Senior Treasury and Ministry of Transport officials have spent the past one week in Beijing holding talks with their Chinese counterparts amid speculation of plans by the government to borrow yet another multi-billion-shilling loan to finance construction of the Naivasha-Kisumu stretch of the Standard Gauge Railway (SGR).
The high-powered delegation, comprising officials from the Treasury, Kenya Railways Corporation, Ministry of Transport and State Law Office, left for the Chinese capital last Friday and are expected to return today.
Transport Principal Secretary Esther Koimett is the senior-most State official in the team, which also includes Kenya Railways acting MD Charles Mainga, senior economist at the Transport ministry Duncan Hunda and Kenya Railways engineer Maxwell Mengich among others.
The team is said to have been sent to hammer out finer details of the planned borrowing ahead of the official signing to be held either in Beijing or Nairobi. Treasury Secretary Henry Rotich and his Transport counterpart, James Macharia, declined to discuss the visit’s agenda.
“They are going for normal bilateral government business,” said Mr Macharia, while Mr Rotich referred all our queries to the Ministry of Transport. Ms Koimett and Mr Mainga did not respond to our requests for comment.
A Kenya Railways official had this month hinted at ongoing negotiations to get the funding for what has been described as “Phase 2B” of the railway line.
It is estimated that the Naivasha to Kisumu phase of the SGR will cost Sh350 billion to complete. The Mombasa-Nairobi line was built at a cost of Sh327 billion while the Nairobi to Naivasha stretch, which is about two months to completion, is budgeted at Sh150 billion.
President Uhuru Kenyatta and his Ugandan counterpart, Yoweri Museveni, on Wednesday affirmed the two countries’ commitment to stick to the original plans of stretching the SGR all the way to Kampala, in an indication that Kenya could require yet another loan to build the Kisumu-to-Malaba border section. The two countries have been differing over financing of the cross-border SGR, with China Exim Bank insisting that Kampala has to get Kenya’s commitment to build the section from Kisumu to Malaba before Uganda can secure funding for the line running from Kampala to the common border.
Kenya’s fears over the mounting public debt had seen Nairobi put priority on the line to Kisumu port as part of the plan to have Uganda and Rwanda evacuate their goods via Lake Victoria, dimming prospects for a seamless SGR connection between the Port of Mombasa and Kampala. During this week’s visit to Mombasa together with his Ugandan counterpart, Mr Kenyatta said he was “now keen on the joint development of the SGR line to Kampala”. Mr Museveni described the agreement to extend the line as a “game-changer.”
The Kenyan delegation in Beijing, according to our source, was to engage officials of the Exim Bank of China to finalise on financing negotiations for the construction of the Naivasha-Kisumu line. The second phase of the SGR, which was split into two, is set to be concluded by 2022. The construction contract details had been reportedly concluded when construction of the 120-kilometre stretch to Naivasha commenced in 2016.
A 2016 Cabinet brief put the construction cost of the Naivasha-Malaba section at Sh526 billion, with more infrastructure including the Kisumu port and the way-leave compensation between Kisumu and Malaba factored in. “The Sh526,584,271,147 for the development of the Naivasha-Kisumu/Malaba SGR Section, new Kisumu Port and ICD will therefore be sought from Exim Bank of China under three separate Commercial contracts,” the Cabinet was told in February 2016.
With construction of the new Kisumu Port already under way at a reported cost of about Sh16 billion, the Treasury will need to secure about Sh350 billion for the Naivasha-Kisumu section. The SGR loan repayment details have remained a tightly-guarded government secret. Mr Kenyatta promised to make public the details of the Mombasa Nairobi SGR financing deal after it emerged that the Chinese had demanded the Mombasa port as collateral for the debt, but no information has been released yet.
A leaked copy of the agreement showed that Kenya had committed to tough repayment conditions, expensive fees and a requirement that the country waives sovereign immunity on any asset should the loan fall in default.
The loan agreement was also set to be governed by the laws of China and any arbitration to be done by the China International Economic and Trade Arbitration Commission (CIETAC) in Beijing.
Exim Bank also made it a mandatory requirement that the commercial loan be insured by the China Export and Credit Insurance Corporation (SinoSure).
Although inevitable since Kenya has already done half of the second phase of the line, the latest attempt to seek funding revives debate on Kenya’s ballooning debt even as taxpayers face more pressure to fund the flagship project for the Jubilee administration.
Strategies to ensure the loan used to construct the first phase get repaid involved the push for a ‘take-or-pay’ agreement with the Kenya Ports Authority to have the State agency ensure that cargo from the port is transported on the railway line.
This agreement got KPA on the receiving end last year as auditors queried its exposure as a collateral to the SGR loan.
Taxpayers also felt the heat when the government introduced the Railway Development Levy on all imports into the country.
The government in its financing model for the project was to initiate road transit toll levy, a green tax in new vehicle registration among other taxes to fund the SGR loans.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.