Kenya Could Lose Mombasa Port to China Over Debt

Reports from Kenya suggest the country could lose Mombasa Port to China if Kenya Railways Corporation defaults in the payment of a loan from Exim Bank of China. The country used Mombasa port to secure the loan which was taken from the Chinese bank to finance construction of the standard gauge railway (SGR). 

A leaked audit report shows that the government waived sovereign immunity on the Kenya Ports Assets on signing the agreement with China thus exposing Kenya Ports Authority to foreclosure by China Exim Bank. Further, the report says, "The agreements are biased since any non-performance or dispute with the China Exim Bank would be referred to arbitration in China, whose fairness in resolving the disagreement may not be guaranteed." 

The agreements also provide that the revenue of the Kenya Ports Authority is to be used to clear the debt. The Kenya Ports Authority management was supposed to submit comments on the leaked report within seven days from the 16th of November 2018 but it is unclear if that has happened.

The Auditor General has however refused to confirm or deny the veracity of the leaked report arguing that, "Any reports that from my office are taken to Parliament. A report picked from the social media is not official." The Kenyan Cabinet Secretary for Transport and Infrastructure has categorically dismissed the report as untrue, saying, "You know this cannot be true, the idea of waiving a country’s sovereignty. So let’s not dwell on it." 

The loan is, however, very real and the East African reports that, "Of the Chinese loan for the Mombasa-Nairobi track, a total of Ksh319 billion ($3.2b) was spent directly on railway construction, with Ksh213 billion ($2.1b) going to SGR and the rest of it being used in buying the rolling stock (locomotives and wagons)." 

China is said to have also provided raw materials, engineers and rolling stocks for the SGR project while China Communications Construction Company is involved in the SGR cargo and freight business. In short, China is everywhere and the Kenyan government will have great difficulties convincing anyone that China does not have the legal right to take over the port of Mombasa. 

It is not out of character for China to go into such lopsided deals and also not out of character for an African government to vehemently deny their existence. Reports that China was about to take over the Zambian power company made the rounds earlier this year and the country again refuted the claims.

Header Image Credit: Etienne Oliveau/EPA/Pool