Kenyan government risks losing the lucrative Mombasa port to China should the country fail to repay huge loans advanced by Chinese lenders. In November, African Stand reported on how Kenya is at high risk of Losing strategic assets over huge Chinese debt and just after some few months the Chinese are about to take action.
The loans have been granted for the development of the Standard Gauge Railway (SGR). Also at stake is the Inland Container Depot in Nairobi, which receives and dispatches freight hauled on the new cargo trains from the seaport. Implications of a takeover would be grave, including the thousands of port workers who would be forced to work under the Chinese lenders.
Management changes would immediately follow the port seizure since the Chinese would naturally want to secure their interests. Further, revenues from the port would be directly sent to China for the servicing of an estimated Sh500 billion lent for the construction of the two sections of the SGR.
In September 2018, Zambia lost Kenneth Kaunda International Airport to China over debt repayment. The SGR –operated by the Chinese, is a hugely loss-making venture, meaning it cannot generate enough money to repay loans. SGR reported a near Sh10 billion loss in its first year of operations.
The Auditor General has warned that the eventuality is likely because of a lopsided loan agreement that greatly favours the China Exim Bank, who advanced Kenya the loan.Specifically, Kenya got the short end of the stick in the agreement where any disputes arising from the debt servicing would be arbitrated in China.
An audit completed last month indicates that Kenya Ports Authority’s (KPA) assets, which include the Mombasa port, could be taken over if the SGR does not generate enough cash to pay off the debts.
“The China Exim Bank would become a principal in (over) KPA if Kenya Railways Corporation (KRC) defaults in its obligations and China Exim Bank exercise power over the escrow account security,” the audit reads in part. (African Stand)