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February 26, 2018

Chinese takeover? Sh90.9trn project to widen trade deficit

Avic International’s headquarters on Chiromo Lane, Nairobi, on November 27 last year /ENOS TECHE
Avic International’s headquarters on Chiromo Lane, Nairobi, on November 27 last year /ENOS TECHE

Kenya’s real estate market is among the sectors set to benefit from projects being implemented under China’s ‘Belt and Road Initiative’ (BRI), a new report shows.

However, a Knight Frank report titled ‘New Frontiers’ says the initiative is likely to lead to an increase in Kenyas imports from China. Imports stood at Sh362.12 billion as at November last year.

The increase is because most construction materials will be imported from China. While the report does not state how large the increase in imports will be, it shows Kenya’s import value of Sh337.4 billion is a three-fold increase from 2010 against $478 million (Sh48.33 billlion) registered from the United States.

In 2016, Kenya exported goods worth Sh10 billion to China but imported goods worth Sh337.4 billion from the Asian powerhouse, necessitating a trade deficit of a whopping Sh317.4 billion.

 debt increases ten-fold

Kenya is among 15 other markets whose top political leaders attended the BRI Forum for International Cooperation in Beijing in May 2017 and are categorised as ‘Non-core Belt and Road’ countries. The $900 billion (Sh90.9 trillion) initiative targets 69 countries and official BRI cooperation agreements were signed on October 5 last year.

Key projects to be implemented include the standard gauge railway and Lapsset Corridor, both of which are Chinese funded. Also in the list is the upgrade of the Port of Mombasa. “These, amongst other projects, have resulted in the country’s debt to China increasing almost ten-fold, from $366 million (Sh37 billion) in 2012 to $3.1 billion ( Sh313.41 billion) in 2016,” Knight Frank’s head of research Charles Macharia said.

The report states Chinese firms have acquired nearly 40 per cent stake in real estate projects in Nairobi and its environs.

Among the key projects where a stake has been acquired by the firms include the Two Rivers Mall development where the stake amounts to $70 million (Sh7.1 billion), Erdemann Property’s housing project in Athi River and China National Aero-Technology International Engineering Corporation (Avic) mixed-use development on Chiromo Road, Westlands. Aside from Kenya and Tunisia, 13 of the non-core BRI countries have joined the Asia Infrastructure Investment Bank (AIIB), a crucial institution in the actualisation of China’s BRI. The AIIB was launched in 2016, with China contributing $50 billion (Sh5.1 billion) in capital.

Other BRI projects in Africa are Doraleh Port in Djibouti, Mohammed VI Tangiers Tech City in Morocco, Abidjan Port in Côte d’Ivoire, China-Egypt Suez Economic and Trade Co-operation Zone, and Sokhna Port in Egypt. In December last year, Trade CS Adan Mohamed urged the Chinese government to open up its markets for Kenyan commodities.






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