Kenya’s president Ruto Turns West for FDI and Partnerships

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  • President Ruto ran for office partly on a Beijing-skeptic platform in response to claims of Chinese predatory lending to African nations
  • The Kenyan President assured American businesses that his administration would create a favourable business climate to encourage foreign direct investment
  • Moderna will soon start producing vaccines in Kenya, joining other major American corporations in the East African superpower, like General Electric, Meta, Google, and Microsoft
  • He obtained pledges in waste-to-energy solutions, space technology, carbon trading systems and markets.

When Kenya president William Ruto and other African heads of state arrived in Washington, DC, last week for President Biden’s US-Africa Leaders’ Summit, It was Kenya’s chance to rebuild strategic ties with the west.

Along with meetings with companies like Google, Visa and the Rockefeller Foundation in the private sector, as well as general conversations on political relations, security, and economic development, the president of Kenya also made a speech about promoting trade and investment between Africa and the US.

President Ruto turns West.

It is familiar turf for Ruto, who narrowly defeated longtime opposition leader Raila Odinga in the August election. Since taking office, he has refocused Kenya’s diplomatic and economic ties with the US and other Western nations, such as the UK, leading some to speculate that his predecessor’s “Look East” policy, which has seen Chinese-built development spring up all over the country of East Africa, is coming to an end.

President Ruto ran for office partly on a Beijing-skeptic platform in response to claims made by US officials concerning Chinese predatory lending to African nations, which many China-Africa analysts believe is unjust, and worries about Kenya’s rising public debt.

It followed an infrastructure building frenzy by his predecessor Uhuru Kenyatta that included the construction of a 27 km expressway across Nairobi and a Standard Gauge Railway (SGR) between Nairobi and Mombasa, both built and funded by China. Today, two-thirds of Kenya’s US$38 billion in foreign debt is owed to Beijing. Nairobi missed a payment in October, resulting in a fine.

Xi Jinping expressed his congratulations on Ruto’s victory. The Chinese president declared, “I attach great attention to the development of China-Kenya relations and stand ready to cooperate with President Ruto to further the growth of China-Kenya effective development cooperative relationship to the profit of the two countries.”

Upon victory in the election, Ruto stated he had a meeting with China’s ambassador and said his election platform provided a road map for closer ties between Kenya and its largest creditor.

But soon after taking office, Ruto’s administration made the SGR contract publicly available, albeit with significant redaction. And by eliminating his predecessor’s policy of requiring the use of the Chinese-built SGR, he fired a warning shot over Beijing’s bow by enabling importers to select their preferred method of carrying cargo from the Mombasa port. With traders now having the option of road transport, revenue from the SGR cargo division will likely be significantly hit. 

Results of operations

The overtures that Ruto has made to Washington have been very evident. Furthermore, if Ruto has just once met with the Chinese ambassador, the president and his deputy, Rigathi Gachagua, have met with senior US officials about 20 times since September, according to public announcements.

He informed US deputy secretary of agriculture Jewel Bronaugh in Nairobi that the US’s Africa Growth and Opportunity Act is ripe for additional trade agreements with Kenya.

During a visit to New York, Ruto assured American business leaders that his administration would create a favourable business climate to encourage foreign direct investment, wealth creation, and employment expansion.

Additionally, he met with US Secretary of State Antony Blinken to talk about investment and trade. He and Meg Whitman, the US ambassador to Kenya, decided to deepen ties in trade, agriculture, health, and regional security.

The efforts seem to be having an impact. According to plans, Moderna will soon start producing vaccines in Kenya, joining other major American corporations in the East African superpower, like General Electric, Meta, Google, and Microsoft.

Kenya increased its peacekeeping efforts in war-torn Ethiopia and the DRC, even deploying troops in the latter, following meetings with Mike Hammer, the US special envoy for the Horn of Africa.

Kenya Trade Balance with its top trading partners,2000-2020 [photo/ Carnageendowment.org]

US Market is Vital for Kenya’s Agriculture and Manufacturing Sector Revival

Meanwhile, the US embassy in Nairobi triumphantly announced in November 2022 that America is now Kenya’s top export market, mainly due to expansion in the textile industry. Ruto’s administration hopes to add 5 million new jobs. The US ranks eighth in terms of imports.

“Much of this has to do with trade revenues; the US is Kenya’s top export market, and our trade relations with the US and China are much more equal. China is by far Kenya’s biggest importer. However, according to Fergus Kell, a Kenya expert at the UK think tank Chatham House, there is a significant deficiency compared to exports.

“Ruto’s economic programme is centred on enhancing productivity in agriculture and manufacturing. The US is regarded as a significant market for exports from these industries. Additionally, there is a desire to increase domestic production to lessen reliance on imports, which would impact China’s significant import volume.

China’s loan book for Africa has “maxed out.”

According to some commentators, Kenya’s warming relations with the US are more indicative of Beijing’s shifting priorities and Kenya’s dire economic situation than it is of American strategy.

Aly-Khan Satchu, an economist and the CEO of investment manager Rich Management, claims that China’s Africa loan book has reached its maximum capacity and that China is being exceedingly frugal with net new money.

“The signal was given off in 2016, during a meeting of the Forum on China-Africa Cooperation, when Xi Jinping spoke of ‘The End of Vanity,’ about Chinese lending on the continent.” stated Satchu.

Kenya’s dire state of the Kenyan economy needs new investments and partnerships.

President Ruto inherited a bare balance sheet, with debt servicing taking up over 50% of government income and an economy defined as being at serious risk of a debt crisis.

The CEO of Amana Capital in Nairobi, economist Reginald Kadzutu, claims that Ruto’s administration was forced to look for fresh investments and partnerships due to the state of the Kenyan economy.

The Kenyan shilling has declined this year versus the dollar due to the inflation rate currently sitting at just around 10 per cent and the central bank of Kenya raising interest rates.

The World Bank predicts that Kenya’s economy will expand by 5.5 per cent in 2022. However, it also warns that the country is more vulnerable to price increases globally because it is a net importer of gasoline, wheat, and fertiliser.

Ruto must make as many affluent friends as possible, given the harsh economic climate and high expectations of his voter base after a gruelling election campaign.

For Kenya to truly profit from the look-West policy, it is necessary to provide affordable long-term concessional loans.

This considers that there is a small market in Kenya, with a low disposable income level and an uncompetitive business climate in terms of expenses.

The truth regarding whether there are actual FDI inflows will become apparent after six months.

Participants at the US-Africa Leaders Summit watch President William Ruto on huge screens as he speaks at the Walter E. Washington Convention Center in Washington, D.C.[photo/Nation.Africa]

What Kenya Bagged on the US tour 2022

The President won billions of dollars in indirect and direct investments from the US government and US businesses, including support for his most crucial electoral pledge, the Hustler Fund.

He obtained pledges in waste-to-energy solutions, space technology, carbon trading systems and markets.

  • Konza Technopolis, the Silicon Savannah, was discussed at the formal meeting at Arizona State University’s Thunderbird School of Management. The government announced in June that investors had acquired more than 80% of the available land for the first phase, reviving interest in the technological city, which had waned.
  • Global Microsoft will also use digital technology to enable SMEs and startups and improve digital skill sets for jobs.
  • After the discussion, the parties decided to cooperate with Kenya to progress space technology and build creative solid industries.
  • The Rockefeller Foundation promised to make Kenya a destination for clean energy. Kenya also received pledges in the fields of climate innovations, cooperation on carbon removal, and carbon trading technology.
  • It was also decided that Kenya would hold the Kauffman Fellow Africa Venture Capital Summit in September 2023, attracting 300 of the world’s top venture capitalists to Nairobi.
  • The President also obtained Visa’s pledge to support Kenya’s Hustler Fund for Financial Inclusion, e-commerce expansion, and e-government project.

Read Kenya’s investment potential under Ruto’s presidency.

Maingi Gichuku is passionate about helping African businesses grow by offering technology solutions. With a BSC in Zoology and biochemistry, Gichuku yearns for an Africa that can find solutions to its challenges. My drive is to see an economically dynamic Africa and embrace its populations by creating opportunities cutting across the social and economic strata.

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