Kenya Should Not Sign China And South Africa Coal Deal

Kenya has one of the most promising futures in all of Africa, but is about to make a strategic mistake similar to one that oil-rich Angola made in 2006.

That year, Angola agreed to borrow $14.5 billion from China in a resources-for-infrastructure deal, repayable in barrels of oil. But it was a disaster: The construction by Chinese companies and workers was often shoddy and unsafe, the promise of jobs for Angolans was unmet, and as many 200,000 Chinese workers and hundreds of Chinese companies ended up dominating its economy.

The worst example was in 2010 when 150 patients had to be evacuated from a Chinese-built hospital in Angola’s capital, Luanda, after its walls cracked and bricks disintegrated. By 2016, the deal had benefitted China not Angola as projects remain unfinished and payments in barrels of oil have soared as prices plummeted.

Undaunted. China has rolled out across Africa and the world its new $1-trillion “Silk Road” infrastructure initiative. Beijing bills this as a “Marshall Plan”, but the reality is that this is all about benefitting a China that is slowing down domestically.

But many African nations are signing up with China. This week in Beijing, Kenya’s President Uhuru Kenyatta inked a $2-billion deal to build a coal plant and port on the scenic island of Lamu, off Kenya’s east coast, in order to import and burn foreign coal. The deal is being legally challenged in Kenya as elections loom.

Of all the deals China pursues, this is the most nonsensical. Kenya is one of the few countries in the world capable of leapfrogging over the 19th century “smokestack” economic development model. The country has enough geothermal, solar, hydro, and wind potential to not only be self-sufficient but to become an energy exporter.

By contrast, China’s Lamu Coal Project is designed to create jobs for Chinese companies and workers, and to generate export revenue for South Africa. Other big beneficiaries will be Chinese and South African banks and shipping companies.

The deal is also insulting, given that Beijing has banned construction of new coal plants in China for the next two years as it fiercely switches to solar, wind, geothermal, and nuclear power facilities.

The deal is economically foolish for Kenyans because the cost of renewables falls — and will undercut fossil fuels in a handful of years — in sunny and windy or geothermally-endowed nations. For instance, in Chile, solar power generation is now half the cost of coal power because of sunshine. In Kenya, the sun shines 300 days a year and 5 to 7 hours daily, similar to Chile’s climate and twice the number of sunny days in Germany where solar is popular.

Besides providing savings, energy self-sufficiency will generate enormous benefits. It will create jobs for Kenyans, eliminate dependency on foreign oil or coal imports, and avoid the risk of sudden spikes in the cost of imported coal, oil or interest rates charged by foreign banks.

Energy represents Kenya’s biggest competitive advantage in addition to its people and high literacy rates. It’s already one of the cleanest energy countries in the world: Geothermal supplies 51% of Kenya’s power needs; hydro-electricity, less reliable due to droughts, up to 39% more; and imported coal, gas, and oil 13% with wind power only 1%.

The wisdom of rapid development of geothermal has been demonstrated. “As a result of the government’s investment in geothermal energy, since August 2014 the cost of power to industrial and domestic consumers has fallen by over 30%,” noted the World Bank.

Fortunately, Kenya has also been bringing on stream new solar and wind farms (Africa’s largest) this year built by consortia from Denmark, the U.S., and China. But expansion and acceleration of these sources should be the focus of economic development, not burning South African coal.

Besides, another advantage of aggressive development of solar and wind is that these can be “off grid” or “mini grid” —- utilized immediately in rural areas as opposed to expensive generation projects that require costly transmission grids.

Kenya’s usage of geothermal power at 51% is second only to Iceland’s where geothermal meets 30% of its power needs. But Iceland’s cheap geothermal power has become an industrial strategy too. Bauxite is shipped there for processing into aluminum for export. Kenya could do the same.

The potential is enormous and so is financing from foundations and governments for the type of renewable development opportunities that Kenya can offer. (China, by contrast, pushes clean energy at home and pushes dirty energy projects abroad and hopes to build 50 coal plants throughout Africa.)

Despite obvious benefits, China’s powers of persuasion have somehow swayed Kenya’s government officials. Even more suspicious is the fact that even those Kenyans — who like coal –have opted to import somebody else’s expensive coal from thousands of miles away rather than to develop Kenya’s coal.

One explanation could be that imported coal provides a way for China to build and control a power plant and huge port on the Indian Ocean for decades. That “chess piece” will insure political influence and market access for Chinese goods and workers forever into Kenya and all of East Africa.

To summarize for other outsiders, this smells like colonization, not nation-building.

And Kenyans deserve better.