Opinion and Analysis
City Hall must be transparent over Sh5bn loan
Posted Thursday, October 11 2012 at 19:42
- For CCN officials to have failed to offer full disclosure invites more questions than answers.
- Clear terms of reference for such an exercise ought to revolve around whether or not the loan was procured competitively.
City Hall’s statement appearing in sections of the media this week dubbed Facts on the Sh5bn Equity Loan to City Council of Nairobi is short of facts.
Why City Hall took the loan is not an issue for our deliberation. However, for CCN officials to have failed to offer full disclosure invites more questions than answers. It would have helped matters if the following issues had been explained.
Did CCN required Sh5 billion, or less? Did the council sign a letter of offer or contract with Equity Bank? Who signed the deal?
Were specific procedures required for procuring a loan of such a magnitude followed in line with article 35 of the Constitution of Kenya? Why didn’t City Hall publish the information earlier, in full, for the public to scrutinise it? If “negotiations” with Equity Bank settled on a floating interest rate, what are the applicable margins?
Other than percentages, it would be important for City Hall to disclose its respective monthly repayments since the loan was procured. And if Equity’s current base lending rate stands at 19 per cent, why did City Hall settle for 20 per cent?
If part of the loan was paid to institutions such as the Local Authorities Pension Trust, the National Social Security Fund, and the National Hospital Insurance Fund, when was the money paid?
The dates and respective amounts of money paid to the institutions should be made public.
Was part of the loan used to pay staff salaries and settle other obligations? How much, to how many staff and organisations?
Until all these questions, and many more others lingering in the public domain, are promptly answered both the Treasury and the Transitional Authority should ensure that an independent forensic audit is undertaken.
Clear terms of reference for such an exercise ought to revolve around whether or not the loan was procured competitively; if the process was rushed and information not fully shared; details of the actual contract signed; the repayment plan, and the effect the loan has had on City Hall’s revenue and if the same will not hurt the County Government.
Juma is a programme officer at Consumers Federation of Kenya.