Don't worry. Nothing to see here. This has nothing to do with Russia. It's just China assuming its rightful place in the world.



China To Take Over Kenya's Largest Port Over Unpaid Chinese Loan
by Tyler Durden
Thu, 12/27/2018 - 10:27

No more Mr. Nice Chinese Guy.

After years of "benevolent" handouts to various African countries by Beijing, all of which however came in the form of loans, of which few have led to viable, long-term projects and cash-flow generating assets, and led to accusations that China is pursuing a "new colonialism" of the African continent (and more recently, nations along the One Belt, One Road corridor), China is demonstrating to the world what happens when its debtors refuse to pay up.

But first a brief detour: readers will recall that China's ambitions for Africa are hardly new, and were discussed here over 6 years ago for the first time in "The Beijing Conference": See How China Quietly Took Over Africa"

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And while back then few noticed, in September of 2018, during a major conference with African leaders, China's president Xi Jinping proposed an additional $60 billion in financing for Africa in the forms of assistance, investment and loans, the western media was quick to label the latest round of Chinese financing a "debt trap", to which a top Chinese official responded at the time that Beijing is merely helping Africa develop, rejecting criticism it is loading African countries with unsustainable financial burdens.

It turns out, the official was not exactly telling the truth, because far from handing out free money the African Stand reports that China is likely to take over Kenya's lucrative Mombassa port if Kenya Railways Corporation defaults on its loan from the Exim Bank of China.

Call it a "debt-for-sovereign equity" exchange with a twist.
Kenya's Mombassa port

China's aggressive strategy emerged when a leaked audit report showed that the Kenyan government had inexplicably waived its sovereign immunity on the Kenya Ports Asset when signing the agreement, thus exposing the Kenya Port Authority to foreclosure - and confiscation - by China's Exim Bank.

The report said that "the payment arrangement agreement substantively means that the Authority's revenue would be used to pay the Government of Kenya's debt to China Exim bank if the minimum volumes required for [rail] consignment were not met", auditor F.T Kimani wrote. "The China Exim bank would become a principal over KPA if KRC defaults in its obligations, reports Africa Stand and All Africa news.

KRC accepted the multi-billion dollar loan from the Chinese institution to build the Mombassa-Nairobi standard gauge railway (SGR), with construction services provided by China Roads and Bridges Corporation (CRBC), a division of state-owned conglomerate China Communications Construction Company (CCCC), which is why some have said the loan was a low-risk, full recourse vendor financing, one where it is China who gets all the upside while sticking the naive natives with all the potential downside, as the "worst-case scenario" now confirms.