China Africa Research Initiative’s (CARI) report on April 14 shows that Kenya’s Mombasa port is not collateral, and its seizure is never sought. This notion differs from the Kenyan auditor office’s statement, adding more confusion on the port’s link to Chinese debt.
The report’s title is “How Africa Borrows From China: And Why Mombasa Port is Not Collateral for Kenya’s Standard Gauge Railway.”
The authors are from Johns Hopkins University School of Advanced International Studies, Washington, D.C.
The auditor office is in charge of inspecting state entities’ financial accounts. It has warned for three years that the Kenya government might forcedly hand over the control of its Mombasa port.
This warning comes from the default risk on a 3.6 billion dollar loan Kenya borrowed from Beijing to build the Mombasa-Nairobi Standard Gauge Railway (SGR).
However, CARI’s report stated that the auditor general was wrong.
According to the report, the auditor general misunderstood the “waiver of sovereign immunity” clause, also featured in other infrastructure contracts across the continent.
The new report’s authors said, “Instead of serving as collateral or security for the loans, the profitable Mombasa port was linked into the SGR project as its major customer.”
The port, which is run by the Kenya Ports Authority (KPA), mainly aims to ensure a set level of cargo transported on SGR.
The KPA committed to using its income to fill the gap if cargo volumes fell below that level. Kenya’s Railway Development Levy, a tax on all imports into the nation, would substantially cover the repayment of the SGR debt.
The Mombasa case is not unique. Reports have recently extended from Nigeria to Zambia, Uganda to Sri Lanka. They showed that governments had committed vital assets like land or ports in exchange for Chinese financial aid that can be “seized” if they default.
According to CARI, rumors continue to circulate around other large Belt and Road Initiative projects in Zambia (Kenneth Kaunda International Airport and Zambia National Broadcasting Corporation), Uganda (Entebbe International Airport), and Montenegro (Bar Boljare Highway).
Both China and Nairobi denied that Mombasa port was collateral for the loan but gave no explanation, leaving the contract’s exact terms a mystery.