Chinese Debt Trap: Kenya’s Mombasa Port could be taken over by China

A common practice adopted by African leaders in recent times is the act of hiding details of loans from creditors, especially China from their citizens; this follows the growing campaign by young Africans against killer loans with tendencies to jeopardize their future.

When the News first broke in 2018 that, major Kenyan assets were committed in loans taken from China, both the Kenyan government and their Chinese counterparts denied the report; at the time, President Uhuru Kenyatta promised reporters that, he would make the documents relating to the Chinese loan public but failed to do so. “You want a copy of the contract, I’ll avail it to you tomorrow,” Kenyatta said in a failed promise.

The same issue has resurfaced in a recent development where a comprehensive report signed by the former Auditor General as presented before parliament revealed that, some of the countries assets, especially those of Kenya Ports Authority (KPA) went into the secret negotiation before the Sh364 billion Standard Gauge Railway (SGR) loan was granted; an evidence which defeats claims by the former Chinese ambassador to Kenya, Wu Peng in denial that, “No Kenyan asset is at risk because of the loans.”

The audit report which exposed the ‘hidden’ agreement stated that, “KPA assets are exposed to the risk of takeover by the lender.” This the auditor explained that, the takeover is eminent because, KPA as an entity was used to sign the payment arrangement agreement and also documented as the “borrower” despite its publicly known role of a facilitator.

In describing the take-over of Port operations, the auditor reportedly said that, “KPA shall make good any shortfall arising either on account of failure to reach the minimum volume of cargo…such an amount as is required to make good the shortfall within a period of 30 days after completion of reconciliation. In the event that KRC defaults to pay China Exim Bank freight and service charges, KPA would be compelled to deposit the amount due to KRC to a bank account designated by the Exim Bank.”

To worsen everything, Kenya Ports Authority and Kenya Railways Corporation waved both asset and legal immunity irrevocably; increasing the possibilities of the “lender” to lay hold on the targeted facilities. An excerpt of the resurfaced report says that, “under this clause (17.5) the borrowers – KPA and KRC – agree that any proceedings against them or their assets in connection with the agreement, no immunity from such proceedings shall be claimed by it or with respect to its assets.”

The agreement also settled on China International Economic and Trade Arbitration Commission as a destination for Arbitration in times of dispute; “The place of arbitration shall be Beijing, PRC. The language of arbitration shall be English. Each arbitration award shall be final and binding on all parties,” the agreement smartly added.

Kenya has lately been struggling with how to settle the already existing debt pile on the country; the Chinese SGR loan is due for payment but the country’s economy as has been further distorted by the pandemic does not seem healthy to pay the loan which is to be repaid in instalments. The issue of whether the country is at risk of losing these assets or in the position to settle the debt as agreed lies in the political games of the government.

However, a movement called the Kenya Debt Abolition Network (KDAN) has staged a campaign calling for the abolition of “Illegal, Illegitimate and Odious Debts through evidence-based processes like Citizen Debt Audit” following recent developments. Does your country owe China? Do you know the terms under which such agreements were signed? Let’s discuss.

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