Kenya receives US$290m financing from Japan

Alexander Richter 31 Mar 2010

Kenya and Japan sign large project aid deal worth US$290million that will help finance the construction of Unit 4 and 5 of the Olkaria 1 plant in Kenya.

Reported from Africa, “Kenya and Japan have signed a mega project aid deal, confirming the Asian economic giant’s quest for a stronger presence in Africa backed by a doubling of financial help in the next two years.

The Olkaria geothermal power project deal worth Sh23.4 billion (US$290m) was signed by Japanese ambassador Shigeo Iwatani and Finance minister Uhuru Kenyatta. It upholds Japan’s rising interest in infrastructure development in Africa that has in the recent past been under an aggressive Chinese invasion.

Financing the Olkaria project also means Japan is targeting one of Kenya’s most lucrative sectors that should also help it flaunt its green energy credentials.

The money is part of the Sh29 billion package that Kenya and Japan negotiated during Prime Minister Raila Odinga’s recent trip to Tokyo.

The geothermal project involves construction of Olkaria 1 Unit 4 and 5 that should add 140 megawatts of power to the national grid and expand Kenya’s geothermal power production capacity by 85 per cent.

“The overall goal is to secure Kenya’s energy needs and improve the climate for investment and development,” said Mr Iwatani during the signing ceremony at the Treasury on Wednesday.

The Japanese government has extended to Kenya a total of Sh330 billion in aid over the past four decades but has also signalled its intention to venture into the hunt for natural resources and private sector investment.

The Japanese have been on a mission to follow in the China’s footsteps and Prime Minister Yukio Hatoyama has come up with the “Hatoyama Initiative” that seeks to channel $15 billion (Sh1.15 trillion) including private and public finance to the developing world.

In recent months, State-backed Japanese firms have been making a few but high strategic entries into East Africa, targeting the expected windfall in mineral extraction and consumer goods markets unleashed by the fast-integrating region.

The region with over 100 million people has grown into a huge market with the discovery of such minerals as oil and gas in Uganda and Tanzania.

“There is some kind of soft competition emerging between China and Japan, not just in Kenya but across Africa,” said Gerrishon Ikiara, a lecturer at University of Nairobi’s Institute of International Relations and former permanent secretary in the ministry of transport in an earlier interview.

“It’s a fight that involves both economic and political dominance. Japan has been here for long, but is now stepping up its efforts upon realisation that China is fast increasing its influence in key economies such as Kenya,” he added.

During the press conference, Mr Iwatani noted that the country is currently being served by an additional 290 MW of emergency power which was contracted as a stop-gap measure to ameliorate the impact of capacity shortfalls occasioned by rapid growth in demand for power and by the effects of lower rainfall resulting from severe drought in the past two years.

“During that period, we all experienced frequent power blackouts, a high cost of electricity and there was an increase in the amount of carbon dioxide emissions because of the increased use of emergency thermal generation,” said Mr Iwatani.

China came earlier in the game as its fast economic growth forced it to look for more natural resources outside its own borders and Africa turned out to be one area where such opportunities exist.”

Source: Business Daily