Kenya to lose its port to China if it defaults on SGR loan

NAIROBI, Kenya, Dec 19 – Kenya risks losing its port authority if Kenya Railways Corporation defaults on the Standard Gauge Railway (SGR) loans.

This is according to the Auditor General’s report on the financial health of the institution.

The report has revealed that Kenya Port Authority was used as collateral with the agreement citing that the Authority’s revenues will be used to pay Kenya’s debt to China Exim Bank if the minimum volumes required for consignment are not met.

China Exim Bank Financed 90 percent of the Sh327 billion SGR loan from Mombasa to Nairobi.

This news is worrying since the railway line is struggling to meet its operating costs and made only a Sh1 billion in the first year of operations.

The SGR was designed to transport 22 million tonnes of cargo annually, an equivalent of 40 per cent of Mombasa Port.

The Kenya port receives at least 5,000 containers every day out of which eight trains are able to transport 800 containers (108 each) a day.

China is also financing 90 per cent of the Sh150 billion Nairobi-Naivasha section and has since been approached for an additional Sh370 billion for the Naivasha-Kisumu line.

Kenya will pay Exim Bank of China Sh34.8 billion in the financial year 2019/20 from Sh6.07 billion this fiscal year, and Sh8.39 billion in 2018-19.

Cumulatively, the government will spend Ksh82.85 billion in the year starting July next year to pay Chinese lenders compared to Ksh26.61 billion it paid in the current year ended June.

Kenya ranks as the third most indebted country to China in Africa in the period between 2000 to 2017 according to China Africa Research Initiative data.

Though the borrowing decreased significantly in 2017 compared to the years 2014 to 2016 Kenya’s borrowing from China currently stood at Sh980 billion as at the end of 2017.

Only Angola and Ethiopia, who owe China Sh4.28 trillion and Sh1.37 trillion in the period under the review, are ahead of Kenya.

Standard Gauge Railway and Road network expansion was the main use of the debt borrowed from China.

Last year, struggling to pay its debt to Chinese firms, Sri Lanka handed over the port of Hambantota to China on a 99-year lease.

Sri Lanka owes more than $8 billion to state-controlled Chinese firms.