In 2007, Democratic Republic of Congo (DRC) entered into a $10 billion resource-financed infrastructure agreement with China where copper and cobalt mining licences would be allocated to a Chinese consortium. In exchange, the consortium would secure financing of $6.56 billion worth of infrastructure projects and invest $3 billion in mining projects.
The agreement only came to the limelight after international financial institutions flagged it saying DRC did not have the overhead to take $10 billion in debt, its debt-to-GDP was standing at 73 percent.
China and DRC were forced to renegotiate the deal to $3 billion and three years later the latter found itself cornered. China EXIM Bank rescinded the agreement saying the 25-year reimbursement period agreed upon was too long and demanded the remaining stake in the mines’ deal held by the DRC government, whilst the other stake held by a Chinese consortium be mortgaged until the loans were reimbursed.
Moving on to Ghana, in 2010 the government informally secured $3 billion loan from China without parliamentary scrutiny and in the deal a 15 year-off taker agreement was to be given to a Chinese firm for supply of 750 million barrels (13,000 barrels per day) of crude oil for servicing the debt.
Three years later during the sharp drop in global oil prices, China EXIM Bank renegotiated for an increase in barrels of oil collateralised for debt service from 13,000 to 15,000 barrels a day, and also demanded that the agreed fixed price paid for crude oil going for debt service be reduced from $100 to $85 per barrel. According to Ghana’s then Finance minister, that $15 difference would have seen Ghanaians pay $6.4 billion to repay a $3 billion loan. Ghana decided to cancel half of the agreed $3 billion loan.
These two anecdotes are always used to herald the lack of transparency in Chinese contracts entered by African governments which later unravel and hurt China-Africa investment relations.
Kenya seems to be creating its own page of anecdotes after a document purported to be a leaked letter from the Auditor- General’s office detailed that Kenya Ports Authority (KPA) assets risk being seized by the Chinese in the event of a default.
The government when securing the SGR debt financing collateralised Kenya ports assets and waived the port’s sovereign immunity giving China EXIM Bank the power to step in as principal shareholder of Kenyan ports in the event of a loan default.
Now for the Kenyan case, it seem to have entered into a Chinese dungeon we will not be getting out of anytime soon.
Recently, the government listed Kenya Ports Authority among the many parastatals it intends to privatise. Unfortunately, this can’t happen without an agreement with China EXIM Bank since the sovereign immunity waiver technically gives it powers to veto any privatisation deal. And if government is really desperate to privatise KPA, then it’s the Chinese who will get first priority because any other bidder stands vetoed by China EXIM Bank.
The auditor-general has refused to deny or confirm the authenticity of the document. But the letter whether fake or not is already a Pandora’s box. The SGR loan dominates more than 60 percent of China-Kenya’s debt and is expected to go up with the extension to Kisumu and Malaba making it the largest Chinese investment in Africa and pushing Kenya’s debt-GDP up by five points.
This means that the risk of port seizure is actually real if the letter is true and unless government makes the agreements public, this storm is not going away anytime soon. It’s worth noting that there is no reliable database, even in China, listing Chinese-funded projects with the terms and conditions attached to the bilateral loans.
This paucity of data is one of a major concern, making it difficult for general public in Africa to appraise sustainable Chinese projects.
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.