Kenya was given stringent conditions by the Chinese government before signing for the Ksh360 billion Standard Gauge Railway (SGR) loan.
In a contract document released by Transport and Infrastructure Cabinet Secretary (CS) Kipchumba Murkomen on Sunday, November 6, China was given preferential rights to supply all the materials needed to actualize the 480-kilometre railway line from Mombasa to Naivasha.
“The goods, technologies and services purchased by using the proceeds of Facility shall be purchased from China preferentially,” the contract says in Article 2.5.
At the same time, China was given exclusive rights to manage the SGR operations and take all the proceeds from it as part of the loan repayment.
“The entire proceeds of the Facility shall be applied by the Borrower for the sole purpose of the payment of approximately Forty-Two Point Zero Six percent (42.06%) of the Commercial Contract amount and shall be exclusively utilized to make the payment for the Line Section of the Project,” Article 2.4 of the contract reveals.
SGR loan repayment
Kenya was also given 20 years to repay the loan, of which seven years were grace period.
This means Kenya is supposed to clear the loan within 13 years after the grace period lapses.
“The Borrower shall pay to the Lender a Management Fee on the aggregate amount of the Facility equal to Four Million US Dollar (US$4,000,000;90) in one lump within thirty (30) days after this Agreement becomes effective but noaater than the first Disbursement Date in any case, which amount shall be calculated at the rate set forth in Article 2.2. The Management Fee shall be paid to the account designated in Article 4.6,” the contract adds.
The loan is accruing interest of two per cent (2%) annually.
“The rate of interest applicable to the Loan shall be Two percent (2%) per annum. The rate applicable to the Management Fee shall be Zero Point Twenty-Five percent (0.25%). The rate applicable to the Commitment Fee shall be Zero Point Twenty-Five percent (0.25%) per annum.
“The Maturity Period for the Facility shall be Two Hundred and Forty (240) months, among which the Grace Period shall be Eighty-Four (84) months and the Repayment Period shall be One Hundred and Fifty-Six (156) months,” Article 2.2 and 2.3 of the contract state.
It adds: “During the Availability Period, the Borrower shall pay semi-annually to the Lender a Commitment Fee calculated at the rate set forth in Article 2.2 on the undrawn and uncanceled balance of the Facility.
“The Commitment Fee shall accrue from and including the date falling 30 days after the date on which this Agreement becomes effective and shall be calculated on the basis of the actual number of days elapsed and a 360 day year.
“The Commitment Fee shall accrue on a daily basis and be paid in arrears to the account designated in Article 4.6 on each Interest Payment Date.”
