The Chinese Government has set straight claims that the Jubilee government used the Mombasa port to secure the multi-billion shilling loan it took from China Exim Bank to build the standard gauge railway (SGR), leaving the cash-flush Kenya Ports Authority (KPA) exposed to seizure by the Chinese in the event of a default.
Earlier reports had indicated that Kenya risked losing the Port of Mombasa should it fail to settle the Sh324.01 billion loan secured to build the Standard Gauge Railway (SGR),a warning alleged to have been given by the Auditor General.
Chinese Foreign ministry Spokesperson Hua Chunying has denied having attached Mombasa port as collateral to its funding of the standard gauge railway line.
A leaked report by the Auditor-General’s office showed that in 2013, the Kenya government had waived the port’s sovereign immunity in order to use it as a security for the Chinese loan.
“We have checked with the relevant Chinese financial institution and found that the allegation that Kenyan side used the Mombasa Port as a collateral in its payment agreement with the Chinese financial institution for the Mombasa-Nairobi railway is not true,” Mr Chunying said in a December 25 statement.
The leaked report, whose authenticity Auditor-General Edward Ouko neither confirmed nor denied had fanned fears that Kenya had exposed one of its most strategic assets for recovery should the loan fall in default.
The auditors found that the KPA’s assets were committed as collateral for the Sh327 billion SGR loan that China gave Kenya in 2014.
The Ministry of Transport, the Treasury and State House are believed to have played key roles in brokering the agreement, which was sealed during President Kenyatta’s visit to Beijing.
“KPA assets are exposed since it signed the agreement where it has been referred to as a borrower under clause 17.5, and any proceedings against its assets by the lender would not be protected since the government waived immunity on the KPA assets by signing the agreement,” the November 16 audit letter to the KPA management says.
The KPA generated Sh42.7 billion in revenue in the year to June 2017, a 7.9 per cent growth over the previous year, according to its latest financials report.
In May 2014, Kenya entered into a deal to borrow $3.233 billion loan (Sh324.01 billion) from China’s Exim Bank. This comprised $1.633 billion (Sh163.3 billion) commercial loan and $1.6 billion (Sh160 billion) concessional loan to build the 385km modern railway between Mombasa and Nairobi.
The loan, whose interest is 3.6 per cent above the six months average of London Inter-Bank Offered Rate (Libor), the international benchmark is to be repaid in 15 years with a grace period of five years.