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Mombasa Port a gateway to South Sudan for China

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Straight Talk

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Former Chinese Communist Party leader Deng Xiaoping presented his “Cat Theory” to introduce a capitalist market economy for Mainland China. As per the theory “It doesn’t matter if a cat is black or white;as long as it catches mice,it’s a good cat.” The “Cat Theory” which he put forth was to convince policy makers for the radical shift in economic policies. “Cat Theory” is also relevant if one looks at the way China is pursuing its geo-political interests using its economic clout. There is one more distinct quality about the cat which makes it a stealth killer. When the cat advances towards its prey it hides its claws.

 

 

Kenya is latest in a series of nations to feel the claws of Chinese debt. Latest report attributed to Auditor General suggests that strategic Mombasa Port could land up in the hands of Chinese Bank, EXIM Bank if Kenya fails to repay the loan amount. Though, the Audtior General Edward Ouko has issued a denial. But it does not mean that Mombasa port will not become Chinese one day as we have seen the example of how Sri Lanka handed over Hambantota port to China to pay off its debt.

To sustain higher economic growth China needs unfettered access to raw materials for its factories and a market to export its finished goods. At a time when China is facing pressure from United States of America over trade,Africa offers tremendous opportunities for Chinese economy. Infrastructure investment in Africa reflects China’s decades-old strategy of using soft power. More recent investments in Kenya and Ethiopia represent an extension of the Chinese President Xi Jinping’s Belt and Road Initiative (BRI). BRI is a trillion-dollar investment strategy which focusses on developing transportation sector and infrastructure, particularly in Eurasia region but also in East Africa. The amount of Chinese loans to Kenya has grown tenfold in the five years since China unveiled its Belt and Road Initiative.

In May 2014, Kenya and China inked Sh 327 billion railway line agreement. According to the terms of the agreement,China had to finance 85 per cent of the total cost through Export and Import (EXIM) Bank while Kenya had to bear the remaining 15 per cent of the projects’ cost. The rail line pened in May-2017. China financed Nairobi-Mombasa Railway link is touted as the biggest infrastructure project in the history of independent Kenya and is a part of Kenya Railways Corporation’s new Standard gauge railway (SGR) line. The Mombasa-Nairobi rail connectivity will cut down travel time by half. It will benefit passengers and cargo transportation. The SGR project is expected to link Mombasa to Rwanda with a branch line to Juba in  South Sudan in future. This Mombasa-Nairobi railway line will give China access to South Sudan in near future. The oil production of South Sudan is dominated by Chinese oil majors. China National Petroloeum Corporation (CNPC) pumps nearly all of South Sudan’s oil production. After cessation in 2011,both Sudan and South-Sudan are now mutually dependent on oil revenues for their economic survival. South Sudan is landlocked and has 75 percent of the oil reserves. The oil from the fields of South Sudan is transported through 1600 kms pipeline to reach export terminals in Port Sudan and then it reaches to refiners in China. On August 30th 2018 South Sudanese President Salva Kiir Mayardit paid a visit to China National Petroleum Corporation Headquarters and had talks with Wang Yilin about further deepening oil and gas cooperation. A memorandum was also signed after talks to boost existing production and consider acquisitions of new acreage. The high profile visit signifies the closeness of South Sudan and China.

Mombasa-Nairobi link when  it will be joined with Juba in South Sudan through branch line then it will open an alternate route for Chinese companies and South-Sudan for trade and export of Oil. Moreover, cost is critical in the production of goods and to remain competitive in the globalized economy. Fuel is one such factor that has cascading effect on the entire supply chain right from manufacturing to retail. In September, 2018 Sudan Ministry of Petroleum signed an agreement with three oil companies operating in Sudan and South Sudan to pay a transit fees of $14 per barrel. One of the companies that signed the agreement is China National Petroleum Corporation. In addition to it, if oil is shipped through Sudan, Chinese companies will also have to pay fees for marine terminal usage. Therefore, opening up of an alternate supply route using Mombasa port and railway link will give an edge to China. Therefore, Mombasa is a strategically important port for China as it will be a gateway to South Sudan.

 

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