Big Brother China pumps $11b into East Africa

Saturday May 04 2013

The East African region has received about $11 billion in investment and development aid from China over the past decade, new data shows, reflecting the growing influence of the Asian giant in the region

The East African region has received about $11 billion in investment and development aid from China over the past decade, new data shows, reflecting the growing influence of the Asian giant in the region.

According to global research firm Open Data for International Development (AidData), the region received the money between 2001 and 2011, with mineral rich Tanzania and Uganda getting 80 per cent of the funds at $4.6 billion and $4.5 billion respectively. Kenya received $1.6 billion, while Rwanda and Burundi received $469 and $165 million respectively.

China is particularly targeting infrastructure development projects across the region, pitting it against development partners such as India, Japan and traditional giants like Europe and the US.

India, for example, is now the top source of Kenya’s imports, overtaking the United Arab Emirates and China, according to statistics from the Kenya National Bureau of Statistics.

In 2011, the region received a huge chunk of a $5 billion loan from New Delhi to finance key infrastructure projects.

With support from their governments, Chinese and Indian firms are targeting the expected windfall in the region’s telecoms, mineral extraction, engineering and consumer goods markets, fields previously dominated by Western firms.


However, the UK and US remain the biggest source of direct investments into East Africa, with their share expected to increase following the discovery of hydrocarbons. Latest figures from the Organisation of Economic Co-operation and Development (OECD) shows that in 2011 alone, the US extended to Kenya $620 million in aid, while the UK gave Tanzania and Uganda $219 and $163 million respectively.

Overall, China has channelled $75 billion to Africa through investment and aid in the past decade compared with $90 billion from the US.
“When you compare the US and China, the total official finance is roughly comparable,” said Bradley Parks the executive director of AidData.

The increased inflows from China also reflect the growing trade between Africa and the Asian dragon, growing 10 times from $15 billion in 2001 to $150 billion as of last year.

Trade between Kenya and China on the other hand, has grown from Ksh45 billion ($535 million) in 2007 to Ksh145 billion ($1.72 billion) in 2011. China has become Tanzania’s largest trading partner and second largest source of investment. Tanzania’s trade with China rose 15 per cent in 2012 to reach $2.47 billion last year.

China’s growing influence on the continent is now a concern among traditional Western donors who are questioning the trend among African countries to give contracts for major projects to the Asian giant regardless of the financier.

In Uganda, for example, the European Union ambassador to the country, Roberto Ridolfi, cited the example of the Masaka-Mbarara bypass that it financed through a concessional loan.

“When the EU provides such a loan, the tender is left open to all firms irrespective of their countries of origins. Likewise, Chinese-funded project should be left open to all,” said Mr Ridolfi.

The envoy also appealed to the country to “value its true investment and trading partners,” a statement critics say may be an indirect call to give the Union more preference.

“We are a key partner.  Findings of major international export markets show the EU alone took the largest share with over 52 per cent, with UK, Italy, Germany, Netherlands and Belgium in the lead.  It is crucial that the government of Uganda value its true investment and trading partners,” said Mr Ridolfi.

Among factors that favour China is its funding structure, which is not tied to such indicators as human rights records, reforms and transparency, conditions that most Western donor put into consideration.

Equally, the areas of focus between the two are different. Whereas most Western powers have paid special attention to improving social services like health and education, China has channelled most of its investment funds towards improving infrastructure on the continent.

But a senior lecturer at the University of Nairobi warns there could be a bait for the continent with regard to this arrangement.

“China is mainly interested in sectors such as roads and railways that will help it easily extract and transport minerals from Africa to feed its industries, and is using project financing as bait to secure rights to scarce natural resources including lithium ion used in making batteries for electric cars,” said Samuel Nyademo.

He added: “Africa needs to be careful. In the long term, aid is expensive. The Chinese will build roads, railways and ports to extract resources but if the final value addition is being done abroad, Africa only gets a fraction of the real value of these resources.”

Among infrastructure projects the Chinese government has funded in Uganda are the construction of the Mandela National Stadium as well as the foreign affairs and presidential buildings in central Kampala.  China has also promised to fund the delayed $2 billion 600MW Karuma hydropower dam, after its original financier, the European Union, raised queries over the procurement process.

President Yoweri Museveni struck the deal with China after he met President Xi JinPing at the Brics summit in Durban, South Africa on March 28.

In Tanzania, the Chinese government is funding a 523 kilometre natural gas pipeline from Mnazi Bay and Songo Songo Island in the south, to Dar es Salaam. The project will cost $1 billion.

In Kenya, China has provided $1.4 billion loan to the geothermal sector.

Rwanda, on the other hand, is courting China to finance the $600 million Bugesera International Airport.

At the last China-Africa conference, the Asian giant committed to advancing the continent at least $20 billion in loans over the next three years.

By Peterson Thiong’o
and Emmanuel Mulondo