Economy

MPs set stage for Treasury to pay Anglo-Leasing debt

anglo leasing

First Mercantile Securities Corporation and Universal Satspace sued the Kenyan government in Switzerland and the United Kingdom over contracts. Photo/FILE

Parliament on Tuesday set the taxpayers on the path to paying two companies associated with Kenya’s biggest financial scam, Anglo-Leasing, some Sh1.4 billion despite calls by Opposition MPs and civil society groups that the government first unmask the faces behind the controversial contracts.

Two House committees endorsed the Treasury’s plan to pay First Mercantile Securities Corporation and Universal Satspace LLC the colossal amount arising from judgment that the two claimants got from Europe’s highest court of international disputes settlement.

The National Assembly’s Budget and Appropriation, and Finance committees approved the payment plan after Treasury secretary Henry Rotich told a joint sitting of the two teams that failure to pay the debt exposed Kenya’s properties abroad to the risk of being auctioned by the claimants.

Mr Rotich said the Treasury had received notification for the attachment of a number of properties in Europe if the government fails to pay the Sh1.4 billion settlement that parties to the dispute agreed two years ago.

The National Assembly is Wednesday afternoon expected to debate the joint committees report and approve or disapprove of the payments. 

Mr Rotich told the committees that the estimated cost of not paying the negotiated amount could amount to Sh20 billion annually through annual penalty payments and accumulation of domestic interest rates.

“Including the annual penalty payments of Sh96.6 million and the high interest rates, we estimate that the cost of not paying this debt could reach Sh20 billion,” the minister said.

Mr Rotich argued that not paying the debt comes with an even more difficult challenge of compromising Kenya’s ability to raise funds from the international market with dire consequences.

“It makes it difficult for us to issue the sovereign bond without which domestic interest rates will rise for both private and public sector borrowers,” he said.

READ: Sh1.4bn Anglo-Leasing settlement clears way for Eurobond

The Treasury argues that the potential benefits of paying Sh1.4 billion far outweighs the cost of forking out Sh20 billion in penalties and interest payments.

“This payment will be in line with the constitutional requirement that public funds be used in a prudent and responsible way,” Mr Rotich told a divided committee.

First Mercantile Securities Corporation and Universal Satspace sued the Kenyan government in Switzerland and the United Kingdom for failure to meet its obligation in the Broad Band Network and the Bandwidth Network contracts awarded to the two firms in 2004.

First Mercantile was contracted to supply VSAT equipment that would connect Kenya’s post offices while Universal Satspace inked a 10-year deal to provide bandwidth and manage the network built by First Mercantile.

The UK court decided in favour of the two complainants and awarded them $10.6 million and $7.8 million respectively plus costs.

The awards are accruing penalty charges at the rate of $1,413 and $1,665 per day respectively translating to a total of $3,078 (Sh264,708) per day. Mr Rotich urged Parliament to approve of the payments arguing that Kenya has no other means of settling the dispute.

“There are no legal avenues left for the government as all channels of appeal have been exhausted and the Attorney-General has advised that we pay the amount to avoid further costs,” he said.

Opposition Coalition for Reforms and Democracy (Cord) MPs voted against the planned payment but the committees adopted a joint report endorsing the payments whose deadline is Wednesday.