Negotiate with China as equal partners

It may be through the Chinese that Kenya strikes its first oil and gas ever.

China’s presence in Kenya’s oil exploration process is just a part of the country’s involvement in searching for African natural resources.

Oil, gas and other key minerals form the main target by the Chinese in Africa.

It is a major strategy, to commit African resources for the long term to power and feed the ongoing industrial and commercial revolution in the country.

The Chinese, in most cases, approach the issue through their specialised state companies and state banking institutions that provide capital and credit.

The highest level of government clears all diplomatic huddles for their deals in Africa.

It is evident that African nations have benefited from their engagement with the Chinese, especially at this time when Western economies have diverted their attention away from Africa since the onset of the global economic downturn, which China seems to have escaped.

Decades of humiliation

Africa has benefited especially from grants associated with infrastructure development.

African nations find it easy to transact with the Chinese after decades of near humiliation by Western donors and Breton Woods institutions.

The Chinese rarely insist that African nations keep minimal standards of governance and accountability, which may be detrimental to African interests in the long term.

The interest that Africa’s heads of states have shown in dealing with China, through their massive attendance of FOCAC (Forum on China —Africa Cooperation ) meetings in Beijing and in Egypt, attests to the value given to relationships and deals with the Chinese.

Since partnerships with China will remain important to African economies, it is critical that each nation develops strategies on how to engage with the Chinese so that mutual benefits and value addition are achieved.

Also to ensure that African nations are not disadvantaged in the long term.

A strategy that demonstrates transparency and accountability is most desirable.

Most long term Chinese natural resources deals are bundled together with sweeteners such as infrastructure projects and grants to host countries.

We have also heard of military hardware being packaged in natural resource deals, which is unfortunate.

African nations should develop systems that ensure that they get maximum value out of their natural resources, and not go for easy short term options.

Negotiating deals with the Chinese is said to be a very difficult undertaking.

Therefore developing capacity to negotiate with them is needed.

Deals that package natural resources with long term infrastructure grants may not present the desired level of transparency and permit professional value and benefit analysis and due diligence.

It becomes even more problematic when such deals are hurriedly clinched through MoUs signed at the highest diplomatic levels with little regard to the underlying details.

The Chinese, on their part, need to develop a holistic strategy for engaging with African nations.

This should be a strategy that demonstrates that China is a socio-economic partner with the African countries and not just a country mainly interested in maximising gains from the continent.

We have seen the Japanese model of engagement with Africa which seems to have worked well.

They appear to focus on the export of technology goods to Africa through private businesses and import key resources in the open market.

Japan participates in socio-economic development projects through their JICA organisation.

To be more specific, Kenya needs Chinese capital to develop and exploit natural resources especially oil and gas.

The capital engaged in oil exploration is essentially Chinese government capital and it will contend with higher risks than private capital.

Kenya is currently classified as a high risk frontier in as far as hydrocarbon potential is concerned and is thus attracting less private capital.

This is why the Chinese should be fully facilitated to pursue oil exploration.

The draft constitution, if passed, has provisions ( Clause 92) requiring parliamentary approval for agreements entered into for exploitation of natural resources in Kenya.

This will provide the necessary legal and regulatory framework for oversight and approval of agreements pertaining to natural resource exploitation, including oil and gas.

The Chinese will need to develop and put into practice a definite policy in respect of project labour.

It appears that the Chinese import all technicians and professionals from their country for every project even when Kenya has such expertise.

This is one area that is likely to develop tension if not handled properly and urgently.

China will need to develop a policy and strategy on corporate social responsibility to engage local communities, who are critical in ensuring success in their project execution.

The government will need to discuss with China’s leaders so that Kenya can benefit from Chinese intermediate technologies that are critical to our agriculture, public health, and the SME sector.

This will be a demonstration of socio-economic partnership.

Balancing of trade

The Kenyan government will also need to discuss balancing of trade with China Local private businesses would welcome being more engaged in developing trade strategies between Kenya and China, with a view to improving the balance of trade which is currently skewed in favour of China and troubled by counterfeits and sub standard goods.

When competing for local tenders on various projects and knowing that the Chinese will always come out cheaper because of their government’s credit support, the procurement system in Kenya should address the plight of local contractors before they become extinct as they are barely in a position to fairly compete with Chinese contractors.

All the above considerations will help to create a positive image of the Chinese — that they are keen to become partners with Kenya for the mutual benefit of both countries.

China should avoid being viewed as only interested in natural resources, a labour market for their citizens, and a market for their low priced goods.

Wachira works with Petroleum Focus Consultants. Email: [email protected]