Kenyan Treasury Allays Fears of Losing Port Over China Rail Loan

NAIROBI (Capital Markets in Africa) — Kenya’s National Treasury moved to allay fears that the nation could lose ownership of its busiest seaport in case of failure to repay a loan from China to build a railway.

“There is absolutely no risk of China or any other country taking over the Port of Mombasa,” Treasury Secretary Ukur Yatani said in a statement Monday. The government “cannot and has not pledged public assets as security for a debt, because such an action would not only violate provisions in its existing loan agreements with other bilateral creditors but more importantly because Kenya treats all its creditors equally,” Yatani said.

In a report to Parliament on March 11, the Auditor-General said the Kenya Ports Authority’s assets — which include the Mombasa hub — are part of loan-repayment agreements and are exposed to the risk of a takeover. Kenya borrowed about $3.6 billion from China to build a railroad between the port and the nation’s capital, Nairobi.

The financial viability of the new railroad came under scrutiny from lawmakers concerned that the railway might not be able to generate enough revenue to help pay off the loan within the agreed time. Revenue from the line fell 8% to 12.4 billion shillings ($113 million) in 2020 from a year earlier, according to Kenya’s statistics office.

In details made public about the agreement, the Auditor-General said KPA was listed along with Kenya Railways Corp. as a borrower. That’s contrary to the previously disclosed details that KPA’s only obligation is to facilitate and guarantee a certain threshold of cargo to be transported using the new railway, according to the report.

KPA “assets are exposed to the risk of takeover by the lender since the authority signed the payment arrangement agreement,” according to the report to the National Assembly. “Consequently, it appears from the payment arrangement agreement that Kenya Ports Authority’s revenue and assets have expressly guaranteed the repayment of the loan.”

Yatani said the loan agreements Kenya entered into with the Export-Import Bank of China were reviewed by the Attorney-General before they were signed.

Source: Bloomberg Business News