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Foreign Affairs set to scuttle Afreximbank Kenya head office bid

AMINA

Foreign Affairs and International Trade secretary Amina Mohamed. PHOTO | ANTHONY OMUYA

Summary

  • Sources at the bank said the ministry had rejected some of the critical demands by the bank.
  • Besides diplomatic immunity, the multilateral lender wanted its employees exempted from paying tax in line with the privileges accorded other multilateral institutions.
  • The Foreign Affairs ministry was said to be particularly uncomfortable with several clauses in a draft agreement touching on taxation.

The African Export-Import Bank (Afreximbank) is expected to inform the government of its decision to move its planned regional headquarters from Nairobi after the Ministry of Foreign Affairs rejected some key demands by the bank, including diplomatic immunity for its top executives.

The ministry on Friday said it had reviewed a draft agreement with the bank to have the Sh3 billion headquarters set up in Nairobi.

“We expect to sign a deal soon and there is no stalemate. We have sent them the documents and we expect them to sign soon,” said Foreign Affairs Principal Secretary Monicah Juma in an interview.

But sources at the bank said the ministry had rejected some of the critical demands by the bank.

“The Kenyan Ministry of Foreign Affairs (MOFA) has responded but deleted a number of key requirements such as diplomatic immunity for the president of Afreximbank. As of now the MOFA has not given the bank what the bank asked for. The gap between MOFA and the Bank is so wide. From the response of MOFA it is clear they do not want Kenya to host Branch of Afreximbank,” said a senior person at the bank.

“A letter will soon follow communicating our decision to relocate the branch to another eastern African country barring a change in the ministry’s position,” the source, who sought anonymity, said in an email interview.

Afreximbank has in the past indicated it would move to Addis Ababa, Ethiopia if Kenya did not act on its demands by the end of September.

Ethiopia is said to have agreed to grant the bank’s top executives diplomatic immunity.

The bank said in September it had waited for two years for communication from Kenya’s Foreign Affairs ministry but had yet to receive any response.

Besides diplomatic immunity, the multilateral lender wanted its employees exempted from paying tax in line with the privileges accorded other multilateral institutions.

Afreximbank 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).

READ: Afreximbank’s plan for Kenya regional office hit by tax war

The bank’s demand for special privileges was supported by the fact that similar multilateral institutions and diplomatic missions in Nairobi enjoy the same.

The Foreign Affairs ministry was said to be particularly uncomfortable with several clauses in a draft agreement touching on taxation.

Treasury secretary Henry Rotich had said in a letter to Afreximbank that he had completed a review of the agreement and the same had been forwarded to the Foreign Affairs ministry for finalisation.

“This is to inform you that the Treasury has now completed review of the branch office agreement between the Republic of Kenya and Afreximbank after consultations with Mr Kudakwashe Matereke, regional branch manager for East Africa,” said Mr Rotich in a letter dated September 22 to the bank’s president, Benedict Orama.

“We have forwarded the agreement to the Ministry of Foreign Affairs for finalisation and formal communication to Afreximbank.”

Mr Rotich suggested the signing of the agreement be done on the sidelines of the 2016 annual meetings of the International Monetary Fund and the World Bank Group in Washington, DC. The event was held between October 7-9.
However, the signing of the deal did not take place.

“As of today’s date nothing has come from Ministry of Foreign Affairs to Afreximbank. Recall that Treasury had passed the file to Ministry of Foreign Affairs. Consequently there was nothing to sign in Washington. Since the deadline has passed,; the decision now is to relocate the branch to another East African country,” said a bank official familiar with the matter.

The Treasury earlier told the Business Daily it had resolved all the outstanding issues but Afreximbank maintained the stalemate remained.

“There was a misunderstanding by Foreign Affairs on the legal status of Afreximbank. Now that has been sorted out and approvals will be completed shortly,” Mr Rotich said.