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Port at risk as audit finds it was used to secure SGR loan

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Mombasa port cargo
Cargo is offloaded from a vessel at the Port of Mombasa. FILE PHOTO | NMG 

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.

A leaked report by the Auditor-General’s office shows that the Kenyan government had in 2013 waived the port’s sovereign immunity in order to use it as a security for the Chinese loan.

Auditor-General Edward Ouko refused to confirm or deny the authenticity of the document, which was widely circulated on digital platforms, insisting that his reports are officially submitted to Parliament and not to the public through social media.

“Any reports that from my office are taken to Parliament. A report picked from the social media is not official,” said Mr Ouko, even as he evaded the questions on the authenticity of the document.

The KPA management had up to November 27 to respond to the audit queries raised, according to the leaked report.

The auditors found that the KPA’s assets were committed as collateral for the Sh327 billion SGR loan that China gave Kenya in 2013.

The Ministry of Transport, the Treasury and State House are believed to have played key roles in brokering the deal, which was sealed during President Uhuru Kenyatta’s visit to Beijing.

The leaked document says that China Exim Bank gained power to step in as principal shareholder of the KPA in the event of a loan default, setting up an escrow account for the agency’s proceeds and using the collected revenue to cover the loan repayment shortfall.

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.

“KPA assets are exposed since it signed the agreement where it has been referred to us 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 National Audit Office’s letter to the KPA management dated November 16 says.

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Ironically, it is the Kenya Railways Corporation — not the KPA — which owns SGR assets and oversees its running as a transport business that is supposed to generate revenue for loan repayment.

Both the SGR passenger and freight service, which commenced last year, are yet to generate even half the revenues anticipated in the feasibility studies, raising fears over Kenya’s ability to service the loan.

Githu Muigai, the Attorney-General at the time of signing the loan deal, did not respond to queries on the matter.

James Macharia, the Transport and Infrastructure Cabinet Secretary, dismissed the report as untrue.

“You know this cannot be true, the idea of waiving a country’s sovereignty. So let’s not dwell on it,” Mr Macharia said.

In addition to the loan, China also provided raw materials, engineers and rolling stocks for the SGR project.

And when the SGR cargo and freight business was launched last year, Kenya once again assigned that task to a Chinese firm, the China Communications Construction Company.

The leaked document shows that the Auditor-General’s office has questioned what it sees as a lopsided contract, adding that “the agreement is biased since any non–performance or dispute with the China Exim Bank would be referred to arbitration in China whose fairness in resolving disagreement may not be guaranteed.”

Of the Chinese loan for the Mombasa-Nairobi track, a total of Sh319 billion was spent directly on railway construction, with Sh213 billion going to SGR and the rest of it being used in buying the rolling stock (locomotives and wagons).

The loan, whose interest charge floats at 3.6 percentage points above the six months average of London Inter-Bank Offered Rate (Libor), is to be repaid in 15 years with a grace period of five years.

That means the first principal repayment is expected next year and is the basis of growing concern over insufficient cash that the railway is generating from freight and passenger service.

In September, rating agency Moody’s listed Kenya among countries at the highest risk of losing strategic assets to China over a pile of debt.

Chinese debt stood at Sh554.88 billion or 73.4 per cent of Kenya’s bilateral debt totalling Sh756.28 billion at the end of September.

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World Bank pushes G-20 to extend debt relief to 2021

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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.

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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.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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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.

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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.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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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.

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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.

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