Kenya risks losing the profitable Mombasa port to China should the country fail to repay enormous loans advanced by Chinese lenders.
In a report, Ouko says the government used the Kenya Ports Authority (KPA) assets as security to secure the loan, meaning the Chinese bank would take over the assets in case Kenya fails to repay the debt as agreed.
“The payment arrangement agreement substantively means that the Authority’s revenue would be used to pay the Government of Kenya’s debt to China Exim Bank if minimum volumes required for consignment are not met as per schedule one,” he says in a report.
“The China Exim bank would become a principal in (over)KPA if KPC defaults in its obligations and China Exim bank exercise power over the escrow account security,” the report adds.
Ouko says KPA assets are not protected under sovereign immunity since the government waived immunity on the agency’s assets by signing the agreement with Exim Bank of China.
“The agreements is biased since any non-performance or dispute with the China Exim Bank (the lender) would be referred to arbitration in China, whose fairness in resolving the disagreement may not be guaranteed,” Ouko notes.
KPA currently has operating revenue of Sh42.7 billion, which grew by Sh3.1 billion (7.9 percent) from operating revenue of Sh39.6 billion in 2017.
Last month, global credit rating company Moody’s said Kenya is among African countries that risk losing control of key assets to China over failure to repay debt.
The Chinese government is reported to have taken over Sri Lanka’s Hambantota port for a lease period of 99 years for failing to show commitment in the payment of billions of dollars in loans.
Kenya owes the Exim Bank of China over Ksh.200 billion
Page 3 of Auditor General’s report. Kenya’s port collateral for China loan Read more: