In 2015, China presented its Digital Silk Road (DSR), with a vision of global connectivity. The idea may sound appealing, with massive digitalisation investments aiming to raise living standards and bring the world closer together (The Diplomat, 2021a). At the same time, African nations remain highly indebted to China’s government and private investors (China Africa Research Initiative, 2022). This post critically examines these macro level relations through the case of data protection and problem gambling in Kenya.
China-Africa dynamics
Recently, some researchers and economists have claimed that China’s economy may be significantly smaller than the country reports (Financial Times, 2022; Martinez, 2022). However, regardless of its true size it is a well-known fact that Chinese investments in African countries have gone on for decades. On top of that, Chinese loans continue to grow, and most African states have large debts to the Chinese government and private Chinese investors (The Diplomat, 2021b). In fact, the loans amount to around USD 153 billion over a 19 year period, starting in 2000 (China Africa Research Initiative, 2022). In Kenya alone, the government exceeded its annual loan target by some 330 million USD, showing the depth of the debt crisis in Kenya (Africa Research Institute, 2016). Such large loans plausibly mean China has a significant finger in the game when it comes to African countries’ development in general, and their economic development in particular.
But loans are not the only factor that influence China-Africa relations. Out of its 55 member states, 52 member states of the African Union have signed China’s Belt and Road Initiative (BRI) (Eguenu, 2022). This is an initiative with a socioeconomic focus and in which digitalisation plays a large role. As a part of the BRI, President Xi Jinping introduced The Digital Silk Road (DSR) in 2015. The US, together with some other countries, have banned China’s tech giant Huawei due to data safety issues (Further Africa, 2021). Some say that this ban plays a large role in the DSR initiative as China aims to undermine Western digital dominance. In large, DSR aims to increase China’s position on the global arena by for example moving large amounts of data from Western-based servers to Chinese ones, and by promoting data sovereignty (Eguenu, 2022).
Huawei is, however, more popular in other parts of the world. In Africa, for example, we find multiple centres and cloud services built by Huawei. In fact, the company is now the largest network supplier across the continent (Further Africa, 2021). One major reason that Chinese technology is popular in many African countries is China’s emphasis on data sovereignty. Chinese promotion of data sovereignty challenges Western ideas of openness. In other words, the power over data, servers, and tech tools remains within the own country (read: with the leaders of the given country), making it an attractive alternative to many African nations (Eguenu, 2022).
Digitalisation of financial services
The positives
According to OECD (2021), a speedy digitalisation of economic sectors awaits development across Africa in the post-pandemic setting. For example, mobile banking services are playing an important part in increasing financial inclusion in many African nations. In Sub-Saharan Africa alone, there are almost 160 million active users of mobile money service and about 550 million registered users overall (GSMA, 2021). Since many mobile money services are available with or without internet access, they are usable also in remote areas. Thanks to this, it has helped many, most-marginalised communities and individuals to access financial services that otherwise may not have been an option to them (Brazzel, 2022). It is also reported that this type of services are impactful tools for empowering young people and women in particular (GSMA, 2021).
Apart from accessibility, mobile banking services have shown to help reduce vulnerability to shocks. For example, it facilitates speedy remittances from other parts of the country (or from abroad) in the case of e.g. sickness, flooding or drought (African Argument, 2022). Additionally, easy-access loans allow people to make investments that improve households’ financial power in the long-run. The collected effects of individual mobile money use therefore show positive results also on a macro level. Studies have shown that countries with well-established mobile money services have higher levels of GDP growth than do countries that have less well-functioning services (Tech Africa News, 2022). As such, it is in many cases an incredibly important tool for socioeconomic development, both on a national level and for the individual citizen.
For results to be successful, however, there are certain pre-conditions that are necessary. For example, mobile money companies are often vulnerable to data breaches, and governments need to find efficient and safe ways to regulate the services (African Arguments, 2022). Some scholars also raise the issue that the existing digital infrastructure is inadequate in terms of regional coordination (Eguegu, 2022). In turn, this creates risks of unleveled digital development which may hamper sustainability of positive socio-economic development. Combined, these challenges mean many African nations may face massive losses in case of cyberattacks.
The negatives
While cyberattacks are a real threat, it does not stop there. Reports show that, as the use of mobile money services increases, so do the risks associated with online banking. For example, scammers and cryptocurrency frauds have increased (Tuko, 2022). On top of that, it is not only at the national level that debts are growing. The easy-access loans that mobile banking services make available have increased personal debts around the continent. As mentioned above, many marginalised and poor households have benefitted from mobile banking service, but there is a backside to the accessibility too. There are examples of how large telecom companies launch promotion deals specifically targeting individuals from low-income households who have run out of credit, offering them lower rate loans (Kimani, 2020). This undoubtedly pulls poorer households into the debt trap. In fact, a large share of debtors say that they are not able to repay their loans (Tuko, 2022). And as if this was not enough, lenders also witness how debt collectors use harassment, threats and shaming to scare debtors into repaying their loans (BBC, 2021).
Studies show that people struggling with a gambling addiction are more likely to apply for loans using mobile banking services. On top of that, the risk of falling into debt via mobile loans increases depending on the severity of a person’s gambling addiction (Folkhälsomyndigheten, 2022). This fact is worrisome in itself. Therefore, it is even more worrisome when one considers that many individuals choose to turn to online gambling as a coping mechanism in conditions of unstable employment (Bitanihirwe et al, 2022; Kimani, 2020). The size of the informal sector in Sub- Saharan Africa reached a staggering 76,6 per cent in 2014 according to the International Labour Organisation (ILO, 2015). With this in mind, one can only begin to grasp the implications of all these factors combined. It is this issue that I will discuss hereafter, concretising it by looking at the situation in Kenya.
Kenya’s relationship with China
Kenya’s relation to China did of course not start with the BRI. But for the sake of this post, it is at that point in time where we will start. In 2017, the (now outgoing) Kenyan president Uhuru Kenyatta signed the BRI and did so as the third country overall. Since, China has financed, constructed and invested in multiple large infrastructural and other projects. These include, but are not limited to, a railway connecting Mombasa, Nairobi and the Naivasha port, and development of several across the country (The Diplomat, 2022). When it comes to the DSR, Kenya is one of many African countries who signed the agreement. Some of the main advantages that the leaders look forward to include a common legislative framework, decreased trade barriers, modern technological solutions to mainstream e.g. customs control and business industry, as well as a stronger network of financial markets. Kenyatta described his excitement early on. He viewed the development of the country’s soft infrastructure as a massive help for Kenyans to reap the goods from the Fourth Industrial Revolution (The East African, 2019).
Previously this year, the Kenyan population chose a new President – Mr Wiliam Ruto (CNN, 2022). He has raised concern regarding the previous government’s close affiliation with Chinese officials. Some concerns claim that the Kenyatta regime was in fact direct beneficiaries of the close relationship with Xi Jinping’s China. In other words, direct accusations of Kenyatta and his allies (be it within the government or family members) allocating shares of Chinese investments into their own pockets (The Diplomat, 2022).
Mobile banking in Kenya
In Kenya, mobile banking has helped increase financial inclusion from below 27 per cent in 2006, to over 80 per cent in 2019 (Central Bank of Kenya, 2019). While this is incredible, Kenya is no exception when it comes to indebtedness. As mentioned above, the connection between mobile banking and problem gambling is often present when it comes to problematic gambling.
Mobile loans were ten times more common than traditional loans already in 2018. Similarly, access to devices like tablets and smartphones does not only increase access to banking services but also lowers the brink of online gambling. As mentioned earlier, gambling can often be seen as a viable alternative in case of unstable employment. Kenya is no different. In fact, almost a fifth of people in Kenya (aged 18 and above) think of gambling as a good way to make a living (Chamboko and Guvuriro, 2021). Already back in 2017, there were reports on how Kenyans got themselves heavily indebted due to gambling. Among other factors, one part of the problem was outdated regulation gambling and sports betting. The market had already seen a rise in online gambling and the mobile bank loans meant gamblers had easier access to financial means to support the gambling (The East African, 2017).
From the government’s side, measures to curb gambling issues included tax increases and a new regulatory framework for betting and gambling in 2019 (Chamboko and Guvuriro, 2021). In addition, the government updated its data protection framework. While the road to establish the new data regulation law was rocky, it eventually went into force in 2019. Reports say the framework is largely guided by EU regulations in terms of user data protection, and that the Data Protection Office is quite an independent institution in relation to other institutions (CGTN Africa, 2019).
Vulnerability of online gamblers as subjects of China – Kenya relations
Ultimately, as technology fits into complex social contexts, its impact can only be evaluated as positive or negative based on how African states use it, making African agency central to any assessment.
Eguegu (2022, p 37)
The former President Kenyatta signed the BRI in 2017, the same year as reports showed that problem gambling had become almost unmanageable in Kenya. Now, this is of course most likely an odd coincidence. However, what may the implications of the above described dynamics be? More specifically, how may the individual Kenyan gambler be affected?
Firstly, while Kenya’s new regulations do include “companies”, there are few reports (if any) that review the compliance among Chinese tech companies in regard to Kenya’s data protection regulations. This is in itself a problem, and it may very well have direct implications on how individual user data is used (or even sold). Taken together, individuals in the lower income groups, with peculiar employment conditions and a penchant for gambling, are arguably among the most vulnerable when it comes to data protection. Plausibly, insufficient digital and regulatory literacy puts those individuals in an even more vulnerable position. Therefore, rigorous assessments of the impacts of Chinese companies as well as the DSR are necessary to minimise the vulnerability of citizens’ in this aspect.
Secondly, the new Data Protection Office is reportedly quite independent. This is a good thing in terms of remaining unbiased towards companies. However, too free a playfield may also increase the risks of the institution allowing itself to be lobbied by China. This may have direct or indirect implications on Kenyan citizens – we already saw a case of predatory loan promotions specifically targeting poorer households. In combination with the amount of user data that companies like Huawei have access to, this factor may be detrimental for indebted gamblers in Kenya. Especially so when considering the extent of investments made under the DSR.
Another interesting aspect to consider is the contradicting information regarding data sovereignty. Some report that Kenya’s new regulations follow the line of EU’s openness and user-protective focus. Here, the aim is arguably to help individual citizens hold companies accountable and enhance citizens’ voice. Others, on the other hand, mention that China’s data sovereignty is highly interesting for reasons opposing openness. This could directly impact the individual gambler when we consider the reports on forceful, shaming debt collection. This ambiguity puts already vulnerable gamblers in an even more harmful situation as it may mean that foul debt collection can continue unnoticed or even be allowed by law.
This post has discussed some of the main ways in which Kenya’s relation to China may impact the individual Kenyan citizen. We have seen the Kenyan government taking steps to strengthen data protection in the country. However, the large debt that Kenya has to China undoubtedly puts Kenya in an inferior, accommodating position. The same way agency is important for empowerment of the individual, it also becomes important on a national level. The question remains whether the interest of Xi Jinping, Chinese tech companies and the Digital Silk Road itself outplay the Kenyan government’s incentives to protect their citizens’ data
—————————————————————————————————————-
Reflection on exercise
The blog exercise has been educational and challenging on many levels. Since we chose to prioritise a critical stance in our posts, I have made an effort to ensure that my posts challenge my own, first impressions. This is something I definitely will find useful when writing professionally. I do have previous experience from professional social media management. However, my experience has mostly been individual tasks, seldom in collaboration with others. Through our good collaboration, I have learned how to collectively plan, manage and write a blog. Additionally, the blog exercise resembles in some ways the monitoring of world events that is part of my profession. As was brought up during the feedback session, our posts could have been aligned better, in terms of topics for example. I also do wish I had gotten more replies on my Google Form. That way, I could have followed through on my initial plan to use the replies for a follow-up post on charity apps. In terms of SEO and readability, I struggled to find the balance between an academic style of writing and a more blog-appropriate style.
Lastly, six weeks is quite a short time frame to get the most out of this exercise. Especially so considering the many posts to be posted. This, in combination with unclarity regarding the number and character of posts, made the exercise a bit difficult at times.
—————————————————————————————————————-
Sources
African Arguments (2022). The Rise of Mobile Money in Sub-Saharan Africa: Has the digital technology lived up to its promise?. Accessed November 3, 2022 and available at: https://africanarguments.org/2022/02/the-rise-of-mobile-money-in-sub-saharan-africa-has-the-digital-technology-lived-up-to-its-promise/
Africa Research Institute (2016). The rise of debt in Africa. Accessed November 4, 2022 and available at: https://www.africaresearchinstitute.org/newsite/blog/rise-debt-africa/
BBC (2021). Kenya outrage over debt collectors’ shaming tactics. Accessed November 4, 2022 and available at: https://www.bbc.com/news/world-africa-57985667
Bitanihirwe, Byron K.Y.; Adebisi, Tunde; Bunn, Christopher; Ssewnayana, Derrick; Bardy, Paul; and Kitchin, Paul (2022). Gambling in South-Saharan Africa: Traditional Forms and Emerging Technologies. Current Addiction Reports. Accessed October 30, 2022 and available at: https://doi.org/10.1007/s40429-022-00449-0
Brazzel, Diana (2022). How mobile banking is transforming Africa. Harvard Kennedy School. Accessed October 30, 2022 and available at: https://www.hks.harvard.edu/faculty-research/policy-topics/public-finance/how-mobile-banking-transforming-africa
Central Bank of Kenya, Kenya National Bureau of Statistics, and FSD Kenya (2019). FinAccess Household Survey. Accessed November 7 and available at: https://www.centralbank.go.ke/uploads/financial_inclusion/1035460079_2019%20FinAcces%20Report%20(web).pdf
China Africa Research Initiative (2022). Chinese Loans to Africa Database, accessed October 30, 2022 and available at: http://www.sais-cari.org/data
CGTN Africa (2019). KENYA DATA PROTECTION. Accessed November 7, 2022 and available at: https://www.youtube.com/watch?v=a1EJt429bYY
CNN (2022). William Ruto declared winner of Kenyan presidential vote amid chaos at election center. Accessed 7 November, 2022 and available at: https://edition.cnn.com/2022/08/15/africa/ruto-wins-kenya-presidency-intl/index.html
Eguegu, Ovigwe (2022). The Digital Silk Road: Connecting Africa With New Norms of Digital Development. Asia Policy, Volume 17, Number 3, July 2022, pp. 30-39.
Financial Times (2022). China’s GDP blackout isn’t fooling anyone. Accessed October 30, 2022 and available at: https://www.ft.com/content/43bea201-ff6c-4d94-8506-e58ff787802c
Folkhälsomyndigheten (2022). Ekonomi och spelproblem. Accessed November 4, 2022 and available at: https://www.folkhalsomyndigheten.se/spelprevention/om-spelproblem/ekonomiska-problem/
Further Africa (2021). China plans digital dominance in Africa via the Digital Silk Road. Accessed November 1, 2022 and available at: https://furtherafrica.com/2021/12/30/china-plans-digital-dominance-in-africa-via-digital-silk-road/
Gamblers Africa (2019). How Effective Has Kenya’s 2019 Gambling Bill Been. Accessed November 7, 2022 and available at https://gamblers.africa/regulation-news/how-effective-has-kenyas-2019-gaming-bill-been/
GSMA (2021). State of the Industry Report on Mobile Money 2021.
International Labour Organisation (2015). Five facts about informal economy in Africa. Accessed November 4, 2022 and available at: https://www.ilo.org/africa/whats-new/WCMS_377286/lang–en/index.htm
Kimani, Elijah (2020). Fin-tech in Kenya should not cause poverty in pursuit of financial inclusion. London School of Economics. Accessed October 30, and available at: https://blogs.lse.ac.uk/africaatlse/2020/01/20/fin-tech-kenya-poverty-financial-inclusion-gambling-mpesa/
Martinez, Luis R. (2022). How Much Should We Trust the Dictator’s GDP Growth Estimates?, Journal of Political Economy, Number 10, Volume 130, pp. 2731-2769.
OECD (2021). Africa’s Development Dynamics report shows digitalisation of economic sectors will kick-start a new growth cycle after COVID-19. Accessed October 30, 2022 and available at: https://www.oecd.org/dev/africa-development-dynamics-2021-launch.htm
Tech Africa News (2022). Adoption of Mobile Financial Services Directly Associated with a Positive Impact on the GDP: New Research. Accessed November 3, 2022 and available at: https://www.techafricanews.com/2022/10/27/adoption-of-mobile-financial-services-directly-associated-with-a-positive-impact-on-the-gdp-new-research/
The Diplomat (2021a). China’s Digital Silk Road and the Global Digital Order. Accessed October 30, 2022 and available at https://thediplomat.com/2021/04/chinas-digital-silk-road-and-the-global-digital-order/
The Diplomat (2021b). The Quiet China-Africa Revolution: Chinese Investments. Accessed October 30, 2022 and available at https://thediplomat.com/2021/11/the-quiet-china-africa-revolution-chinese-investment/
The Diplomat (2022). What Kenya’s Presidential elections means for China’s Belt and Road Initiative. Accessed November 7, 2022 and available at https://thediplomat.com/2022/08/what-kenyas-presidential-election-means-for-chinas-belt-and-road-initiative/
The East African (2017). Gambling in Kenya gets out of hand. Accessed November 3, 2022 and available at https://www.theeastafrican.co.ke/tea/business/gambling-in-kenya-gets-out-of-hand–1361620
The East African (2019). President Kenyatta welcomes resolution to form Digital Silk Road Initiative. Accessed November 7, 2022 and available at https://www.theeastafrican.co.ke/tea/business/president-kenyatta-welcomes-resolution-to-form-digital-silk-road-initiative-1416926