It is no secret that both Americans and Chinese harbour deep-seated suspicions of one another.

However, a leaked diplomatic cable written by the US ambassador to Kenya Michael Ranneberger provides a rare, on-the-ground-view of how America’s top diplomats view the rise of China in Africa. 

It also reveals how America’s foreign policy is contributing to its waning economic influence in East Africa relative to China.

While Washington continues to take a missionary approach that seeks to spread democracy and promote governance in the region, Beijing’s policy is driven by its core national interest of economic survival.

Over the past five years, China’s relations with East Africa and the wider Great Lakes region have been driven by the need to secure energy, strategic metals and mineral reserves to meet rising consumer demand at home.

The cable, posted on global whistleblower WikiLeaks’ website, indicates that the US government is reluctant to collaborate with China in East Africa as there appears to be little convergence of the two countries’ interests to date.

In addition, China’s apparent silence on implementation of Kenya’s political reform agenda in particular, is causing unease, as the US considers the reforms essential to the country’s future stability and prosperity.

The flooding of regional markets with Chinese counterfeit goods, such as batteries, which directly damages US market share in the country, is another source of concern.

The cables say that Kenya’s leadership may be tempted to move ever closer to China in an effort to shield itself from Western, and principally US, pressure to reform. This story is already being reflected in the region’s investment data.

According to data from the Kenya Investment Authority, Chinese investment projects in Kenya in 2008 numbered about 96, representing an investment capital of $52.6 million, about 7.3 per cent of the total foreign direct investment flowing into the country.

In Kenya, Chinese foreign investment is mainly in the manufacturing and service sector with a recent shift into mining and minerals exploration.

Shengli Engineering & Consulting Company was the prime contractor for the Mombasa Road-City Centre-Gigiri road upgrade project.

In addition, the second phase of a project to upgrade the Jomo Kenyatta International Airport is being worked on by China National Aero-Technology International Engineering Company. The first phase of the project was completed by the Chinese company China Wu Yi.

Negotiations are underway regarding the building of the second main port in Lamu and the South Sudan Rail Link ($1 billion, partly financed by the Chinese government).

In the East African region as a whole, China’s investment footprint has also been growing steadily. In Rwanda, for instance, according to a study done by the African Centre for Economic Transformation, between 2000 and June 2009, the Rwanda Investment and Export Promotion Agency registered nine Chinese investment projects worth $46 million, about 4.3 per cent of registered investment projects during that period.

In line with Rwanda’s ambitions to be the dominant regional player in communications and outsourcing services, infrastructure development for information and communications technologies has become a priority in government policy.

A significant development here was the signing of a 2005 memorandum of understanding between the Rwandan government and ZTE Corporation of China, which in turn led to the engagement of Chinese ICT experts to boost the sector.

Technology projects being carried out by Chinese experts in Rwanda include the establishment of an ICT Park in Kigali and the construction and operation in 2007 of a factory by A-Link Technologies, a registered Chinese ICT company that assembles mobile phones.

The largest Chinese ICT investor in Rwanda, Star Media Communication Network Technologies, has established a pay-TV system, and further expects to invest $20 million in a television station and an Internet service provider.

In Tanzania, according to a study by H. Moshi submitted to the African Economic Research Consortium, by the end of 2007 there were more than 140 Chinese companies registered with the Tanzania Investment Centre (TIC) and the Business Registration and Licensing Agency.

Among them, 13 are in construction with an investment of $12.4 million; 11 in manufacturing with an investment of $54.12 million; three are in agriculture with an investment of $49.33 million; two in solid minerals and telecommunications each — investment of $11 million; and one in shipping — an investment of $5 million.

The official figures released by TIC indicate that on aggregate the Chinese share of FDI to Tanzania stood at 2.4 per cent of total FDI flow into Tanzania between 1990 and 2006.

The manufacturing sector received the lion’s share of Chinese FDI, during the period, followed by agriculture and natural resources. The dominance of Chinese FDI is in agro-based manufacturing, and in the agricultural sector.

A recent project financed by Chinese assistance is the construction of the 60,000-seaterTanzania National Stadium in 2004, constructed at a cost of $43.5 million, with 53 per cent of the cost financed by the government of Tanzania and 47 per cent ($20.5 million) financed through a soft loan from China.

In Uganda, according to the Uganda Investment Authority, Chinese investment constitutes about 26 per cent of the overall foreign direct investment in Uganda. The number of Chinese investors is growing, with 118 companies registered by 2008.

Over 200 Chinese firms are currently involved in various activities in Uganda including agro-processing, manufacturing, energy, tourism, mineral exploration and construction.

The manufacturing sector leads in Chinese FDI (63.48 per cent), followed by electricity, gas and water (12.84 per cent), with lowest investment being in social and personal services (0.13 per cent).

With respect to infrastructure, the Chinese government has stepped up China-Uganda co-operation in transportation, telecommunications, water conservancy and electricity.

China’s engagement in East Africa is expected to continue to grow, and this shift of the development landscape in the region toward the East will undoubtedly continue to cause jitters in American circles, as US interests are increasingly threatened.

Conceivably, this could, at least in Kenya, lead to a greater US insistence on “reforms.” Mr Ranneberger writes that “advancing implementation of the reform agenda is the central objective of US policy in Kenya.
Achieving this is key to ensure the future democratic stability and prosperity of Kenya, a strategically important partner of the United States.”