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Afreximbank, Kenya close in on deal for setting up Nairobi hub

Afreximbank PIX

Benedict Okey Oramah president Afreximbank. PHOTO | AFREXIMBANK

Summary

  • The deal has been in the works for two years, but threatened to unravel over the government’s refusal to grant the multilateral lender and its staff diplomatic status.

Kenya is expected to sign a deal paving the way for setting up of a Sh3 billion regional headquarters by the African Export­ Import Bank (Afreximbank) in Nairobi.

The deal has been in the works for two years, but threatened to unravel over the government’s refusal to grant the multilateral lender and its staff diplomatic status.

The Business Daily learned on Wednesday that a deal will be signed in the coming days. An earlier communication from Afreximbank indicated that a deal was to be signed last Wednesday.

But Afreximbank head of communication Obi Emekekwue said later that “some elements” of the deal were being finalised.

“I understand that the signing is not taking place today after all as they are fine-tuning some elements. We will be in touch as soon as the agreement is finalised,” Mr Emekekwue said.

It was not immediately clear whether Kenya had accepted all the conditions demanded by the regional bank. Signing of the deal, however, could signal resolution of the impasse.

READ: Foreign Affairs set to scuttle Afreximbank Kenya head office bid

The move will avert the possibility of Kenya losing out to Ethiopia in the race to host the regional headquarters of the multilateral lender. Afreximbank finances and promotes intra-and extra-African trade.

The financial institution has in the past decade become a significant player in Kenya’s economy, having financed big-ticket deals amounting to nearly Sh30 billion.

In 2014, for instance, Afreximbank financed national carrier Kenya Airways’ expansion — helping it acquire new aeroplanes at a cost of $2 billion (Sh200 billion).

This year it loaned the Kenya government Sh20 billion ($200 million) to help save the troubled airline, which has been struggling under the weight of massive debts.

The bank has also lent power distributor Kenya Power Sh1.5 billion ($150 million) to support the Rural Electrification Programme which seeks to supply electricity to primary schools in readiness for President Uhuru Kenyatta’s laptops project.

It has lent billions of shillings to private financial institutions in Kenya, including Sh2 billion ($200 million) to the National Bank of Kenya for on-lending to exporters and Sh5 billion ($50 million) to NIC Bank, which supports importers with letters of credit.

The location of the bank in Nairobi is not only expected to create new quality jobs but also generate business opportunities to Kenyan suppliers.

Diplomatic privileges

“With the branch office, meetings will take place in Nairobi giving business to hoteliers and boosting tourism earnings,” the bank has said.

The bank had a dispute with the Ministry of Foreign Affairs and International Trade over delay in granting the multilateral lender and its staff diplomatic status, a condition that Ethiopia is said to have agreed to.

The government was said to be uncomfortable with several clauses in a draft agreement touching on taxation and diplomatic privileges that Afreximbank had set as preconditions for locating its regional headquarters in Nairobi.

Afreximbank had wanted its employees and operations to be accorded diplomatic immunity and tax exemption in line with the privileges accorded other multilateral institutions.

The lender had argued that the privileges were not unique to Kenya as they had been granted by host governments in Abuja (Nigeria), Harare (Zimbabwe), Abidjan (Cote d’Ivoire), Tunis (Tunisia) and Egypt (Cairo), which is its headquarters.

The bank also finances local content in Kenya’s extractive sector and its Nairobi base was seen as beneficial to local oil, gas and mining sectors.

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