By Peter Wanyonyi
On May 17, Sri Lanka was down to just one day’s supply of petrol. The country, beset by debt and unable to afford imports of fuel, food, cooking gas, or anything else, was in the grip of devastating riots and protests, as irate citizens burnt government vehicles and beat up government officials across the island. The island’s worsening economic crisis turned deadly: an MP was killed, ministers’ houses were torched, and hundreds were injured as violence spread across the island.
The older Rajapaksa was once the toast of the nation. Serving as President of Sri Lanka from 2005 to 2015, he led the country’s military in their civil war against the secessionist Tamil Tigers. Rajapaksa’s forces became increasingly ruthless in the war, and Western countries condemned the violence against Tamil civilians that the military quickly gained notoriety for. Starved of Western support and weapons, Rajapaksa turned to China for military aid. The Chinese came through for him, resulting in the Sri Lankan army defeating the Tamil Tigers in 2009 and ending the war, which had lasted over 25 years. But China was interested in more than just a government victory.
Powerful empires need to dominate sea lanes for trade and military projection. For this, they need geostrategic locations from which they can deploy forces quickly, and deep-water ports where they can berth their navies. Countries that possess these features become highly coveted targets for ambitious empire-builders, and Sri Lanka is no exception. From the mid-1600s to the early 1700s, the Dutch and Portuguese empires fought bitterly contested wars for control of Sri Lanka before the British Empire gained control of the island and used it to guarantee its control of trade with the crown jewel in its empire, India. Later, as the British Empire waned, Sri Lanka gained independence – and was co-opted into the American camp during the Cold War, with China and the Soviet Union also continually vying for interest and control of the island. The Soviet empire collapsed, the Americans lost interest in the region, and a new power arose that coveted Sri Lanka for its unique geographic features. That power was China.
Sri Lanka occupies a highly strategic location, straddling vital sea lanes that host numerous sea trade routes. Nearly 70 percent of the world’s oil and over 50 percent of the world’s container shipments pass through Sri Lanka’s southern waters. Sri Lanka also has many natural deep-water harbours that, if developed, can quickly become critical maritime hubs in the Indian Ocean region, given Sri Lanka’s easy access and central location to the Middle East, East Africa, South Asia, and Southeast Asia.
And so, as Rajapaksa celebrated his victory over the Tamil Tigers, the Chinese showed up bearing gifts. Sri Lanka gorged on hefty loans from the Chinese and set about investing in impressive infrastructure: $5 billion was splurged on a new port, a new airport, and broad highways cutting back and forth across the island. China attached no transparency or accountability conditions to the loans, and the Rajapaksa clan grew fat and wealthy off the Chinese largesse. Another $2 billion of Chinese money went into setting up a modern business hub near the port of Colombo, which itself had received hundreds of millions of dollars in Chinese investment. China snapped up Sri Lanka’s debt whenever it could, and loaned Sri Lanka the money to repay interest on those loans. Colombo’s exposure to China was so massive and apparent that it was used to warn other countries bent on tapping China’s bottomless pockets.
In July 2018, this column, running in our sister paper, The Nairobi Business Monthly, cautioned Africa to beware of the Chinese debt trap and warned of the calamity soon to befall Sri Lanka (see Nairobi Business Monthly, July 2018, “Africa, Beware of the Chinese Debt Trap”).
And then Covid-19 struck. As the world went into Covid lockdowns, trade in the Asian region – the hardest hit by the virus – ground to a halt. Sri Lanka’s role as a regional business hub evaporated overnight. The ships that had been paying berthing and transit fees to Sri Lanka stopped coming. The shiny new ports and airports it had built with Chinese loans fell silent and sat empty. Sri Lanka was making no money, but its Chinese loans were still due. Sri Lanka turned to its creditor for yet more loans to avoid defaulting on the loans. China patiently dished out yet more money, and Sri Lanka sunk deeper into debt.
By early 2022, Sri Lanka was in a bind. It needed to repay $7 billion in loans to China, but the country was broke. China applied the squeeze, and Sri Lanka was forced to hand over control of its assets – ports, airports, roads – to China. That wasn’t enough, though, and Colombo was forced to beg China for a restructuring of its debt. China declined, and Sri Lanka ran to the IMF for help. The IMF also declined, having been side-lined by Sri Lanka during its Chinese-loan boom years. The local currency plummeted, and inflation shot up: in March 2022, consumer prices rose by 19 percent.
As imports became more and more expensive, fuel shortages became a daily occurrence. The country ran out of cooking gas, and widespread power outages created chaos. Food and medicines became scarce, and violent street protests broke out. The Rajapaksa clan had lost power after the 2015 presidential elections, when Mahinda lost to his former aide, Maithripala Sirisena. But the clan had made a comeback after his brother Gotabaya Rajapaksa won the presidency in 2019, helped in part by a spate of mysterious bombings that led to heavy criticism of Sirisena, who ended up serving just one term in office. The Rajapaksas had quickly gone back to their Chinese friends, making up for lost time by taking on even more Chinese loans. But in May 2022, Mahinda was forced to resign.
Days later, Sri Lanka defaulted on its debt. At the time of writing this article, the country is in deep crisis: there is no electricity on the island, there is no fuel, no cooking gas, no food, and with violence in the streets. Without the money to pay the military, it is doubtful that the government can survive, and Sri Lanka’s creditors – principally China – will be forced to either take a haircut on their debt or commit to re-establishing order on the island by sending in some form of a peacekeeping force. But what, you wonder, does this have to do with Kenya and Uhuru Kenyatta’s legacy?
Everything, as it turns out.
Uhuru Kenyatta’s presidency has uncannily mirrored that of Mahinda Rajapaksa. Uhuru’s economic platform is based on the same foundation as Rajapaksa’s: eschewing conditional Western loans and instead going after China’s “easy money”. The going has been good for Uhuru’s cronies, who have grown fat off the loans. Kenya has built impressive infrastructure during Uhuru’s presidency – everywhere one looks, there are gleaming new railway stations. Our main airport, JKIA, is now the most modern airport in the region and all of Africa outside South Africa – without the thieves and robbers one encounters in South African airports. Brand new highways crisscross Nairobi and the rest of the country. Shiny buildings adorn Nairobi and other cities as Chinese money sloshes across Kenya.
Uhuru’s splurge on infrastructure is the most visible legacy of his “Big Four” agenda, which made up the main plank of his re-election platform in 2017. He promised to focus on developing affordable housing, food security, universal healthcare, and manufacturing. These developments were expected to create millions of jobs and lift Kenya towards the business end of middle-income status by the end of this year.
At least that was the plan – the reality turned out differently. Developing affordable housing requires bravery in Kenya because it needs land reform in and around our urban centres – and land reform is the one thing Kenya’s ruling classes all agree on: it must never happen. Uhuru’s affordable housing ambitions died quickly. Achieving food security assumes that Kenya’s idle farmland – most of it held by colonial-era concessions to owners of British descent – will be turned into productive farms. This is a touchy issue: Kenya’s position as the economic powerhouse of East, Central and Southern Africa (excluding South Africa) relies on businesses owned by a small, immensely wealthy White elite, alongside their Asian and ruling-class African elites.
Any moves to confiscate the land owned by this privileged few would see Kenya quickly descend into Zimbabwe-style economic chaos, a situation that South Africa is inexorably heading towards. No one – not even Kenya’s Africans – wants that. Add to this Kenya’s attractiveness as a destination for refugees from the region’s never-ending wars, and the corruption of the country’s ruling class, and food security was never going to happen – how do we achieve food security when we cannot stop refugees pouring in? The World Food Programme feeds some of them, but Kenya must also devote resources to the teeming camps. Uhuru quietly ignored his pledges to enhance food security as a pillar of his second term.
Manufacturing has always been a mainstay of Kenya’s economic leadership in the region. But Covid-19 put paid to most of this, as a brief but ill-advised lockdown – thankfully abandoned when it became clear that it was pointless – wreaked havoc on the sector. The corruption within Kenya’s electricity sector and the inefficiency caused by the Kenya Power monopoly have continued to make Kenyan manufacturing expensive and almost untenable, and Covid was nearly the final nail in that coffin. But although the sector just about survives, it will never be the success that Uhuru thought it would be, and this was clear from about 2018.
Uhuru, therefore, settled on the one thing that he could deliver: infrastructure. In this, he followed the Sri Lankan model. Kenya occupies a very strategic location on the East African coast and is famously the gateway to the resources locked up in Congo to the West. Only Kenya and its sister country, Uganda, have the roads to get Congolese timber, minerals and other resources to the world market. By an accident of geography, Congo is to the West of Africa, while the markets for its resources are to the east, in Asia.
The journey around South Africa from Asia to western Congo is long, expensive and dangerous. And, at any rate, Congo’s resources are concentrated in the east and south of the country, close to Tanzania and Uganda – and Tanzania lacks the road and rail networks needed to ferry those resources to the coast for onward transport to China. That leaves just one viable route: moving Congolese resources from Eastern and Southern Congo through Uganda – which has a good road network – and onto Kenya’s shiny new highways.
This is why the Chinese have invested so heavily in Kenya’s rail, air, and road links. As with Sri Lanka, Kenya is walking a debt-servicing tightrope: in December 2018, a leaked letter from Kenya’s Auditor-General warned that the Kenya Ports Authority risked losing its assets to China if Kenya defaulted on its Chinese loans. The letter was hushed up and declared “a mistake”, but the alarm bell was ringing. It has become louder since.
Last month, it was revealed that annual Kenya’s debt repayments for Chinese-funded infrastructure projects had doubled, and now stand at Sh74 billion. Chinese lenders dominate Kenya’s loan repayments, with over 80 percent of our loan repayments heading to China. Alarmingly, Kenya asked China for debt relief in December, arguing that Covid-related economic stagnation meant Nairobi was not in a position to service its debt. China rejected the request. Today, Chinese loans to Kenya amount to over US$ 7 billion – and growing, as China is projected to lend Kenya billions more this financial year. Repaying these loans is dependent on good economic performance in Kenya, which in turn depends on two critical factors: the coming presidential election and the state of the world economy.
It is no secret that worldwide food shortages are coming. Vladimir Putin’s demented invasion of Ukraine has resulted in the world losing over 12 percent of its wheat crop, which is Ukraine’s share of world wheat production. The resultant Western sanctions on Russian resource exports have created a massive spike in oil price, as Russia is a major oil and gas producer. Even worse, Russia, Ukraine and Belarus account for up to 40 percent of world fertiliser production across the Potassium, Nitrogen, and Phosphorus ranges.
Ukraine’s production has been destroyed. Russia and Belarus are under sanctions and cannot export their products easily. This shortage of fertiliser will lead to poor harvests and massive food shortages in the very near future, and economic growth in food-insecure countries like Kenya – and the rest of Africa – will be massively impacted. But our people say that among the blind, the one-eyed man is king. Even with food shortages, Kenya will be far better off than its neighbours, where food shortages and perennial wars – Ethiopia, Somalia, South Sudan, and Congo are all at war – will see the usual refugee numbers made worse by food shortages. So, naturally, Kenya will receive even more refugees than usual. Kenya’s economic productivity will be strained, and our ability to pay our Chinese debts will be severely tested.
And then there is the politics of succession. Once upon a time, Raila Odinga could be relied upon as incorruptible and financially unimpeachable. But time changes everyone, and Raila’s hunger for the presidency has seen him bury his principles and go to bed with Uhuru’s mob. It’s no exaggeration to state that the president’s inner circle is exceedingly corrupt: Uhuru himself has stated so on many occasions. These nameless nabobs will continue to run the show in a Raila presidency as the quid pro quo for accepting the old man’s candidacy.
The alternative is not appealing either. William Ruto’s rags-to-riches journey is amazing, but no one pretends that he became one of Kenya’s wealthiest people by burning the midnight oil and relentlessly applying himself to business. Influence-peddling and outright corruption by his inner circle has always been an open secret, and the DP himself has faced accusations of having an unhealthy appetite for other people’s land – and for public money. He has denied the accusations, but the impression has remained, and it’s not difficult to see why. Even the presence of bridesmaids Musalia Mudavadi and Moses Wetangula is little comfort: Kenya’s most infamous corruption scandal, Goldenberg, happened on Mr Mudavadi’s watch at Treasury. And Mr Wetangula’s alleged entanglement with the real estate assets of the Kenyan embassy in Tokyo needs no retelling.
All political careers end in failure. Uhuru’s is no exception. As his presidency winds down on the back of impressive infrastructure achievements, it cannot escape notice that Kenya’s Chinese loans will soon come to resemble Sri Lanka’s: unpayable and unserviceable. This mess, then, is what Uhuru hands over to his successor, whichever of two it might be. As legacies go, this one is a poisoned chalice. (
— The author is an information systems professional.
Email your news TIPS to Editor@nairobilawmonthly.com, and to advertise with us, call +254715061658 anytime of the day
