“I will be part of the delegation to accompany the President to the Asian country next week. The new SGR line will extend from Naivasha, Narok, Bomet, Sondu and finally Kisumu” – Raila Odinga on the 20th April 2019
We are now surely living in interesting days. Not enough that the “opposition” leader and Building Bridges Initiative leader Raila Odinga was stringing along with President Uhuru Kenyatta to Beijing and the Belt and Road Initiative Summit in Beijing this week. It was a grand summit with all the partners who are cooperating with the Chinese on their mission. Clearly, the Kenyan government officials had to go. As they have substantial investments, loans and projects already done in Kenya.
This being the Standard Gauge Railway (SGR) from Mombasa to Nairobi, now the second extension is to Naivasha. Clearly, that is not as golden as getting it to Kisumu. Then it would be a better deal to get the railway from Uganda connected too. The reason why President Museveni even took the ride in Kenya during the last month or so. Therefore, the trip to China now, seems abysmal. Even if they get to sell avocados. It is at least something.
I will first show you the two reports from the day before the Kenyan Officials flew to Beijing as they were scheduled to meet and negotiate a loan for an extension of the SGR to Kisumu. Alas, that has clearly not gone to plan. That is why I will show what one media house in Kenya wrote today and what the State House claims after failing.
CTGN reported on the 23rd April 2019:
“Kenya’s president Uhuru Kenyatta will today travel to China to secure a Sh368 billion loan for the extension of the Standard Gauge Railway (SGR)” (Christine Maema – ‘Kenya’s President travels to China to secure Sh368b SGR loan’ 23.04.2019, link: https://africa.cgtn.com/2019/04/23/kenyas-president-travels-to-china-to-secure-sh368b-sgr-loan/).
Standard Media on the same day:
“President Uhuru Kenyatta will today travel to China to negotiate a Sh368 loan billion for extension of the Standard Gauge Railway (SGR), a State House official has confirmed. Uhuru will be flanked by African Union’s High Representative for Infrastructure Development in Africa, Raila Odinga” (Moses Nyamori – ‘ Uhuru leaves for China to secure Sh368bn loan for SGR extension’ 23.04.2019, link: https://www.standardmedia.co.ke/article/2001322214/uhuru-goes-to-china-for-more-loans).
Citizen Kenya reports today:
“However, there was no word from the Kenya – China talks on the Naivasha – Kisumu SGR extension. Instead, Kenya signed an operation and maintenance service agreement for the Nairobi to Naivasha segment of the SGR. “.. the most important investment right now is to connect the SGR to Naivasha MGR so that come August there will be seamless connectivity,” CS Macharia said, the government choosing to hold its head high despite not achieving the much sought after Ksh.368billion” (Citizen Kenya – ‘ SGR construction to end in Naivasha as China loan bid flops’ 27.04.2019, link: https://citizentv.co.ke/news/sgr-construction-to-end-in-naivasha-as-china-loan-bid-flops-242884/).
State House Press Statement:
“It is important to note that the question of funding for the extension of the Standard Guage Railway from Naivasha to Kisumu was not on the agenda of the meeting between the two President’s. It therefore follows that the President cannot be said to be returning home empty handed for something he did not request. It further goes without saying that these headlines are are not only factually incorrect, they are misleading and extremely damaging to the reputation of the People and the Government of the Republic of Kenya. Whilst making it clear that the Government of Kenya did not discuss any funding proposals for the extension of the SGR at this meeting, it is very critical to state at this point that the SGR project is a regional project and the complexities in negotiating its completion involve several countries and securing financing for its completion could take several years of intricate negotiations” (State House – Press Statement, 27.04.2019).
First be first, the delegation from Kenya was a bit to excited and well prepared to come home with a giant loan. To a state and republic already high on the old loans. Where the SGR is already a losing money project and it is well established. As well, as the levels of loans compared to the budgets are already hitting the economy too. Therefore, that they were so pleased to travel for more loans is a crazy idea, but in the sphere of Jubilee, its just another Tuesday.
Secondly, the media showed and mirrored the events before, where both Raila Odinga and Uhuru Kenyatta was preparing for the loans. Kenyatta even had visit from Museveni to ensure his support and willingness to add the stakes for an extension. Because, that would mean, the same sort of deal and arrangement could be done with Kampala as well. Alas, the Northern Corridor Integration Projects with the SGR between the Republic is surely on hold. As the Republics are not capable or able to configure the stakes, the leverage or collateral for the Chinese to accept the conditions of a possible loan.
Third, when the State House comes out with a Press Release like today. It is sort of thinking that people have the memory of a gold-fish. Because, the statements of Odinga before leaving. Was all praising and willing to build a Industrial Zone in Kisumu in combination of the extended SGR. However, that dream is gone in the wind. The Jubilee and the President couldn’t fix another giant loan for the state to eat. Clearly, he missed the mark. Even if the State House claims he never intended to get it. Why have the meeting and greeting with Museveni before and later travel with a giddy Odinga? That doesn’t make sense to me? Can someone explain that to me, I don’t speak the language of gibberish.
We know there is more than what they say. The State House is trying to deflect it, surely soon Odinga is defending the State House. As the loyal subject he has become. He was planning not only to build a bridge, but also be a part of the belt and road initiative too. That would mean a double pay-off. Kenyatta nevertheless, will surely find another scheme to trick money to his businesses. We are just awaiting it.
The SGR Trick have been the same all along, awaiting the blessing and the nod from Beijing. Hopefully the Jubilee follows this old Chinese Proverb: “Timely return of a loan makes it easier to borrow a second time”.
If not, they might loose more than the good favours and possible loans from them. They might even loose, whatever collateral they made in previous engagement. Also, make it twice as harder to get more loans. Peace.
If you were ever thinking that Beijing would loan and build without consequence. Those days should long be gone. The Chinese are planning to earn money on their investments, they don’t care about the Republic’s they are investing in, as long as they are profits on their investments. They want earn on these loans and since the rate of loans are so high. They are now starting to pick collateral for their infrastructure loans, especially the draining of loans to the Standard Gauge Railway (SGR).
“While acknowledging China’s leading role in the Kenyan economy as a trading partner, the President called for increased Chinese investments in the country. “China now ranks as the number one trading partner with Kenya accounting for 17.2% of Kenya’s total trade with the World,” he said. “Kenya is open and safe for business. Kenya has one of the most conducive business environments in Africa,” the President added” (President.Go.Ke – ‘President Kenyatta Asks China To Give Preferential Treatment For African Goods’ 02.11.2018).
While Kenyatta are acting as it all positive, the reality is that the state are having giant issues with their “investments” and loans there. But Kenyatta wants to make it sound positive, when it really isn’t, just the rate of the loans have grown and the consequences of the relationship with China is now starting to cost. It is the Kenyans that has to pay these loans down and with every way possible. As the Chinese has leverage over the Kenyan government. Take a look at these quotes from media recently!
Loan Rate in Kenya:
“Kenya’s current public debt stands at approximately 4.884 trillion Kenyan shillings (USD$49 billion) or 56.4% of the country’s gross domestic product.. This is up from 42.8% in 2008. In other words, the country owes more than half the value of its economic output (GDP)” (…) “China is Kenya’s largest creditor, holding about 72% of the country’s bilateral debt as of March 2017. Studies show that Kenya’s Chinese debt poses a threat because the loan agreements are not transparent, projects are not well prioritised, accounting procedures are weak and it’s not clear what projects are costing” (Odongo Kodongo – ‘Kenya’s public debt is rising to dangerous levels’ 05.08.2018).
Selling State Owned Enterprises:
“The Privatisation Commission has approved sale of 26 state-owned corporations to raise funds to support the budget. The commission, under the Privatisation Act, 2005, was mandated to sell 26 poorly performing state corporations to cut down government spending. Those approved for sale are National Bank of Kenya, Consolidated Bank of Kenya, Kenya Meat Commission, Development Bank of Kenya, East African Portland Cement, Kengen, Kenya Pipeline Corporation, Kenya Ports Authority, and five sugar millers — Chemilil, Sony, Nzoia, Miwani and Muhoroni. Others are Agrochemical and Food Corporation, New Kenya Co-operative Creameries, Numerical Machining Complex and Isolated Power stations, hotels (Kabarnet Hotel, Mt Elgon Lodge Ltd, Golf Hotel Ltd, Sunset Hotel Ltd and Kenya Safari Lodges and Hotels Ltd). Also targetted are Kenya Tourism Development Corporation-associated companies, which include International Hotels Kenya Ltd, Kenya Hotels Properties Ltd, Mountain Lodge Ltd and Ark Ltd” (Cynthia Ilako – ‘State to sell 26 companies to finance current budget’ 03.11.2018, The Star Kenya).
China Selling Infrastructure Loans to Investors:
“The plan will see Hong Kong mortgage insurer Hong Kong Mortgage Corporation (HKMC) buy a diverse basket of infrastructure loans next year and explore the idea of “securitising” or repackaging them into securities for sale to investors, allowing it extra liquidity that it can loan out to finance more infrastructure projects. “This initiative we believe will help ‘recycle’ commercial banks’ capital to be redeployed into other greenfield infrastructure projects, besides enabling wider capital markets participation in infrastructure development under the Road and Belt initiative,” said HKMC Greater China chief executive Helen Wong” (Allan Olingo – ‘China plans to sell off its African infrastructure debt to investors’ 05.11.2018).
We are seeing the growth of loans, that is up 42,8% and the debt level of the 56,4% of the GDP. Because of that, the state are now selling of their State Owned Enterprises. Most likely to Chinese holding companies and investors, who are expecting to gets points on their dollars. As well, as securing their future on the investment. They are selling the central institutions and businesses, which was state controlled, but they will now become para-stalls of the Chinese.
But selling the institutions are not enough for the Chinese. They are planning to take it further. Planning to rehash the loans as sub-prime loans for investors, meaning they are taking the risk instead of the Export-Import Bank of China, where the loans are usually collected and distributed from. Therefore, the loans are another target of more profits as they want to earn on them as well into the Capital Market. Just like the US Banks did with House Loans and mortgages in the past.
While all that is happening and with the knowledge of this, the President is still keeping it cool. Kenyatta is still not saying the brazen truth, that they are a debt-slave to China. Are in such big trouble, that the investment of the SGR are killing the economy and they have to trade-off their assets to keep up with their payments. That is what is happening and this is not really developing, but hurting the economy even more. As this institutions and businesses has been controlling their markets. Now, they will have masters from outside, which are not there to secure the market, but make a direct profit. Therefore, the citizens are not only paying their loans for the railroads, but for destroying their economy. Peace.
The Government of Kenya and the Government of Uganda, should both worry about their arrangements and their growing debts, as the non-sustainable rates of debt and higher interests. As the unnatural growth of the national budget, where the lack of revenue is covered with more state debt. To cover both salaries and development projects. All of this has happen over the recent years. As more and more of the yearly budget goes to pay interest on old loans, as the old loans also mature and the rates will become more dire. As the strength of the economy isn’t going in the same rates as the loans. This is in the end a debt trap. A debt trap China has used in other countries.
Sri Lanka is the recent example, which has come into a debt trap, where the Chinese loans has become so dire, become so big and not able to recover. That the collateral for the state was to favorable lease the harbor of Hambantota to the Chinese. They had too, since they couldn’t repay the creditor from Peking. That should be realization from all the others who borrows big and think that the Chinese will not get something valuable back for their funding.
This should be a warning for the Kenyan and Ugandan counterparts, this should be a warning for President Kenyatta and President Museveni. That is if they care about the state resources, about their minerals and about the possible extractions from their republics. If they want to be debt-slaves, or lease away the crown jewels to the Chinese, because they promised favorable debt plans, that in the end put them in juxtaposition, that they cannot come out off; unless they trade away something very valuable. If that would be licenses to drill oil in Turkana or in Bunyoro.
Who knows what the end-game of these massive loans are and if the Presidents and their parties plans to repay them. Or hope that the next generation will try to invent new way of generating money. If so, then they are saved by rare luck and not by planning ahead. These loans are big and taking bigger and bigger slices of the GDP. They are going far beyond the levels of revenue and possible future forecast of funds. Therefore, the loans can only at this point benefit the ones giving them. They will get the repayments and the interests. If they don’t get that, they will take collateral and take other state entities to get their values back. The Chinese are doing that in Sri Lanka, they could easily do that with Kenya and Uganda too. They are in for the taking and ready to muscled out.
The Chinese doesn’t play and doesn’t play with money, they will recollect and they will recover the funds spent. As they are not playing games, they are really investing and hoping to get paid-in-full. They are waiting for the numbers to go from red to black. They don’t expect to loose, and if they do. They will figure other ways to collect the lost.
President Kenyatta and President Museveni should know this, but I doubt they are thinking in this direction right now. They are eating and not caring, but their states and their economist should worry. As the growing debts has a backside, not only the interests and the lack of development it creates, as they have to find bigger revenue to cover the debt and the mature loans, as they have to settle old affairs and such. They don’t go away or get deleted over nothing. They got to take charge and find a way to solve it.
The Chinese will take advantage if they start to default, if they struggle to pay, which could come, if the loans and the negative spiral of lack of revenue continues. That is if the state doesn’t find ways to repay. Than, the Chinese might take a port, might take state owned enterprise, but surely they will be paid-in-full. Peace.
“The government is borrowing without proper revenue planning or policies that factor in revenue growth challenges. This, according to Parliament’s Budget Office, coupled with the growing need to finance projects, will see the level of Kenya’s debt increasing in the coming year, which is already a cause for concern for some” (Kenya NTV, 2016)
Today is a day where I have questions and they are big because when you crunch the numbers for the last three fiscal years and estimated debt ratio it’s start to be worrying. It isn’t a sweet and tender way of asking. I know, but the numbers and the citizens will have to repay the amounts of borrowed cash at one point. As the Japanese will not deliver second-hand vehicles to the hospitals forever like they did during either this or last week in Kenya; Kenyan Government shouldn’t base their budget on handouts, but on tax-monies. The budget now is worrying as the levels of budget that are borrowed as it is going directly to portfolios that are day-to-day business instead of giant infrastructure development.
Why do I say that? Because each year you can question the ratio between the debt and the development projects; like in 2013/2014 the debt we’re 330bn, but the development 224bn. That is a 100bn used on day-to-day instead of building roads to Ethiopia or planning the Standard Gauge Railway. Take look!
In the 2013/2014:
At the fiscal year ending the 25th July 2014 the budget debt we’re 330,440,692,719.35. That means there 330bn debt, which we’re 25.8% of the National Revenue. National Government budget spent on development we’re 224,355,607,699.00 or 224bn.
In the 2014/2015:
At the fiscal year ending 24th July of 2015 the budget debt we’re 400,249,353,175.10. That means there 400bn debt, which we’re 25.1% of the National Revenue. National Government spent on development we’re 270,320,838,230.00 or 270bn.
In the 2015/2016:
At the fiscal year ending the 22nd July of 2016 the budget debt we’re 683,479,898,203.50. That means there 683bn debt, which we’re 36.9% of the National Revenue. National Government spent on development we’re 333,170,357,469.90 or 333bn.
So as you see, the FY 2013/2014 isn’t the worst. FY 2014/2015 is the start of loose government spending. The Jubilee all of sudden borrow 400bn and spends 270bn. That is 130bn that is used on day-to-day business, with loaned fiscal funds instead of the ordinary tax-base that the government should be fixated on. So with the last year FY 2015/2016 the Jubilee went all out in the stratosphere and borrowed from any bank or institution possible; as the debt we’re 683bn and the development we’re 333bn. That is 350bn that are used to day-to-day business and not development. The question remain why the sudden giant loan ratio towards the last year before election and why the lack of projects to use the newly granted funds.
The fiscal responsibility seems weak and not there when a government can splash this kind of funds and use this amount of debt on day-to-day instead of big projects and infrastructure projects needed. I am sure DP William Ruto has more friends that can be sub-contractors for some Chinese infused borrowed road projects around Kisumu. But, the ability to sustainable development with the steady rise of debt is worrying. That the IMF and World Bank is saying the debt ratio is still feasible should be worrying. As the IMF and World Bank never had control of the worst years before the Greece defaulted and needed saving grace from the world around it. The worst comes to worst when the Kenyan Government starts to default and reach it’s limit they have to have a mercy on the Jubilee and the counterparts who are paying for loose fiscal behaviour. The worst comes to worst with the giant amount of added fiscal funds might give the economy a edged inflation and bank rates that weakens the Kenyan Shilling as the deficit between reality and what is really used.
You can wonder why the Jubilee wants to hedge up so much loans and government debt. When the FY 2013/2014 and FY 2014/2015 we’re the net domestic borrowing around 300bn, but by FY 2015/2016 it become 500bn. That is a jump of 200bn of Domestic Borrowing. That should also be questioned together with the ratio already in the budget. This doesn’t seem like a healthy fiscal policy. The public should question the use of the borrowed domestic and total ratio of debt. The governance levels and accountability of the funds should be asked from Opposition and also the Auditor General. The Inspectorate of Government the IGG or Ombudsman should hassle the hustling Jubilee who has gained these funds and been responsible for the allocated budget and inquired for the option for loans to development and day-to-day use.
What do you think? Peace.
“I understand that everyone in the rural areas,the MPs, the MCAs,Governors and all aspirants are claiming responsibility for any upcoming infrastructural project.They are fighting about who lobbied for what and who talked with whoever and who met whoever……..it’s not a question of who lobbied for any development be it roads,electricity connection,building of schools and many more….it’s a question of giving service to the forty to forty two million Kenyans who pay taxes.Hii Maneno ingine yote haina maana” – Uhuru Kenyatta
President Kenyatta has today a State House summit on transport and infrastructure projects in Kenya under his leadership and the Jubilee Government. That has soon finished their first term in the presidency. They had pledges upon pledges when they went into government.
They wanted to build a giant and fantastic electric quick railway. The Standard Gauge Railway and also develop the Lamu Port through the LAPSSET project with fellow neighbors. The Pipeline of crude-oil from the Northern Kenya in Kerio Valley in the Lokichar Basin to the upgraded Lamu Port; where the Jubilee Government also wanted the Lake Albert crude oil from Uganda to go to. Something that fell through as the licensed companies in Uganda though it was too costly to build through Kenya compared to Tanzania. So the Kenyan Government has to do it on they’re own. As the LAPSSET it is waiting for private enterprise to engage and use their monies on the planned infrastructure.
The other issues are stadiums not built in regions where it was promised the fields of glory never came. It was easy to promise the district towns a sports facility, but none of them came to fruition. The others developments we’re that from Kenya had 30 Air-strips before Jubilee and by now they have 50 of those. Still, the discussion on the failed development project and upgrade of Jomo Kenyatta International Airport (JKIA) have not been an issue as the embarrassing project it is for the ruling regime and their PR team.
“There is corruption at the port. Find out who among the people in this room are thieves” – Uhuru Kenyatta.
There are always some issues and even after years in power and set change with rule of law. The Jubilee government tends with the same fractured system, the corrupt Mombasa port where the monies that makes all import more expensive and still they haven’t instilled checks and balances to Ports and therefore the extra taxation of the imports happen on a daily basis. As the corrupt mind and bodies continues to thrive with the speaking up against it, but not dealing with it in Parliament or by sanctions of law.
The Jubilee government has dozens of plans and pledges, as much as they have foreign loans to build the projects from the World Bank, International Monetary Fund and the Chinese. The extent of debt collected by the recent new loans has come to 49% of GDP. In April 2016 the Jubilee Government had collected $1.35 billion in debt, while fixing a massive deficit in the Kenyan budget. Still, this is worrying as the debt and interest has to be repaid to the International lenders and development banks which the tab is taken from.
This was not discussed at the Summit and where is the money for the development projects coming from as they shouldn’t just surface out of thin air. Just like the roads and rails need wages, plans, dialogue and trade to get built. As the landowners need to be compensated together with the companies building the roads need paid for service rendered. Therefore the business of infrastructure is expensive as the giant projects cost a fortune because they are supposed to stay for long and be kept for decades on.
The same with all the roads not taken care of as the feeder roads of the Northern Kenya, which is left in mud and dust; the focus on three Nairobi by-passes to fix the congestion of the capital. Not thinking of other towns who could need extra bypasses like Eldoret or other where the Jubilee doesn’t deliver the needed infrastructure, except if it is fitting with the border-passes and agreement with nation on the other side who needs roads of exporting through Kenya there. Therefore the Summit is more a PR Show, than proving real progress as the corrupt, the debt and all the other problems are destroying the champion sound and roar from the Jubilee Government under President Kenyatta. Peace.
There been reports of the new equipment arrived just before the General Election, the Police was expected this. I will come with quotes that tell what is expected if the Uganda Police Force follows it and get the equipment that was budgeted for, Take a look!!
First Allocation to the General Election:
“30% Payment for 113 operational vehicles and 40 specialized vehicles for policing the 2016 general elections under a 4year credit financing facility with effect from FY 2014/15 made” (…)”35% payment towards the supplied 2 twin engine helicopters made” (…)”Additional 112 Operational vehicles, 46 specialized vehicles and 1,900 motor cycles to support the management and provision of security for 2016 National General Elections procured” (Budget Framework Paper, P: 19).
The budget for vehicles is 62,539,322 UGX. For the helicopter engines are 9,641,658 UGX. But the money is in the allocation in that part of the budget framework. We know that this part is not the main part that matters, but it still is money for it. There is more important what comes here!
Post-Election Police Budget:
“Policing the post 2016 general elections (Shs 51.1bn)” (…)”The experience is that after elections there is always a spate of violence which normally takes a big chunk of police budget to contain. During that time, every police officer gets out of the barracks to the field to ensure law and order. The operational budget covers feeding, consumables, fuel, maintenance of vehicles & equipment, training and intelligence gathering. This requires additional budget of Shs 51.1bn” (Budget Framework Paper, P: 22).
So I am sure the cars seen on the docks in Mombasa in Kenya that are procured for the Ugandan Police Force, was used under the budget are for the Post-Election, because the 60M UGX is not getting the Police Force far. So it must be additional budget that they got; which is substantial allocation for buying equipment, vehicles and training. So I am sure a hunch of that went to the new expensive mambas and Armored Personnel Carrier (APC).
Kenyan media see the imported cars at Mombasa docks today:
“Uganda has imported armoured police cars, similar to those Kenya acquired at the end of January, ahead of its general election set for February 18. The vehicles have features including water cannons, riot controls and wedged front plows. The Star spotted them at G-section in the Port of Mombasa but Kenya Ports Authority officials declined to comment on the “sensitive” matter” (Elkana, 2016).
This here was to be expected, IGP Kale Kayihura wants to make the bloody mess of “Walk to Work” again, and has put money where his mouth is. Or the expensive big-man security vehicles that has the capacity to shut down demonstrations. They will continue to oppress the public in the name of the National Resistance Movement, and his boss Mzee! As he speaks of violence and expected that he needs big guns to shut down opposition as he has done in the past. This here is just a manifestation of it.
I think you catch my drift and assessment of the actions of the police. As they are following blindly the orders of Mzee, something else IGP Kayihura recently said, he speaks peace right now as long the election observation monitoring (EOM) are in the country. So that when they leave: he will go full-front against the opposition as he and his crew in the Police has done so much in the past. So I have hard time believe the peace rhetoric of Kayihura, it’s kind of hard to believe from him and his loyal cronies. Before I go to deep, I stop here. Peace.
Budget Framework Paper – Justice, Law and Order, – Vote 144: Uganda Police Force – Paper overview for voting in allocation for Budget 2015/16.
Elkana, Jacob – ‘Uganda imports armoured police cars ahead of February 18 general election’ (04.02.2016) link: http://www.the-star.co.ke/news/2016/02/04/uganda-imports-armoured-police-cars-ahead-of-february-18-general_c1288972