Auditor-General Edward Ouko
China
Despite
Exim Bank of China
Exim-Bank
Hambantota
India
Kenya
Kenya Ports Authority
Kenya Railways Corporation
Kimani
KPA
KRC
Mombasa
Nairobi
New York Times
Sri Lankan

China may take Mombasa port over SGR debt, says Auditor-General

Kenya could lose the port of Mombasa to the Chinese government if Kenya Railways Corporation (KRC) defaults in the payment of Ksh227 billion (2 billion) owed to Exim Bank of China.

The government borrowed the billions to construct the Mombasa-Nairobi standard gauge railway (SGR), against opposition that the project by China Roads and Bridges Corporation (CRBC), a Chinese State-owned company, could become a white elephant. The country’s sovereignty is now at stake.

A report by Auditor-General Edward Ouko states that the payment agreement substantively means the revenue of the Kenya Ports Authority would be used to clear the debt.

The audit shows that KPA’s revenue was Ksh42.7 billion ( $418,000,000) as at June 30, 2018, a 7.9 percent increase from the Ksh39.6 billion (Ksh388,000,000) recorded the previous year.

“Exim Bank would become a principal over KPA if KRC defaults in its obligations and the Chinese bank exercises power over the escrow account security,” a management letter sent to the KPA reads.

Mr Kimani said, “The KPA assets are exposed since the authority signed the agreement in which it has been referred to as a borrower under clause 17.5.”

He added, “Any proceedings against its assets by the lender would not be protected by sovereign immunity since the government waived the immunity on the KPA assets by signing the agreement.”

The auditor notes that the agreement is biased since any non- performance or dispute with the bank would be referred to arbitration in China, “whose fairness is resolving the disagreement may not be guaranteed”.

Despite the danger of losing the lucrative port, he recommends that the authority discloses pertinent issues and risks related to the guarantee in the statements.

The KPA is also required to confirm in the management representation letter that its assets are not a floating charge to the government of Kenya loan.

In December 2017, the Sri Lankan government lost its Hambantota port to China for a lease period of 99 years after failing to show commitment in the payment of billions of dollars in loans.

The transfer, according to the New York Times, gave China control of the territory just a few hundred miles off the shores of rival India.

“The case is also one of the examples of China’s ambitious use of loans and aid to gain influence around the world – and of its willingness to play hardball to collect,” says the New York Times of December 12, 2017.

Share this Post

by

Search