Kenya, the immigrant economy?

By Joseph Wachira Kimani

Imna and Jimnah Insurance Agency

It’s always easier to blame than take responsibility! Blaming immigrants, Mexicans and Africans, for the nation's woes has long been an American pastime, especially in hard economic times like today. Recently, there has been an upsurge in anti-immigrant sentiment, particularly in areas of the country that host large number of immigrants. One of the well-entrenched myths about immigrants is that they steal jobs from American workers, collect an excess of government benefits and in general represent a drain on the economy.

Is Kenya becoming an Immigrant Economy? The Asian economic giant, CHINA, is emerging as the favourite in winning every mega government project, as local contractors take a back seat. The onslaught of the Chinese in Kenya is worrying, especially to local contractors who remain sidelined. From railway lines, airports, port, superhighways, housing to village roads, Chinese companies control a considerable chunk of the projects. So disadvantaged are Kenyan contractors and manufacturers that blaming the Chinese is increasingly becoming the favourite Kenyan Pastime.

According to Kenyan contractors the arrangement where China is becoming the financier and contractor is likely to kill the local construction industry despite the high reputation Kenyan engineers have because of their inability to undertake mega projects. However local contractors were, have and still are synonymous with shoddy jobs and projects that are haunting them. The local contractors do not accept that they do shoddy jobs. According to them, government officials in charge of awarding tenders and contracts are behind the poor workmanship. By local contractors giving kickbacks to the government officials to win tenders, a good part of the project cost is used to give freebies to government officials and in turn recover that by spending less on the project hence poor workmanship.

It also noted that the construction sector is fragmented and lacks in scale, skills and organisational capacity to undertake major projects. Further, the industry is unable to exploit construction opportunities in the expanding regional markets. Significantly with major local roads and railway concessionary agreements proposed or undertaken, the local industry remains a passive spectator in such public – private partnerships as foreign concerns make forays into the local turf, the ministry of Transport and Infrastructure Development warns.

But is it true that immigrants take jobs away and are a drain on the economy?

Over the past few weeks from January 2018, there has been unrest with traders mainly in electronics, electrical, clothing and beauty products, ranging from human hair, jewellery, wedding decorations, hair weaves and skin bleaching cosmetics over the government’s crackdown on illicit goods from China. According to the traders, the fight against illicit goods was being abused to punish legitimate businesses. Nairobi’s grey economy relies on China products that are said to be pocket-friendly but not necessarily good for the economy. The traders are decrying the infiltration of foreign traders from China in local businesses because they have a greater advantage of importing the same goods cheaply.

What is the actual story?

According to the World Bank, about 400 Chinese firms operate in Kenya ranging from manufacturing (automotive), food, building and construction, consumer electronics and communication equipment among other sectors. Contrary to popular belief, the Chinese do not take away jobs from Kenyans. According to a paper published in 2016, entitled ‘Impact of the Influx of Chinese in the Construction Industry’, the undisputed fact that most projects run by the Chinese firms are done well ahead of schedule, confidence in their work by the Chinese firms providing high quality and competitively priced work in the construction sector. Add to this financial muscle and local contractors do not stand a chance in the mega projects. But if they build on capacity to deliver quality and build their financial muscles, they will compete on the same level. On the issue of poor workmanship on projects undertaken by local contractors, the Chinese will always have an upper hand. Unless the challenges of poor workmanship are mitigated, the construction industry in Kenya will be incapable of efficiently executing the large scale projects anticipated within the Vision 2030 and other projects within the region economic blocs. The projects being undertaken by Chinese have employed a sizable number of Kenyans ranging from surveyors, engineers, supervisors, drivers, flagmen and casual laborers. They are buy and consume local goods and services, paying taxes and not only raising the quality of work but productivity. Chinese are good for the Kenyan Economy, if only we see what they create rather than what they take away or opportunities lost by Kenyans. The Chinese do not have a negative effect on the earnings and employment opportunities of native-born Kenyans and that neither workers in complementary jobs, nor minority workers, appear to be adversely affected by Chinese immigration.

Similarly, contrary to popular belief, the Mexican and African immigrants do not take away jobs from American workers. Instead, they create new jobs by forming new businesses, spending their incomes on American goods and services, paying taxes and raising the productivity of U.S. businesses. Immigrants are good for the economy, not the other way around. A study by the Department of Labor in the US noted that the perception that immigrants take jobs away from American workers is "the most persistent fallacy about immigration in popular thought" because it is based on the mistaken assumption that there is only a fixed number of jobs in the economy. Experts note that immigrants are blamed for unemployment because Americans can see the jobs immigrants fill but not the jobs they create through productivity, capital formation and demand for goods and services.  Statistics show that immigrants pay more than $90 billion in taxes every year and receive only $5 billion in welfare. Without their contributions to the public treasury, the economy would suffer enormous losses. Additionally, American Immigration Institute Survey of prominent economists revealed that four out of five said that immigrants had a favorable impact on economic growth. None said that immigrants had an adverse impact on economic growth. A 1994 study of unemployment and immigration by Richard Vedder and Lowell Galloway of Ohio University spanning 100 years (from 1891 to 1991) found that higher rates of foreign-born population historically have corresponded to lower unemployment rates. The study found that immigrants expand total output and the demand for labor, tend to be highly productive and promote capital formation through high savings rates. According to a 1992 L.A. Times analysis summarizing the best available research, "Immigrants contribute mightily to the economy, by paying billions in annual taxes, by filling low-wage jobs that keep domestic industry competitive, and by spurring investment and job-creation, revitalizing once-decaying communities. Many social scientists conclude that the newcomers, rather than drain government treasuries, contribute overall far more than they utilize in services. America is what it is today because of its immigrants!

What is the future like with Chinese in Kenya?

Since it initiated market reforms in 1978, the Asian giant has achieved a steady economic growth, in the process, lifted its population out of poverty and become the largest economy on Earth. China also happens to be the third-largest direct foreign investor in the world. When the Chinese arrived in Kenya, it opened a new frontier for them. Africa is largely undeveloped and this gave the avenue to expand their influence beyond Asia. When all projects in Kenya are done, the Chinese operating here will not fly back home but extend their stay and invest directly into the available industries and open new ones: At a bigger scale and cheaply. Kenya is China’s preferred African industrial nerve centre owing to its business environment and incentive framework with manufacturing and agriculture identified as the main engine of growing the economy. The skills that China holds in the different sectors will be transferred to Kenyans and there will be emerging associations and individual investments in the following sectors

• Industries:
  • Motor Vehicle Assembly plants
  • Electrical Cables and appliances
  • Ceramic products
  • Tele-communication
  • Plastic products
  • Textile
• Transport  and Auto mobile: Already there is heavy presence of Chinese brand of cars including:
  • Buses: Yutong, Climber, Higer, Zutong, Golden Gragon
  • Trucks: Sino, Foton, Golden Dragon, Sany
  • Sedan/4X4: Tigo, Foton, Golden Gragon,
  • Heavy Machinery; Sany,XGM
• Construction: Evident in Rail, Road, Airport and housing
• Recycling: There has been a lot of export of scrap metal to China from Kenya fueling the steel industry. The construction industry has been consuming the final products of these recycling plants. Kenya has been battling management of plastic waste yet we have a lot of plastic products imported from China: Utensils, Furniture. These are among the plants that will be established locally to be part of construction value chain.
• Food
• Hospitality
• Tourism: Kenya has traditionally depended on UK and US as the tourist market. However China is the new frontier and the new crop of Billionaires and big spenders lie in China. There is already evidence of Chinese tourists visiting Kenya

It’s time to take responsibility!