Tuesday, November 3, 2009

Deals with China will hurt Kenya, warn researchers

By JIM ONYANGO - Tuesday, November 3 2009 at 00:00

The increasing investment, foreign aid and diplomatic ties with China will hurt Kenya in the long run because of limited joint ownership or local capital in Chinese investments, researchers have said in a survey to be released on Tuesday ahead of next week’s major meeting between Chinese government officials and African leaders in Egypt.

Kenya’s ministry of Foreign Affairs has confirmed that a strong delegation comprising of yet to be named government officials will represent Kenya at the second ministerial conference on Forum on China Africa Co-operation in Sharm El Sheikh, Egypt, from November 5-8 which comes as China directs its appetite for raw materials to Kenya.

Kenya is hoping the conference will build on its trade with China which is still skewed in China’s favour.

In 2007, China exported goods and services worth $980 million while Kenya exported to China goods and services worth $38 million.

But as the government officials prepare to join other African leaders at the conference which has the potential of cutting deals for China’s corporations in mining, oil and infrastructure construction, researchers are warning that the continued involvement of China in Kenya’s economy, even though beneficial, could be short-lived and could lead to the destruction of local businesses and labour market.

“There have been complaints to the effect that the Chinese investors do not usually offer job opportunities to local professionals,” says Dr Joseph Onjala, a researcher at the University of Nairobi’s Institute for Development Studies, who participated in the survey to be launched on Tuesday.

The survey carried out by 14 universities in Africa was supported by the African Economic Research Consortium (AERC) — a World Bank funded organisation devoted to economic policy research and training, says African leaders.

The report comes hot on the heels of accelerated China’s engagement with Kenya in recent weeks as the communist state started exploring oil and mineral resources besides completing several road infrastructure projects across Kenya.

Even though Kenya is yet to discover oil, state controlled China National Offshore Oil Corporation (CNOOC) started the sinking of a $26million oil well in Boghal, near Isiolo town in northern Kenya in a move designed to keep Africa’s natural resources flowing to China’s booming economy.

But analysts say despite National Oil Corporation of Kenya having 13 per cent stake in the prospecting well, it lacked local labour input.

“Increasingly the structure of employment is changing, with an increasing proportion of foreign employees in Chinese enterprises,” says the report by the University of Nairobi’s Institute for Development Studies.

China is also planning to take over from Qatar the development of a multi-billion dollar port and transport corridor that could provide a new export route for Chinese oil in southern Sudan.

This came up after a Kenyan delegation led by Prime Minister Mr Raila Odinga visited China last month for talks on the project involving the construction of the port, road and rail lines that would link to Kenya’s borders with Ethiopia and southern Sudan.

But China’s dominant metals producer Jinchuan Group pulled out of a Titanium mining deal in Kwale district saying that a Canadian firm Tiomin resources, holding the rights to the mineral, had not given it enough disclosures to enable it buy the stake in the mining firm.

Jinchuan group is considering approaching the Kenyan government directly to wrestle the mining license out of the Canadian’s control in a move that would undercut the influence of Tiomin Resources in Kenya.

The Canadian firm has held the mining permit for nearly 10 years without starting the project.

Local researchers feel that Chinese firms are undercutting local companies already engaged with Kenya.

They estimate that more than 50 per cent of construction activities in Nairobi both private and state-sponsored have been captured by Chinese construction firms usually preferred for projects ranging from roads, water systems, power generation and hospitals.

“Fears have been raised about threats to engineering talent and skills and the collapse of local construction companies due to invasion of Chinese construction firms” says the report.

Eve though Beijing’s scramble for influence and resources in Kenya is raising deep concerns among analysts and researchers, the ministry of foreign affairs says it is preparing a business matchmaking conclave between Chinese and Kenyan firms on the sidelines of the China-Africa forum in Egypt with a view to milking opportunities from the Far East country.

“The ministry intends to utilize the opportunity to leverage on the economic and commercial opportunities offered by China…the government will make arrangements to provide comfortable ground transport in Sham El Sheikh during the breadth of the programme” says the ministry in a letter inviting local businesses to participate in the meeting in China-Africa meeting in Egypt.