Details have emerged of the huge amount of money the government has lent struggling state corporations and agencies, with little to no repayment in sight.
As of June 30, 2024, the total outstanding loans to the referenced entities stood at Sh1.197 trillion, casting serious doubts on whether taxpayers will ever see a return on these massive investments.
The repayment rate is alarming, with the National Treasury dossier detailing that out of Sh1.26 trillion disbursed, only Sh64.5 billion — about five per cent — has been repaid.
At the top of the list is the Kenya Railways Corporation, which owes Sh737.5 billion.
Not a single shilling has been repaid by KRC.
Similarly, Kenya Airways PLC, another perennial loss-maker entity until this year, owes Sh99.9 billion, with zero repayments made.
The two entities alone account for nearly 70 per cent of the total outstanding loans, yet there is no clear plan for repayment.
Abraham Rugo, the executive director for the International Budget Partnership-Kenya, observed that the situation may not change for the better.
“A lot of the institutions are not performing, and thus it is hard to see how this will ever be paid. Note that they are the ones with a majority of pending bills,” he told the Star on Wednesday.
The energy sector is another major concern, with KenGen having an outstanding loan of Sh78.6 billion while Kenya Power owes Sh71.3 billion.
Chronic financial struggles of the country’s power companies have seen them repeatedly rely on government bailouts.
The Rural Electrification and Renewable Energy Corporation, with an unpaid loan of Sh13.6 billion, further underscore the inefficiencies in the recovery.
Water agencies are not spared among the worst offenders, the National Treasury data reveals.
In the list, Athi Water Works Development Agency leads with an outstanding loan of Sh55.1 billion, followed by the Coast Water Works Development Agency at Sh20.6 billion.
Other water-related entities with huge debts to taxpayers, among them the Lake Victoria North and South Water Works Development Agency, owe a combined Sh28.4 billion.
The grand question is why the entities have been allowed to operate with impunity and why there is no urgency in reclaiming these debts.
Recent reviews by Auditor General Nancy Gathungu on the matter have pointed to systemic negligence in recovering public funds.
She said the scale of the unpaid loans raises concerns about mismanagement and service delivery failures.
Gathungu revealed that during the year under review, the affected institutions did not make any repayment against their respective loan balances.
The auditor, sounding the alarm of possible loss of funds, observed that some of the entities continue to perform dismally and require constant government bailouts.
“Non-repayment of the loans has led to the write-offs of the loans as bad debts; opportunity costs in funding other critical areas and eventual loss of public fund,” she said in a recent report.
In the agricultural sector, Agro-chemical & Food Company Ltd owes Sh2.9 billion, while Mumias Sugar Company Limited and Kenya Meat Commission are yet to repay Sh3 billion and Sh940 million respectively.
These entities have long been plagued by inefficiency, yet they continue receiving taxpayer-funded loans with no consequences for defaulting.
In the audit, Gathungu cited Mumias for not confirming the loan balance with the auditors. Loans to various local authorities of Sh7.5 billion were also not disclosed.
Even educational institutions are implicated, with Kenyatta University topping the list with its outstanding Sh10.8 billion. Moi University, on the other hand, owes Sh231 million, highlighting the financial mess of public universities.
The Kenya Urban Transport project, with an unpaid Sh40.7 million, further casts the spotlight on funds disbursed with little accountability.
Other notable defaulters include the Kenya Development Corporation (Sh1.3 billion), Kenya Airports Authority (Sh1.3 billion), and Uchumi Supermarkets Limited (Sh1.2 billion).
Uchumi Supermarket is not in operation and has failed several revival attempts, while it remains unclear why KAA has yet to settle its debt yet it has remained profitable over the years.
Audit details showed that some institutions, including Agro-Chemical, Water Conservation and Pipeline Company, Irrigation Authority, Warma and Utalii College, have requested write-offs.
Taxpayers may also lose shares of Sh114 million that were invested in five non-performing entities, among them Kenya Farmers Association, Nyari Estate Ltd, Kenya Poultry Limited, Ken-Ren Chemicals and National Agricultural Chemical and Fertiliser Limited.
Audits revealed that, whereas KFA exists, the government is not listed as a shareholder, while the fertiliser company was struck off the register. The others were dissolved.
“There was no disclosure of measures put in place to ensure the dormant investments report their returns,” Gathungu reported.
The amounts highlighted are besides Sh100 billion in outstanding obligations guaranteed by the government for Kenya Airways (Sh29 billion), KPA (Sh43 billion), and KenGen (Sh27 billion).
INSTANT ANALYSIS
The government is struggling to get resources to fund critical services like healthcare, education and infrastructure. This has been worsened by the animosity around tax-raising measures, especially after the 2024 tax bill debacle. This begs the question as to why the government has not held the defaulters accountable. Without action, there is a high chance ordinary Kenyans will have to bear the burden indefinitely.
