Billions in aid cash at stake as Uhuru goes on Japan tour

Kenya will be seeking to unlock its share of the $32 billion (Sh2.9 trillion) that Japan has set aside for investment and aid to Africa during President Uhuru Kenyatta’s visit to Tokyo that begins Thursday morning.

Japan committed the money, to be disbursed in five years, during the fifth edition of the Tokyo International Conference on Africa Development (Ticad) in June 2013, a move that has prompted a number of African nations to intensify their courting of Tokyo for a piece of the pie.

Mr Kenyatta’s four-day visit underscores the strong bilateral ties between Nairobi and Tokyo that helped Kenya to win billions of shillings in grants, project finance, foreign direct investments and technical assistance from Japan.

Japan has also gained from the relationship that began from Kenya’s Independence, securing a significant market for its export-dependent economy that produces a wide range of industrial and consumer goods including motor vehicles, electronics and cranes.

Japan is currently seeking Kenya’s support in global diplomatic circles where it is rallying allies to back its bid for a non-permanent membership to the United Nations Security Council (UNSC) in 2016/17.

The Asian nation has held the position before — most recently in the 2009/10 period. Its fresh bid for a seat in the powerful UN organ comes under the leadership of Prime Minister Shinzo Abe who is determined to boost Japan’s geopolitical standing, a stance that has led to tensions with old rivals South Korea and China.

“Kenya has confirmed its support, in line with its broader quest for UNSC reform,” Mr Kenyatta’s spokesman Manoah Esipisu said in a statement.
Kenya is on the other hand seeking to ramp-up the inflow of Japanese aid and investment to boost the economy, create jobs and deliver a raft of social services including health care and water supply to rural communities.

The actual distribution of the ballpark figure of $32 billion is expected to depend on individual negotiations by African countries, setting the stage for intensified diplomatic activity.

Of the amount, $14 billion is to be disbursed in the form of overseas development assistance (ODA) while $16 billion will fund public-private projects.

Mr Kenyatta will be following up on discussions that Treasury has opened with Tokyo seeking funding for a number of projects through Yen-denominated loans with single digit interest rates.

The list of projects in the pipeline includes construction of the Nakuru-Nandapar road linking Kenya with South Sudan at a cost of Sh32.9 billion.

Others are the universal health care and Olkaria V geothermal power plant that KenGen says will produce 140 megawatts at a cost of Sh31.5 billion.

Kenya has rooted its case in historical ties with Japan besides offering a conducive environment for the Asian giant’s multinationals to do business in Africa.

“Kenya has a longstanding and strong relationship with the government of Japan covering key aspects of development cooperation in the economic, political as well as socio-cultural areas,” Mr Esipisu said in the statement.

Japan is one of Kenya’s most important international partners with a triple connection as a diplomatic ally, donor and trade counterpart.

The two nations’ bilateral trade stood at Sh86.4 billion in 2013, with Japan mainly exporting heavy machinery, motor vehicles, and electronics to Kenya.

READ: Japan lends Sh25bn to Kenya to help expand Mombasa port

The balance of trade, however, remains tilted against Kenya which exported low-value primary commodities like tea and flowers worth Sh2.7 billion in the same period.

“Suffice it to say that the President is keen to make the most of them; and keen, also, to make progress on cutting sharply the trade imbalance that now exists between Kenya and Japan,” Mr Esipisu said.

The government is betting on a wave of new local investments by Japanese conglomerates to ameliorate the trade imbalance. Toyota has, for instance, opened a bus assembly plant in Changamwe with an initial outlay of Sh500 million.

The plant is expected to scale up its capacity to 200 units per month from the current 40 units.

Nissin Food Holdings has also established a joint venture with Jomo Kenyatta University of Agriculture and Technology to manufacture food products for both local consumption and export.

Nissin has invested Sh350 million in the venture while the university pumped in Sh150 million.

Besides, Toyota has recently signed a Sh103 billion contract to build Kenya’s first fertiliser factory and has secured the necessary funding.

READ: Japan firms to build fertiliser plant in Kenya

Japan Oil Gas and Metals Exploration Company has also expressed interest in Kenya’s oil and mineral deposits, and has signed an agreement for oil exploration with state-owned National Oil Corporation.

The new investments are expected to firm up Kenya’s longstanding economic ties with Japan whose cumulative assistance to Kenya stands at Sh445 billion.

Total grants to Kenya have hit Sh69.3 billion, helping the country fund specific projects and the national budget.

Some of the ongoing projects funded by grants from Japan include the dualling of the Nairobi-Dagoretti Corner Road and water systems in Baringo and Narok.

Tokyo has lent a cumulative Sh243 billion to Kenya, offering a relatively cheaper source of finance for capital-intensive infrastructure projects.

Some of the ongoing projects funded by the soft loans are modernisation of the Mombasa Port at a cost of Sh10.2 billion, Sondu Miriu hydro-power project (Sh15.39 billion), and Olkaria IV geothermal power station (Sh23.4 billion).

Besides economic matters, Mr Kenyatta will be seeking financial and technical aid from Mr Abe’s government to fight terrorism that has become a major threat to Kenya.

“The President will consult closely with the Prime Minister of Japan in these matters, to see what experiences we can share, and how both countries can help each other overcome the scourge of terrorism,” the statement said.

Japan has announced a commitment of $200 million (Sh18.2 billion) to countries affected by terrorism in the Middle East and Africa.