The relationship between Kenya and China dates back to 1963 established after Kenya’s independence, as China became the first country to establish an embassy in Nairobi. China’s scramble for Africa has completely changed the way local exchange and financial institutions work. One year ago in Kenya, the $3.6 billion dollars railway standard gauge was launched and it was a historical moment for the Kenyans as passengers walked on board the train for the first time. This railway is Kenya’s most significant infrastructure since it became an independent country. The Standard-Gauge Railway outlines a turning point for business and trade in the area. It is, however, also symbolic because it was built and funded by the Chinese, and forms part of the Chinese Belt and Road Initiative of worldwide infrastructural developments.

China has funded many projects in Kenya and the railway is just one of them. Since December 2015, the Kenyan has received more than 13 grant projects, according to reports from the administration, summing up to about $292 million dollars and $8.545 billion for 14 commercial projects and much more. There are no signs that this trend will stop any time soon. According to Chege Ashura, the spokesperson for https://topforexbrokers.net/, as a result of the massive debts Kenya owes China, the local currency has been on a spiraling downtrend as the inflation rates continue to increase. This has led investors in Zimbabwe to worry if this will be the case with the Zimbabwean dollars as Chinese influence in the country continues to increase.

Is it a good or bad debt?

Chinese investments in Africa for the most part is highly welcomed because it renders the opportunity for economic development. Since Kenya has so many banks, China’s investments are seen as a good move for trade and finance in the region. It is likewise regarded as useful for the exchange account business of the many banks in the nation. Yet, many are concerned by China’s growing influence in Kenya and Africa at large. Many critics are of the opinion that China has only made Kenya’s debts and financial burden more, just like it is doing to neighboring African countries in a debt trap diplomacy. China has taken advantage of the country’s hospitality to flood the market with all sorts of products.

The contract for the railway line was signed in May 2014, and the terms of the agreement have been shocking to Kenyans and other countries indebted to China as well. The pact states that all disagreements to the contract are governed by Chinese laws and can only be resolved in Beijing. The agreement also has a confidentiality clause which ensures that the terms are not made public without permission from China.  One fascination provision in the agreement states that regardless of whether Kenya gets other assets to balance the debt totally, the Chinese bank has the discretion to reject the payment or give conditions before accepting such payments. The SGR has faced many setbacks and this could potentially affect the future of the infrastructure as the Kenyan investigative courts also ruled the agreement as illegal upon reviewing the terms.

 

Is the current Sino-Zimbabwe infrastructural venture a Chinese debt trap for the nation?

Just like in Kenya, China effectively invests in massive infrastructural developments in Zimbabwe. The relationship between the two countries dates 16 years after Kenya built relationships with the country.

Like in quite a bit of Africa, China has a solid presence in Zimbabwe, with ventures crossing from farming, energy, mining, and exchange, even in the wildlife sectors. Since Zimbabwe’s economy on a downtrend right now, a few experts state that Wang, who is China’s foreign minister, will improve the economy or encourage Zimbabwean leaders to improve the nation’s financial performance.

In 2003, the ties between Zimbabwe and China increased as the leaders of the African nation, unlike its previous leader Robert Mugabe, adopted the Look East strategy after they were sanctioned by Western countries. From that point forward, China has become Zimbabwe’s greatest source of direct foreign investment. China has also funded the construction of Zimbabwe’s military base in Harare. They also additionally progressively widened their connections by incorporating the development of another parliament building in Zimbabwe which cost more than $100 million.

As the terms of Kenya’s contract with China have gone public, many other African countries are beginning to have second thoughts about the aid that China renders to them cloaked in the veil of infrastructural development. In Zimbabwe, the opposition party and a majority of the citizens and critics are of the opinion that China is exploiting the country’s natural resources by lending huge sums of money that the country will be unable to pay back, trapping them in debts. Most Zimbabwean citizens working for Chinese organizations have complained about the deplorable working conditions that these companies have them work in. In Zimbabwe and Africa at large, China has spent billions of dollars in infrastructural developments such as roads, stadiums, railways, agricultural ventures, and in the energy sector. In return to all this aid rendered by China, these African countries payback in natural resources.

It is no doubt that these funds from China actually help the countries involved, in the sense that the countries are poor, to begin with, and do not have enough funds to develop their infrastructure, and this is where China comes in. Although many are happy with the developments, the terms of such developmental contracts show China trying to entrap the countries in loads of debts. Thus Zimbabweans fear that this might be the case for them as it was with the Kenyan railway project.

886400cookie-checkCould Zimbabwe face the same issues as Kenya?