China’s Uganda threat evokes SGR debt fears

containers

Pedestrians walk next to a container freight station along the Port Reitz Road in Mombasa. 

Photo credit: File | Nation Media Group

The National Assembly Public Investment Committee (PIC) is worried Kenya might lose Mombasa port for failing to clear standard gauge railway (SGR) loans.

The panel has summoned Transport Cabinet Secretary James Macharia and former Kenya Ports Authority (KPA) managing director Gichiri Ndua to shed light on the controversial SGR project agreement between Kenya and China.

Also summoned is former general manager (board and legal services) Ms Muthoni Gatere to explain the signed document between the two countries.

Early this week, China threatened to take over Ugandan airlines over debts. Kenyan Parliament is worried that China might take over the Port of Mombasa because of debts.

According to sources aware of the loan details, KPA has not been fully “servicing their loan” and China might take over the port, which was offered as collateral.

Audit

Documents from the committee revealed that the government entered into two loan agreements with China Exim Bank.

“Preferential credit loan agreement of May 11, 2014, for Sh161.6 billion. Buyer credit loan agreement of the same date for Sh202.36 billion, all totalling Sh363.96 billion. This information was obtained from subsidiary agreements, the actual loan agreements were not made available for audit review,” reads a committee report.

PIC chairman Abdulswamad Nassir said Mr Ndua and Ms Gatere signed to service the loans in an agreement with China Exim Bank for the construction of Sh340 billion SGR.

“We have summoned them to appear before the committee within 14 days because the Auditor General’s report for the financial year 2018/19 indicates that the port has been used to sign off as collateral for the SGR loan.

“Due to that, we need to get input on the same; this is despite legal advice from an external lawyer warning KPA against the move,” said Mr Nassir.

As per the documents, the PIC chairperson said KPA and Kenya Railways can lose their current and future assets if they fail to pay their debt. On Tuesday, PIC will write a letter to the two to appear before them.

“In the agreement, KPA has no right to ask how much the debt has remained. Further, China Exim Bank can go to KPA directly and tell them to pay them directly, that’s a disadvantage. At any given time, if the government fails to honour [the deal], they can easily go and demand their debt,” warned Mr Nassir.

The committee termed it vital for the two former senior port officials to explain the circumstances that led them to append their signatures despite a red flag being issued.

“Did the board approve? What was the precondition? Who drafted these agreements?” asked Mr Nassir when acting KPA managing director John Mwangemi appeared before them over the matter.

Mr Mwangemi defended himself, saying the matter erupted when he was not in charge. He said he inherited the blame.

The acting KPA boss was at pains to explain the agreement and whether the port, which has a workforce of over 5000 people, is safe from China takeover.

The committee said it summoned CS Macharia to elaborate the matter as KPA was under his ministry before it was transferred to the Treasury.

Weighing in on the issue, Mr Kwenya Thuku (Kinangop), a member of the committee, said: “We must secure our assets, we must find solutions before it is too late.”

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