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Chinese Alice in African wonderland

By       Message James Duglous Crickton     Permalink
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Xi Jinping October 2013 (cropped).jpg
Xi Jinping
(image by wikipedia)

Corruption remains the main issue bedevilling the image of the Jubilee coalition government of President Uhuru Kenyatta; it came to power more than two years ago promising 'open governance' in Kenya. And the source of corruption is Chinese aid.

This is ironical since President Xi Jinping has launched a sweeping campaign against graft at home. Wang Jiarui, head of Communist Party's international department, has been frank enough to say as recently as 08 September that "being in power as long as the party had -- since 1949 -- had bred a corruption problem".

Speaking to a group of Chinese and Western academics and diplomats, in Beijing, Wang admitted a home truth. "The Communist Party is keenly aware one of the reasons its predecessor, the Nationalists, lost the Chinese civil war in 1949 was because of the terrible corruption under their rule, costing them public support".

This confession is no solace to President Kenyatta, though as evidence is piling up to show that for China practice and precept are not two sides of the same coin. A study by the Development Research Department of the African Development Bank highlights the flipside of the Chinese aid. China provides aid and development finance through "a not very transparent and poorly understood approach"', it says.

These observations have assumed an added significance after a taped conversation surfaced putting the spotlight on the way the Chinese businessmen have been bribing their way through the Kenyan system. The 'taped-conversations' related to the Sh 17 billion upgrade of Moi Teaching and Referral Hospital (MTRH) into a 1,000-bed hospital complex. It featured Herbert Ocholla Ojwang -- a former aide to former Prime Minister Raila Odinga -- and a Chinese businessman.

As Carloine Wafula reported in Daily Nation, (May 11, 2015), the bribe amount was around Sh 850 million. It works out to five percent of the project cost, which appears to have become the norm. The scam surfaced because Ojwang felt cheated; he was 'edged' out by the Chinese when they found "new patrons".

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The Chinese tender to build a rail-road also ended up in a scandal. Various parliamentary watchdogs have discovered that China Road and Bridge Corporation has inflated the cost. This almost tore the ruling coalition apart.

Like elsewhere, where China has emerged as the 'big daddy' of concessional finance, in Kenya too, its businessmen and their middlemen have mustered "the art of taking care of the monetary interests of people in authority, most often senior government officials, highly connected politicians and parliamentary committees".

Naturally, therefore, there is a growing concern that the rise of China as a significant source of finance presents "a threat to improved governance" in Kenya and other African countries.

These concerns, as brought out in a Working Paper (WP) on China, Africa and International Aid Architecture (African Development Bank) centre on the Chinese practice of routing their Exim Bank loans to projects proposed by Chinese companies, which inter alia fuel corruption "through the transfer of large funds to poorly governed regimes."

This happened in Zimbabwe, for instance, when $58 million credit was channelled through a company called Farmer's World. The company's officials travelled to China to select agricultural equipment and machinery to be imported under the loan, "with all payments going from the Chinese bank to the Chinese exporters".

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Much worse was witnessed in a rural telecom project in Sierra Leone. There was no competitive bidding and the project ran the risk of "not receiving the best value" for money.

Put simply, in a Chinese aided project there is never any actual transfer of money. Money remains in China through payments to Chinese companies and their sub-contractors. At the same time, the concessional line of credit promotes export of Chinese goods and services. And the recipient country remains beholden to the Bamboo capitalist. These are high cost funds no doubt but China is not a fussy lender. Bottom-line only matters to it as it dons the mantle of the East India Company that once enriched the pockets of British nobles.

China Eximbank has financed more than 300 projects in Africa since 1996. And the Chinese Ministry of Commerce financed another 900 plus projects in various African countries. China has also cancelled $1.2 billion in debt. A recent report on Al Jazeera (Aug 11, 2015) titled "How China is changing Africa", has put China's trade with Africa at more than $200 billion in 2014.

"But as business ties deepen, critics say in some cases benefits aren't felt by average citizens, causing more Africans to question the terms of China-Africa relations" the report said. This is because in addition to being the continent's largest trading partner, China finances infrastructure projects and government loans in exchange for resources such as oil, iron ore, timber, cotton and minerals like bauxite.

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A blogger since July 2008 James Duglous Crickton is a London based consultant working with a consultancy firm focusing on Asia, particularly South Asia and East Asia. Political Research is his functional focus area. While his interests are (more...)

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