Economy

State given ultimatum over Anglo Leasing debt

rotich

National Treasury Cabinet Secretary Henry Rotich. The government has been given until Monday to pay First Mercantile Securities for a contract related to Anglo Leasing. Photo/FILE

The government has until Monday to pay Sh924 million owed to a Swiss company involved in the Anglo Leasing scandal, failing which its properties abroad will be attached and auctioned.

In a letter to the National Treasury, First Mercantile Securities Corporation has given the government up to March 24 to pay it $10,679,685 in honour of an award given by a Swiss court in a December 6, 2012 judgement.

Through its law firm, Travers Smith, the company threatened to “take steps with a view to commencing enforcement proceedings in England to recover the judgment debt and any related costs.”

“Despite repeated demands for payment, the judgment debt remains unpaid. Interest on the judgment continues to accrue,” the letter dated March 5 sent to the Treasury Secretary, Henry Rotich, and Attorney General Githu Muigai reads.

But it is feared the amount due could be significantly higher than $10.6 million given that the government is charged an interest of $1,400 (Sh120,400) every day for non-payment.

“We understand that First Mercantile’s Kenya advocates A H Malik & Co have previously written to the Republic of Kenya in relation to the nonpayment of the debt, but that the Republic of Kenya has neither responded to that correspondence nor paid the debt,” reads the letter.

First Mercantile was to provide financing for the purchase of satellite telecommunications equipment for the Postal Corporation of Kenya from Spacenet, an American firm, in what remains one of the country’s biggest scandals.

It is unlikely that the government will meet the deadline as Mr Rotich had earlier indicated that the money to settle the debts would be factored in the second supplementary budget estimates expected in Parliament in May.

In his submission to the National Assembly, Mr Rotich has requested to be allocated money to pay two Anglo Leasing contracts as ordered by international courts to maintain Kenya’s status as a law-respecting nation.

READ: Britain offers new leads on Anglo-Leasing projects fraud

On December 20 last year, the government lost its suit against Universal Satspace Company in London and was ordered to pay Sh650 million this being the principal sum and Sh23 million interest accrued on that sum as of the date of the ruling.

The court gave the State to 4 p.m. on January 17 to pay the amount, with interest accruing at a daily rate of Sh143,190. Mr Rotich now hopes Parliament will consider it important to settle the debts in the supplementary budget estimates.

“We need to understand that this is a court ruling and there is no more room for appeal. It only makes sense for us to pay for the contracts because we will have to do it ultimately,” Mr Rotich said by phone.

While the final word on the way forward will come from the Attorney-General’s office, Mr Rotich said the Treasury’s recommendation is that the country pays the debt once and for all.

“Refusing to pay only taints the country’s image and damages our credit risk profile. We cannot afford to overlook this at a time we are preparing to take to international markets with our sovereign bond,” the Cabinet Secretary warned.

Budget Committee chair the Rev Mutava Musyimi said there is a real need to clear the debt without delay.

“The discussion about Anglo Leasing contracts came up at one of our meetings, and it was considered a challenge we have to deal with. It is now up to the state law office and the officials at Treasury, but we reiterate that these are genuine concerns that need answers,” said the MP.

This article first appeared in the Sunday Nation.