China is likely to take over Kenya’s Mombasa port if the country Railway Corporation defaults in the payment of the huge loan they received from Exim Bank of China.
National Sportslink learned that Kenya used Mombasa port to secure the loan which was taken from the Chinese bank to finance construction the Standard Gauge Railway (SGR).
A leaked audit report showed that the government waived sovereign immunity on Kenya Ports Assets on signing the agreement with China thus exposing Kenya Port Authority to foreclosure of China Exim bank
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.
However, in December 2017, the Sri Lankan government lost its Hambantota port to China for a lease period of 99 years after failing to show commitment in the payment of billions of dollars in loans.
The transfer, according to the New York Times, gave China control of the territory just a few hundred miles off the shores of rival India.
It is a strategic foothold along a critical commercial and military waterway.
“The case is one of the examples of China’s ambitious use of loans and aid to gain influence around the world and of its willingness to play hardball to collect,” says the New York Times of December 12, 2017.
In September 2018, Zambia lost Kenneth Kaunda International Airport to China over debt repayment.
In the likely scenario that China takes over the port, Kenya would be joining Sri Lanka -another debt-distressed nation- in losing a strategic asset. It is possible because 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 principle 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.