Kenya pays final Sh2.5bn for ghost fertiliser plant

Unloading fertiliser at the Port of Mombasa. FILE PHOTO | NMG Kenyan taxpayers coughed up Sh2.48 billion to pay a Belgian bank for a botched agreement for a fertiliser plant started in the late 1970s, a State audit report shows. In the end, the plant was never built, meaning that the money went down the drain.

A report from a parliamentary watchdog indicates that the latest payment pushed the total amount of money lost over the botched Ken-Ren Chemical and Fertiliser plant to Sh6.33 billion. Kenya had earlier paid Sh3.9 billion to the governments of Australia and Belgium because it had guaranteed the construction of the failed fertilizer plant at Changamwe, Mombasa.

“The Government of Kenya has paid a payment of Euro 21.2 million (Sh2.48 billion) towards settlement of government guaranteed debts incurred in 1970 on account of Ken-Ren Chemical and Fertiliser Company,” the Public Accounts Committee (PAC) says in its latest report on government finances.

Julius Muia, the Principal Secretary at the National Treasury, told PAC that the obligation arose from a case filed at the Court of Arbitration of the International Chamber of Commerce by the Belgian bank known as Ducroire. The court found the government of Kenya liable as a guarantor and ordered it to pay Euro 21.2 million to Ducroire

The government had entered into an agreement with a now collapsed American firm, N-Ren, to guarantee the construction of a fertiliser plant back in 1970 at a cost of Sh350 million at an interest of 8.5 percent. The debt has since risen to breach the Sh6 billion mark.

Ken-Ren was a joint ownership between Kenya and N-Ren Corporation in which the two entered into several financing and equipment procurement contracts with various Australian and Belgian banks and suppliers. The government was the guarantor.

Dr Muia told PAC that Kenya had cleared the debts and compensation associated with failed fertilizer plant.

The Treasury argues that Kenya paid the billions of shillings to avoid a negative credit rating that could injure its reputation and lock it out of international debt markets.

“Even though the full amount of the debt is now settled, the committee is deeply concerned that government spent such colossal sums of money on a project which did not take off and against which no value for money was achieved,” Opiyo Wandayi, who chairs PAC, said in the audit report.

The debt obligation arose from the agreement that Kenya signed with the collapsed N-Ren […]

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