China's leverage gives Kenya few good options in seafood spat

Published on
February 19, 2019

A seafood-related uproar has dominated Kenyan media in the past month, with local fisheries industry representatives expressing anger over cheap Chinese imports.

According to fishing leaders including Mohamed Somo, chair of the Lamu Co. Beach Management Units, the industry is calling for protection from Chinese imports, and for greater investment in the domestic fishing sector, with calls growing particularly vociferous for more and better cold storage facilities.

Somo said Kenyan fishing firms are dumping fish – mostly tuna – because they have no cold storage facilities to preserve product that’s been abandoned by price-conscious consumers opting for cheaper imports. Average prices for tuna caught in Kenya have collapsed to one-third of the normal USD 3.00 (EUR 2.65) per kilogram, according to Somo.

Kenya imported 22,362 tons of seafood (mainly Pacific mackerel and tilapia) in 2018, a rise of 11.8 percent on the previous year. But anger over cheap Chinese imports overlooks the relative inaction by Kenya in developing its own fisheries and aquaculture sectors. Kenya last year hosted a global conference on developing a “sustainable blue ocean” but the country hasn’t been able to develop aquaculture on its Indian Ocean coastline and remains a net importer of seafood. The bulk of the country’s supply comes from Lake Victoria, which it shares with Tanzania and Uganda.

While China is currently focused on exporting seafood into Kenya, it may eventually see the potential of establishing its own aquaculture and feed firms in the country, as they have in Ghana and elsewhere in Africa, where the domestic aquaculture sector generally suffers from poor production and management techniques, as well as a relative lack of training and extension services.

That shift may be hastened by the ongoing movement by China to crack down on its aquaculture sector to achieve a more environmentally sustainable output. That could mean lower volumes of tilapia seeking export buyers in places like Kenya. 

On the Kenyan side, a separate public outcry is growing over claims of dangerous levels of heavy metals in Chinese imported seafood. Last November, Kenyan President Uhuru Kenyatta promised a ban on Chinese seafood imports, but it has yet to come into effect. It’s perhaps unlikely that it will, given China’s huge leverage in the country by dint of its central role in the Kenyan economy. 

Data from Johns Hopkins University shows China had lent the Kenyan state nearly USD 10 billion (EUR 8.9 billion) as of late 2018.  To compare, Ethiopia owes Chinese state-run lenders USD 13.7 billion (EUR 12.1 billion), Uganda owes USD 2.96 billion (EUR 2.62), and Tanzania owes USD 2.34 billion (EUR 2.07). Some of the Kenyan debt was extended by the Exim Bank in Beijing, with the Kenyan Ports Authority – operator of key ports like Mombasa – as collateral. China holds 22 percent of Kenya’s external debt.

China’s outstanding bills, while providing leverage over African borrowers, could eventually turn into a liability, especially when viewed through the prism of its bilateral trade, which skewed in China’s favor. Kenya exported USD 96.9 million (EUR 85.7) worth of goods to China in 2017, while it imported USD 3.79 billion (EUR 3.35) in goods from China. Those statistics can be misleading – as of June 2018, India had nearly twice as big a share of Kenya’s imports, though China tranships much of its sales to Kenya through the United Arab Emirates, which ranked as the top source of Kenyan imports. Nonetheless, China ranked 32nd as a destination for Kenyan goods (Britain was in first place, followed by Uganda, Holland, Tanzania, and the U.S. in that order). Clearly – even taking into account any bias in the data due to transhipments – there is room for China to grow its purchases from Kenya to bring balance to a lopsided trading relationship. 

In order for China to see any of the money Kenya owes it, the trade relationship between the two countries has to be rebalanced. There to be more value-add in what Kenya ships to China. This will help Kenya grow its own economy, creating more customers for Chinese tilapia exporters, who are keen to diversify into Africa and away from dependence on the U.S. market.

And there has to be more value-add by Chinese firms in Kenya, rather than simply shipping in vast quantities of cheap manufactured goods from China. Chinese production of seafood and other items in Kenya for local markets can be a solution to Kenyan worries over trade imbalances and lack of competitiveness. 

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