Of the Chinese Fish, Imbalanced Trade, Debt & Market Captivity

“Debt is a cleverly managed reconquest of Africa.” – Thomas Sankara.

“He who feeds you, controls you.” – Thomas Sankara.

While acknowledging the importance of borrowing as a measure aimed at financing key projects and economic activities for a country, the primary concern remains the sustainability of debt, and how debt financing affects the overall economic performance.

With a number of debt analysts, for instance the Jubilee Debt Campaign, pointing out to an impending debt crisis for African countries, it would be fundamental to first consider the politics and economics of external debt, and secondly, the conditionalities attached to it.

In regards to the politics and economics of external debt, the late Thomas Sankara aptly summarizes it in terms of the reconquest of Africa. Essentially, loans advanced by various entities are repaid with interest, and this generates income for the creditors. As such, more Chinese debt for the African countries means more income for China, a similar case with the World Bank and other creditors.

Politically, geopolitical ambitions fuel the need for the formation and adoption of the so-called mutual trading partnerships. Elementally, such partnerships largely benefit the foreign entities that issue out loans to the developing economies.

Africa is a card shuffled by foreigners for ages resulting in dehumanizing statements such as “whoever controls Africa controls the world.” From the Arab slave trade, the Trans-Atlantic trade, colonialism and currently the neo-colonialism era, foreigners dictate the pace of Africa’s game at the global stage.

Part of the foreigners’ games of strategy include foreign aid whose failures override its successes. Advancing foreign aid in form of loans and grants comes attached with conditionalities. The World Bank and the Western states especially in the 1980s and 90s often offered foreign aid with calls for adoption of democratic institutions and market-oriented economic policies. This changed following China’s increased presence in Africa with African countries preferring to partner with the Dragon on the account of issuing loans without conditionalities.

The perception that the Chinese loans come with no conditionalities is a lie! It is commonsense economics that there is no free lunch and there must be a trade-off between cooperating entities. Therefore, for China, issuing loans to African countries is not enough. Access to African markets is a condition inherently pegged on the Chinese loans.

Recently, Uhuru Kenyatta banned the importation of fish from China arguing that the local fish market was on a free-fall. In response to the supposed ban, China, through her ambassador to Kenya Li Xuhang termed it as a trade war while threatening to impose trade sanctions including cutting funding for the economically unviable standard gauge railway line. However, the threats by the Dragon never took effect following the suspension of the ban by the Kenyan government.

Back to the moral sentiments of the indefatigable Thomas Sankara, whoever feeds you controls you. Signing of economic partnerships between African countries and foreign entities involves so many underhand deals that are never disclosed to the public. Such covert deals, in the case of China, seek to create markets for the Chinese goods, and employment for the Chinese people. The government’s suspension of the ban on Chinese fish and China’s threats exemplify the Sankarist view on foreign aid, and dispel the notion that China’s loans are free from conditionalities.

Ordinarily, trade relationships between two countries need to be a win-win affair but the so-called economic partnerships propagated by China can best be classified as highly parasitic and imbalanced.

Take a look at the trade statistics between Kenya and China and notice how it is highly imbalanced. According to the July-September 2018 issue of the Policy Monitor magazine published by the Kenya Institute of Public Policy Research and Analysis (KIPPRA), Kenya imported Chinese goods worth Kshs.390 billion in 2017 and exported commodities worth Kshs.9.9 billion to China in the same year.

An anachronistic plan hatched by China in 2016 to lure the East African Community member states to signing a free trade agreement with her indicates an aggressive ambition by the Asian nation to capture and control the markets of the region.

Luckily, the Kenyan government rejected the trade arrangement which would have led to the death of the Kenyan industries especially the medium and small microenterprises. In as much as this move may be termed as protectionist, it is necessary that the Kenyan government adopt highly protectionist policies to promote the growth and development of the manufacturing sector, key in creating a high number of employment opportunities.  

Free trade favors advanced economies and leaves the poor, developing countries worse off. China’s intentions to convince the East African Community member states to sign the free trade agreement ignores the global economic history of development. China and the Asian Tigers realized faster economic growth and development on the basis of policies protecting the infant industries, the same case with the now classified developed economies like the USA, Germany, Britain and others.

Going back to the reaction by the Chinese ambassador to Kenya, he bluffed that Kenya’s ban on imported Chinese fish was against “the principle of free trade, the rule of law, adherence to bilateral agreements and the rules of the World Trade Organization (WTO).” All these aforementioned trade doctrines will never work in favor of developing countries including Kenya because of their skewed nature working to the advantage of the advanced economies.

Fast forward, was the ban on the imported Chinese fish doomed to fail? Possibly yes. In June this year, the not-so-competent Cabinet Secretary in charge of the Ministry of Agriculture, Mwangi Kiunjuri, came to the defense of the importation of the Chinese fish stating that the supply in the local market never met the demand. Quite logical.

But there are fundamental issues which if addressed would ward off the importation of fish from China. The first issue is to incentivize the production of fish especially in geographical areas where fishing is one of the main economic activities. Additionally, fish farming has to be encouraged but this should be among communities familiar with fishing.

As matter-of-factly, the Kshs.60 million fish processing factory built in Nyeri County in 2015, following the introduction of fish farming in the region as part of the 2009/2010 Economic Stimulus Programme (ESP), is now considered to be a white elephant with its location among a community not accustomed to eating fish heavily influencing its collapse.

Lack of initiative by the Jubilee administration to address the root cause of the increased importation of fish from China is deliberate. Kenya is China’s captive market and with the Chinese loans and/or debts, the Mandarins will dictate what they want in exchange for their financial and technical assistance.

Failure of Kenya and other African countries to learn from history is the bane for their economic floundering. Western powers considered African countries to be captive markets during the colonial era and thereafter in the post-colonial period. The same script is being played by China; on advancing ‘cheap’ loans and controlling the markets. This is neo-colonialism and lack of economic independence.

Therefore, increase in the importation of Chinese fish has got more to do with Kenya being a captive market as a consequence of borrowing finances from China than the purported high demand and lower supply in the local fish market.