More Kenyans believe that China constitutes the biggest threat to the country’s economic and political development than the United States of America, a survey shows.
 
The survey by Ipsos Synovate released on Wednesday revealed that 26 per cent of Kenyans see the Asian country as a threat to the development of Kenya, more than double the perception towards the US which ranks at 12 per cent up.
 
GRAFT
 
According to the survey conducted between July 25 and August 2, the unfavourable perception of China comes in the shape of threats posed by its cheap goods, fear of fostering corruption and leading to job losses.
 
A total of 38 per cent of Kenyans think that the continued relationship between Kenya and China will lead to job losses. This is only 11 percent in the relationship between Kenya and USA.
 
Another 25 per cent think that China will flood the Kenyan market with cheap goods compared to 18 percent perception of the US.
 
Perception of Kenyans towards China has taken a nosedive since March this year dropping from 34 per cent at that time while US’s has been on the rise since then from 26 percent to the current 35 per cent.
 
The perception is, however, skewed politically with more National Super Alliance (Nasa) supporters thinking that Kenya’s bilateral relationship with China is a bigger threat at 33 percent compared to 10 percent with USA.
 
For Jubilee supporters, only 23 per cent hold similar views on Kenya’s relationship with China but more on US compared to Nasa supporters at 16 percent.
 
On the flipside, approval for China comes because of its infrastructure projects in the country at 86 per cent compared to only 38 per cent for US. For US, its loan and grants to Kenya wins it an approval of 49 per cent compared to a paltry 11 per cent for China.
 
This is even as 35 per cent Kenyans say that USA is more important for Kenya to have relations with compared to only 25 per cent for China.
 
However, more Kenyans think that the country’s relationship with US will see the world superpower undermine the Kenyan culture, her elections and encourage terrorism at 14, 12 and 9 per cent respectively. This the Chinese are seen to have no effect on with 3, 0 and 2 per cent perception in that order.
 
More Nasa supporters at 49 per cent compared to Jubilee supporters’ 28 percent see bilateral relations with the US as critical.
 
However, more Jubilee supporters at 30 per cent to 19 per cent for their Nasa counterparts approve of relationship with China.
 
A total of 2, 016 Kenyans were interviewed in 46 counties using face to face interview at the household level with a margin of +/-2.16 per cent and a 95 per cent confidence level.
 
The survey also came before four important events in the country’s foreign relation development.
 
It was before Foreign Affairs Cabinet Secretary Monica Juma held talks with US counterparts in Washington DC on August 22 ahead President Uhuru Kenyatta’s visit five days later.
 
Five days later President Kenyatta held talks with US President Donald Trump and also met US business leaders.
 
President Kenyatta then welcomes British Prime Minister Theresa May three days later in Kenya before flying to China the next day for a major African-Chinese summit on economic partnership.

The value of loans from Chinese lenders to energy and infrastructure projects in Africa almost trebled between 2016 and 2017, from USD 3bn to USD 8.8bn, with policy lenders China Development Bank and China Exim particularly active in helping bridge Africa's infrastructure gap.

Almost half of the total USD 19bn of Chinese outbound loans poured into infrastructure projects in sub-Saharan Africa since 2014 were made last year (2017). Notably, Chinese lenders accounted for more than 40% of all infrastructure finance in sub-Saharan Africa in 2017 and its policy banks made more the four fifths of lending by Development Finance Institutions (DFIs) in the region.

Chinese commercial and policy bank lending for infrastructure projects in sub-Saharan Africa totalled USD 3.6bn in 2014, USD 3.4bn in 2015 and USD 3bn in 2016, before spiking almost 300% to USD 8.8bn in 2017, driven by a series of large power projects across Africa.

The trends are revealed by new research from global law firm Baker McKenzie and IJGlobal, the leading trade publication for infrastructure projects, as leaders from the BRICS bloc - Brazil, Russia, India, China and South Africa - meet in Johannesburg this week for their annual summit. Data is drawn exclusively from fully financed projects and excludes recent announcements of government funding commitments.

Speaking from the BRICS Energy event, which preceded the BRICS Summit, Kieran Whyte, Head of Energy, Mining and Infrastructure at Baker McKenzie in Johannesburg said the rising impact of Chinese policy lending in Africa is increasingly visible.

“Chinese president Xi Jinping’s recent tour of African countries ahead of the Summit is proof of the increasing interdependence of the maturing but still fast growing Chinese economy and developing economies in Africa,” says Whyte.

“This is much more sophisticated outbound lending than the cliché about China investing in African minerals and rail to get commodities to China to feed manufacturing – the data clearly shows Chinese lending predominantly shifting towards African power projects,” he says.

“All countries need power generation, transmission and distribution assets which are reliable and meet demand; without this, wider development is a distant dream," said Jon Whiteaker, editor of IJGlobal. "It is little surprise then that the power sector has grown to be by far the biggest recipient of Chinese policy lending in Africa. The US government may have recently jump-started its Power Africa programme, but it has increasingly been Chinese lenders which African and Middle Eastern countries have turned to get power projects financed.”

Globally, infrastructure deals featuring significant Chinese financing have risen more than threefold since 2012, driven among other things by China's Belt & Road Initiative (BRI), going from 31 deals in 2012 to 105 deals in 2017. The BRI is a world scale Chinese development strategy that combines the creation of a 21st Century Maritime Silk Road and a Silk Road Economic Belt.

Whyte explains that this shift towards power is because China is comfortable operating in the energy sector and is aware power acts as a catalyst for the growth of other sectors in Africa, providing foundations for long term economic development. 

"It's also true that in terms of infrastructure development, many of China’s construction companies are world leaders in the power sector and Chinese goods and equipment are used in the construction process, which further benefits China's economy,” he says.

Whyte adds that as one of South Africa’s largest trading partners, China plays an important role in infrastructure investment in that country. At the BRICS Summit Energy event this week, China pledged to invest USD 14.7bn in South Africa and to grant loans to state owned enterprises Eskom and Transnet.

Against the background of a geopolitical shift in trade relations, China has noted that it is looking to work with African countries in a participative and inclusive way,

Another recent report by Baker McKenzie and Silk Road Associates; Belt & Road: Opportunities & Risks - the prospects and perils of building China's New Silk Road details how key opportunities in Africa with regards to the Belt & Road Initiative will be transactions related to major projects in the power and infrastructure sector and related financing.

Notable projects

Recent examples of large power deals in Africa where at least 50% of the finance was provided by Chinese lenders include:

  • Mambila Hydropower Plant (Nigeria) valued at USD 5.8bn
  • Lamu Coal-Fired Power Plant (Kenya), a USD 2bn PPP 
  • Medupi Coal-Fired Power Plant (South Africa), worth USD 1,5bn
  • Kafue Gorge Lower Hydro Power Plant (Zambia) in 2015, worth USD 1.5bn.

While European DFIs increasingly focus only on lending to renewable energy projects in Africa, coal is still an essential part of energy baseload and vital in a region where grid capacity is almost non-existent and almost two-thirds still live without ready access to power. 

Countries

The African countries seeing most Chinese lending are Kenya and Nigeria, which alone have swallowed up almost 40% of the USD 19bn of lending to projects in sub-Saharan Africa since 2014. However, Chinese banks have been active lenders to infrastructure projects in 19 different countries in the past four years. Chinese policy lending is also set to widen, with Senegal recently becoming the first West African country to sign up to supporting the BRI.

Infrastructure projects in Ethiopia have received USD 1,8bn since 2014, Kenyan projects USD 4,8 bn, Mozambique infra deals USD 1,6bn and Nigerian projects USD 5bn from Chinese lenders. South African infrastructure projects have received USD 2,2 bn from Chinese lenders since 2014, Zambia has received USD 1.5bn and Zimbabwe has seen USD 1.3bn in loans from Chinese policy lenders since 2014.

Sectors

The power sector in sub-Saharan Africa has received USD 17,5 bn in loans from Chinese lenders since 2014 (USD 8,8 bn of this amount was in 2017). The oil and gas sector has received USD 3,2 bn (USD 1,7 bn in 2017) and the transport sector in sub-Saharan Africa received USD 5,5 bn from Chinese lenders since 2014 (with USD 500 million received in 2017).

Whyte notes that for investors in Africa, “A big attraction of China’s Belt & Road Initiative for both African governments and project sponsors is that it assists the speed of project implementation. Project stakeholders advise that the whole process is a lot quicker than other options. Chinese policy lenders assist in providing liquidity and contribute to the speed of implementation of projects in Africa, which is necessary for Africa to participate in the roll-out of the fourth industrial revolution and the global energy transition,” he adds.

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