China's engagement with Kenya does not hold up under scrutiny. The facts and figures demonstrate that China's financial and technical assistance has enabled Kenya to make significant strides in infrastructure, energy, industrialisation, and overall economic development. While it is essential for Kenya to manage its debt levels prudently, dismissing China's contributions as predatory overlooks the tangible benefits that these investments have brought to the country. Instead of focusing on the debt trap rhetoric, the focus should be on leveraging these partnerships to maximise development outcomes and drive sustainable growth.