Politics and policy
City Hall flouted rules in Sh5bn loan, House told
Posted Thursday, August 9 2012 at 21:53
A Sh5 billion loan borrowed from Equity Bank by the City Council of Nairobi was not approved by the Minister for Local Government as required by the law.
An audit conducted by the Kenya National Audit Office (KNAO) that was tabled in Parliament Thursday, concluded that the council’s legal department was not involved in the negotiations.
The Local Authorities and Funds Accounts Committee (LAFAC) which is probing the loan ended its session after top officials differed on key elements of the transaction for which City Hall paid Sh50 million in negotiation fees.
Awoul Aduma, the Director of Legal Services at the council, said that he had neither been part of the negotiations for the loan nor seen the original agreement.
“We have a team of 10 lawyers. I need more time to retrace the movement of the agreement. It must have been kept by one of my juniors,” he said.
Mr Aduma surprised the committee when he said that the document was not registered at the Ministry of Lands and stamp duty paid.
Town Clerk Roba Duba disagreed with his predecessor, Philip Kisia, as well as his heads of departments on details of the loan.
Mr Duba told the committee that the agreement was not among the items handed over by Mr Kisia. The former town clerk said the original agreement was deposited with the legal department and a copy kept by the clerk’s office.
Mr Kisia and CCN treasurer Jimmy Kiamba could not explain how the interest rate payable on the loan doubled from 12 per cent in November 2011 to 24 per cent in December 2012.
It emerged during questioning that the changes in the interest rates were effected without following provisions of the loan agreement which requires a notification to be issued in writing.
Servicing of the loan has seen the council launch an aggressive recovery of land rate arrears.
On Wednesday, City Hall extended by 10 days the deadline given to rates defaulters following a waiver of penalties. The drive, launched last month, had raised more than Sh1 billion by Thursday.
The council has put defaulters on notice that it will take over the properties or auction them to recover the arrears.