Two loans totalling Sh22.4 million taken by the Kenya National Transport Company (Kenatco) in the early 1990s have soared to Sh1.2 billion.
The cab operator, which trades as Kenatco Taxis Ltd, says the debt burden has burgeoned due to interest accrued over the years making it difficult to climb out of receivership.
Receiver manager John Ndung’u said in an interview on Thursday that finance costs are driving the company into losses, even though it has been making an operating profit since 2002.
Kenatco Taxis Ltd has been under receivership since February 1996 after defaulting on two debentures of Sh17 million and Sh5.4 million advanced to the company by the Industrial and Commercial Development Corporation (ICDC).
“The easiest option is to write off the loans. We’re in discussion with the debenture holder on how to resolve this,” said Mr Ndung’u.
“It is now a profitable venture. The finance cost is what is keeping us under receivership,” he added.
Mr Ndung’u has been the Kenatco receiver manager since June 2009.
Kenatco cannot seek refuge in the In Duplum Rule, which provides that interest stops running when unpaid interest equals the outstanding capital amount. The rule, which was passed long after Kenatco had taken the loans, is only applicable to banks.
The ICDC is a non-bank financial institution that offers financing to large as well as small and medium-sized firms.
Kenatco Taxis Ltd is wholly-owned by the government through State-owned investment fund ICDC. It has a fleet of 165 vehicles under lease, 300 drivers, and has operations in Nairobi, Mombasa, and Kisumu.
Its turnover grew by a tenth to Sh421 million in the fiscal period to June 2016, said Mr Ndung’u, quoting un-audited results.
Finance costs stood at Sh153.9 million as at June 2015, eating into Kentaco’s Sh28.3 million operating profit and resulting in a net loss of Sh125.6 million.
The loan interest rates are set by ICDC based on prevailing market rates, Kentaco said, adding that the facilities have been accruing interest at the rate of 16 per cent since November 2009.
Kenatco has since paid Sh47 million as interest only, disclosed Mr Ndung’u, saying the firm has not however been servicing the debt for a long time.
“We have now agreed to pay the debenture holder Sh1.5 million every month,” he said.
The company was founded by little-known businessman Simon Peter Mbacia in 1965 and a year later, was taken over by the ICDC.
Mr Ndung’u said that his focus over the last seven years has been to “stabilise” Kenatco to ensure it can meet day-to-day obligations such as salaries, fleet maintenance, and rolling out technology such as car tracking and digitising operations for efficiency.
Businessman Chris Kirubi served as a general manager of Kenatco in the 1960s and early 1970s, and has denied claims that he was responsible for its collapse.
Then Mwingi South legislator David Musila (currently Kitui Senator) in June 2006 told Parliament that Mr Kirubi should be investigated to establish if he played any role in the downfall of Kenatco.