President Uhuru Kenyatta and his Chinese counterpart Xi Jinping inspect a guard of honour during Uhuru's visit to Beijing in 2015.

Will China take Kenyan Mombasa port over huge debts?

By Samuel Ouma

President Uhuru Kenyatta and his Chinese counterpart Xi Jinping inspect a guard of honour during Uhuru's visit to Beijing in 2015.
President Uhuru Kenyatta and his Chinese counterpart Xi Jinping inspect a guard of honour during Uhuru’s visit to Beijing in 2015.

Kenya is likely to lose its lucrative Mombasa port to China government due to failure by Kenya Railways Corporation to pay back loan the government owe to Exim Bank of China.

The report alleged to be from the Auditor General Edward Ouko noted the government signed an agreement with China on how to settle the debt should the borrower default on the loan. It was agreed that revenue generated by Kenya Ports Authority would be used to clear the debts.

“The payment arrangement agreement substantively means that the Authority’s revenue would be used to pay the government of Kenya’s debt to China Exim Bank if the minimum volumes required from consignment are not met as per schedule one,” read the part of the report.

The report also revealed that China Exim Bank would manage Kenya Ports Authority in case the loan is not settled.

“The Kenya Ports Authority assets are exposed since the authority signed the agreement where it has been referred to as borrower under clause 17.5 and any proceeding against its assets by the lender would not be protected by sovereign immunity since the government waived the immunity on the Kenya Ports assets by signing the agreement,” indicated the report.

It also indicated that the agreement was biased since any dispute with the Bank would be referred to mediation in China whose fairness in solving the disagreement is not guaranteed.

The alleged report noted that Kenya Ports Authority revenue has escalated from Ksh.39.6 billion (USD$396 million) last year to Ksh.42.7 (USD$427 million) billion this year.

It further claimed that the auditor recommended that the authority to disclose the pertinent issues and risks related to the guarantee in the statements and confirm in the management representation letter that its assets are not a floating charge to the government of Kenyan law.

However, the office of the Auditor General has rubbished the report saying it does not know its origin.

“Our attention has been drawn to reports that office of Auditor General has released an audit report on Kenya Ports for FY 2017/2018. This is to clarify that the office has not released any such report,” they tweeted.

Kenya might join Sri-Lanka and Zambia whose port and international airport respectively were handed over to China for failure to settle their debts.

 

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