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00:00A growing web of rail road and sea routes is at the core of Beijing's foreign policy strategy. From China to Southeast Asia Central Asia the Middle East Europe and Africa the Belt and Road Initiative is a huge global project expanding and integrating infrastructure networks which President Xi Jinping has called the project of this century welcome to Mombasa. Traders have been coming to Kenya's oh this city for centuries. The Arabs the Portuguese the British and Indians have all tried their hand at making a fortune here. The latest are the Chinese we'll explore that grandiose ambitions asking whether dreams in far off Beijing match those on the African continent. I'm Rishaad Salamat this is belt & road . China's trade superhighway Mombasa is seen as the gateway to East Africa. At least five landlocked nations including Uganda and Rwanda rely on this port to get goods in and out. The Mombasa Nairobi standard gauge railway or SGI is the nation's biggest infrastructure project since independence from Britain in 1963 . Kenya paid three point eight billion dollars. China arranged the financing and built what is the start of a rail network that promises to open up the passage of people and goods deep into the heart of the continent. Yes Jack RTS journey to Kenya's capital to five hours down for more than eight for cargo transported by truck . He belt & Road Initiative is I believe a good initiative for for the region. The railway link from Mombasa to Nairobi. I have reservations about the price that was paid for for the rail link however the fact that we have a rail link now is creating immense opportunities leading to reduction in supply lead times and so on. That's what we wish for. There's nobody else who can compete with the Chinese investment into infrastructure. However when we look at it from an African perspective Kenyan perspective investments coming in to build our infrastructure are very welcome from wherever they're coming whether it's American with his Chinese or whether it's European because they need to make us more competitive the market is there but to get connectivity to get our products out there is a problem. So we hope that to be afraid that this markets can be opened up not only to China but to all other countries with India. And that's what we are hoping for better transport links are vital if regional expansion is not to hit the buffers. The IMF forecast that the East Africa community will see growth of six point two percent in 2019. Mombasa port itself is expanding to meet the challenge . The equivalent of one point two million twenty four containers pass through this port every year. What's more that figure is expected to grow by 3 to 5 percent per annum. The business the potential is blindingly obvious so far execution has been the source of a litany of complaints. Sure the containers get to the capital quicker. The trouble starts when they get there and when the bills arrive. The government says it's listening and is determined not to create a very expensive white elephant such in good cause presses roll out billions of labels each year . People in supermarkets around the world are unwittingly familiar with some of them. There are seven cargo trains a day coming in bringing hundred fifty containers a day into Nairobi from Mombasa. So that's almost 800 to a thousand containers a day which all used to get pushed onto the single lane road from Mombasa to Nairobi. Tremendous congestion fatalities and so on . However Kenya has not properly addressed the bottleneck at the Inland Container depot in Nairobi and it is heaving with containers so that congestion within Nairobi is hurting business . Do you use it. Yes we are. We are all even though it's more expensive it's in fact where you are kind of forced to by the government. So logistics is always two way right from Mombasa going all the way to Rwanda and then of course later on it can go all the way to West Africa. As we speak today there is no railway or roadway going through West Africa and that can be done very easy to expand it. However when we talk about competitive as we we're also talking about return logistics going back from Kigali all the way to Mombasa all the way to China. We could have a two way logistics becoming competitive . This is so key for all our countries to have export products and export into those markets so that we're competitive both ways . Bitcoin's East Africa's leading producer of edible oils it also makes detergents and other consumer products with factories in Kenya Uganda Tanzania and Madagascar. It sells into 18 regional countries. Chairman Shah is cautiously optimistic about the wider impact of Chinese investments. I think there's no doubt about one thing that China wants to do much more trade right . Whether we call it economic dominance or whatever. They have a competitive edge today. Therefore if they start bringing their industries here to produce here to sell to the West what it does to Africa is not that it's going to be ownership is going to be jobs it creates jobs here in your growth grab and sustain your number one position. Does this worry you. For us as a company because we're not worried because we don't see Chinese goods that we make here. We don't see these coming from China. In fact China is a good market for some of the consumer goods and with its population China India both with their populations there will need much more food there will need to have a lot more of products and that's what Africa can do. So we've got to look at the competitive advantage for Africa and to find what other products that we can then export into China using the same belt & Road initiative. How much do you currently then sell to China or India zero . This glass half full attitude is often countered by fears that all this huge the expensive infrastructure is simply a fast track for China to exploit new markets by leaving African countries swimming in debt. There have also been complaints about transparency for example how China road and bridge corporation was given the contract to operate the line for 10 years and there was no tender process Beijing's African enterprise is really based on trade and not benevolence. It's also inextricably linked to the way the country sees itself in the future. In a geopolitical sense and beyond. Meanwhile for Kenya and its neighbors they see a medium term locomotive for growth. But down the track things look a lot more murky. Some are raising questions about the level of indebtedness on whether or not it's a win win relationship . Coming up we have to look at whether it can be that or it would be a situation where there's only one victim after Mombasa containers end up here in Nairobi. Now that's not the end of the story it's the start of a more profound one . Opportunities for new markets stretch beyond Kenya's capital beyond Kenya itself to Tanzania Uganda Rwanda or even Europe . The question is did it all come at a price that they can afford . Welcome back to belt & road. China's trade superhighway I'm Rishaad Salamat our leaders are letting Africa go to China. That's my view. I think we need to do it in moderation while at the same time maintain our country. We there's quite a lot we can learn and gain from China quite a lot. But I think we need to be to some extent not get China to come and take over our country what kind of feed. We do not interfere in the internal affairs of African countries impose our will on African countries attach any political condition on the economic aid for Africa nor do we seek selfish political gains in investments and financing cooperation with Africa to . China is pushing back against criticism. The belt & Road Initiative loads up partner countries with debt. It also refutes claims it's aimed at strengthening Beijing's global influence. The Chinese president maintains the initiative is a tool for common prosperity. While roads rail and port infrastructure are desperately needed in Africa the continent's debt pile is rising. About 12 billion dollars in Chinese loans were given in 2015 compared with just over 100 million in 2000 . That's according to the China Africa Research Initiative. And then there are Chinese companies many of which are state owned sourcing infrastructure projects in cooperation with African governments. Some do it with financing from the export import bank of China otherwise known as Exim Bank. It's a state funded state owned policy lender Kenya's SGI between Mombasa Nairobi was 90 percent funded by such a loan. I don't think based on the quantity of cargo or the construction costs I was constantly of the loan. And in addition to the cost of running between one way and the other it is not possible for the SDR to pay for itself. I mean we the people cannot pay back the loan . Obviously we have to. And the only way we are going to do that is actually having to suck taxes from other sectors and use that to two to services on a further one and a half billion dollars for the next stage of the line is largely funded by a loan from Exim Bank an extension to Kisumu will cost three point eight billion dollars and Kenya is now asking China for half of that as a grant instead of a loan. What's more to connect the line all the way to Uganda another four point nine billion dollars may be needed. Critics of belt & Road have said that these countries are mortgaging their futures. This is going to lead to a huge amount of indebtedness which could lead to default which would then ultimately to China actually controlling vast swathes of these economies. I don't think that will happen . The evidence spoken about debt trap diplomacy that it's a sinister move by China to get control of strategic assets for example Djibouti is pretty indebted and they've put up a military base in Djibouti could they get Mombasa for for example if Kenya defaults on its railway line debts and so on. It's a very unlikely scenario because the overall trade benefits and that we will see emerging from this and investment and trade benefits we will see with supercede these. I am aware of that . Countries often overpay for the infrastructure. However the infrastructure in this case was necessary and I think overall it would be a benefit to the economy and infrastructure builders like China communications construction companies see plenty of opportunities to boost their own growth as well as those of African nations. It is the parent of the company that built and operates the SGI really feels awesome. I think the whole African continent has opportunity for development. There's a large young workforce but economic growth is slow so there are few good job opportunities right now. I think they like China back in the 1970s. And given China's development through the years I think Africa will also embrace development opportunities . But the steady influx of Chinese companies and workers have fueled accusations that wealth and opportunities are not being shared with the local community. I think that definitely if you look at the financing for a lot of these projects as Chinese banks if you look at the contract there is a Chinese contract . So if you're looking for the big ticket so the person who's receiving the four or five billion dollar cheque is likely to be in some sort of Chinese entity and questions about transparency and corruption won't go away . I think this is a big debate going on whether this Chinese debt is serviceable or not. And the issue around whether it's becoming too heavy in indebtedness and therefore ultimately it will end up in Chinese hands and there will own the country. I think what is important here is to note that there should be no government guarantees for the interest that's being put up . This should be done on a private sector basis whether come in or on it operated and financed and ultimately transferred it at a price so that they get a good return on as a commercial enterprise. Look at it both ways. Short term pain for long term gain but the Kenyan citizenry knows cutting a very big bad debt in terms of taxes because we wanted to pay for the loans the critic and it's interesting that we're still taking in more with a wait and see situation because also unfortunately we have issues of corruption in the country which really how they voted some of these resources from what they were meant to be or we are seeing something that was supposed to be a really big enterprise or really big project that we're hoping but it comes out to be a bit substandard than what we expected. Regarding this target obviously there are many things that actually happen I have not been answered including some of the contracts that have been entered into the payment of costs. The picket line on everything is quite clear. But the Red Cross on whether the costing of individual pieces of equipment on individual construction sites and how he did it all adds up to something that should be in question and I think it's not as transparent as would be profitable for a piece of infrastructure that is close to 5 percent of our gross domestic product. The real question is are those loans used in the right manner for the right projects that will generate the right type of revenues for the African country. Again it comes back to the need for the African countries to develop their own perspectives holistically not project my project on what infrastructure they need for what projects what is the best way to finance these and then to engage with different partners whether it's the Chinese whether it's the World Bank on how to go about building these projects coming up forging Africa's future. The past was all about aid and aid gives us AIDS. It's called always in debt syndrome . I don't take the easy thing by thinking somebody cheated us. I don't think so. I think we are we made a body but we must take responsibility for his welcome back to belt & road. China's trade superhighway people come to markets like this one in Nairobi to get the best deal that they can. It's like anywhere else. Ultimately no one is forced to buy by the same token. Many people have accused governments of not haggling hard enough with Beijing. It's clearly not a two way street. I think it's very very profitable for the Chinese firms that are involved in actually this they're going to make very handsome profits on this. No doubt. But I see I mean the ethics of all of it notwithstanding but I would say well they negotiated the best deal they could get. And so as Kenyan taxpayers we should be actually asking tough questions of our own administrators and on our own governance. How could you. In broad daylight make a deal such as this. Kenyan companies also want to make handsome profits but some sectors are frustrated. We export quite a lot of our products agriculture products to the European market. But the Chinese market is quite is a really untapped. There's some protocols we're supposed to sign as a government of Kenya so that it can support our growers to take the products there. But it does not to them that our manufacturing capacity is not not fulfilled because we are not fully competitive yet and we do need government intervention to urgently address our competitiveness . Secondly the there are no preferential trade agreements also with China at the same time both manufacturers and Kenya's leaders see the increasing numbers of Chinese firms as a positive. We welcome the Chinese manufacturers to the manufacturing fold . Manufacturing is part of the big four agenda driven by the government. And we really need as much investment both local direct investment as well as foreign direct investment to onshore into into Kenya and create a very strong manufacturing hub. President Hu to Kenya is big for agenda aims at boosting manufacturing to 15 percent of GDP from around about 9 percent by 2022. Agriculture health and home construction are the other industries targeted for growth. Just the extent of manufacturing that we see is creating thousands of jobs direly required jobs across the continent. And you're seeing it in increasing numbers. The innovation that we are seeing the Chinese bring to Africa sometimes seemingly quite simple but where they recognize Africa to be a key market. They are innovating for our markets. Bitcoin chairman says local companies can grab opportunities if African leaders pull together VRA is seen by many as being a one way street. You wanted to be a two way street so you want access to the Chinese market. You think you will get that. So I think this is where we must look at Africa becoming more productive more producing goods that add value add more value to our products and really become emerging. And that's the great hope. Will it happen . I think it's up to us as Africans right to make it happen to make sure that we do it in the right manner and become competitive. Today the folly is at intra African trade is at such a low. We are actually putting up more and more barriers within Africa against each other and we're allowing China or America or Europe to come in duty free. And I would dig the all the leadership in Africa to say good night because we've talked about or you you've talked about African Union but it's still talk. It's called NATO no action talk only. We've got to get out of that and make it happen. China's Africa policy has shifted now drawing a clearer line between official foreign policy and private commerce. Beijing created a new development agency in April 2018. It is expected to play a larger part in government strategy as Exim banks role reduces it's one of the criticism China gets a lot which is that it is offering these loans. Those loans are originated by the African countries . They are the ones asking for it. They may have a dream in terms of the nature of the relationship but I do not think they are trying to shape the future of Africa. That's not to say aid and lending won't be influenced by commercial interests interests which some say still have access to resources at their heart . Chinese companies continue to see an abundance of opportunity in the continent's rebounding economy and a green light to raise their presence there. Under the banner of the belt and road initiative while China sees huge investment opportunities. What about your average portfolio manager or your retail investor can they also come along for the ride. If you want to invest directly and of belt & Road initiative that you can do DRP. But basically what you're investing is somewhere where perhaps as a hub for African and international companies so as the environment gets easier as say for example the cost of power comes down then it becomes more easier or more economic to manufacture goods. So that's the story. So I think for Kenya and for East Africa as a whole you sort of sell the story of access not necessarily large minerals or any sort of natural resources that you get elsewhere in Africa. So I think for us it's a sort of a portal to the rest of Africa. That's the way that we would look at it. There is also paying for that. The thing isn't that I think in the long term you have new towns being opened up. You have people who can do more commerce who can ship goods and also what it's doing is moving perhaps the industrial heartland of Kenya away from parts of Nairobi to other parts of the country. So you can manufacture in Naivasha once the planned industrial hub is set up that and you can then export straight out to Mombasa and what have complaints Chinese companies is sweeping up large government contracts in Africa. And White has concerns about challenges to U.S. influence. I think one thing you've got to tell very clearly the Chinese have a serious advantage in the execution. This is where the Europeans want a head start for the last 50 60 years in Africa did not do much the Americans they ignored Africa they did not pay attention to it and when the Chinese came in I think they've done serious execution on the ground. They're giving you better infrastructure at lower prices and they've up their game I think tied aid is gone now it's execution. You can call it economic dominance. You can go to economic colonization colonization. But Africa needs infrastructure now and it needs to be done rapidly. That's always been the problem with foreign aid has ended up in people's pockets hasn't it . Not always. But the past was all about aid and aid gives us AIDS. It's called always in debt syndrome . OK and we don't want to have that what we want to have now is make us more competitive ease our doing business. However we need to make sure that everything has a clear code of ethics . It's all being done on a above board and there's nothing that's being siphoned off the stakes are high for both sides. For China the mouthwatering potential of new markets they're writ large. Less obviously those how to tap them and not be seen as the next colonizer for the recipients Beijing's initiative offers a multi generational change. China may well be a partner but it's also a competitor . Factories like this one can compete with efficient Chinese ones. Sadly that's not the norm when throwing the gauntlet . Many have wilted. The choice ultimately is theirs. I'm Rishaad Salamat. Thanks for watching .

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How Chinese Money Is Changing Africa

Belt and Road: China's Trade Superhighway. Bloomberg Television's Rishaad Salamat reports on China's infrastructure investment in Africa, part of Beijing's trillion-dollar Belt and Road initiative. (Source: Bloomberg)