Ouko questions Sh1bn paid for KBC, Tarda loans

Auditor-General Edward Ouko has questioned Sh1 billion of taxpayers’ money spent in the year to June to bail out Kenya Broadcasting Corporation (KBC) and Tarda after they defaulted on loans from international lenders.

Mr Ouko said the terms and conditions of the loan takeover remain secret amid a push for the Treasury to recover all the money it has paid out on behalf of the agencies whose insolvent loans it guaranteed.

Taxpayers have since 1989 paid nearly Sh20 billion on behalf of the two firms and City Hall, whose loan repayment ended two years ago.

“Terms and conditions under which the government took over these loans have not been made available and as a result it has not been possible to establish whether or not the defaulting institutions were required to reimburse,” says Mr Ouko in an audit review of guaranteed loans.

“It has not been possible in the circumstances to ascertain whether or not the repayment had complied with the terms and conditions of the takeover.” The State broadcaster has been unable to repay a Japanese debt which has accumulated to Sh32.3 billion, prompting the Treasury to pay Sh753.4 million in the year to June for a government-guaranteed loan taken in 1989.

KBC says the money was borrowed on the strength of cashflows expected from the sale of television permits — then pegged at Sh1,000 for every TV set.

READ: City Hall, KBC asked to refund Treasury Sh10bn

The permit fees were outlawed with the liberalisation of broadcasting in 1997. The government also stepped in to help Tarda — now under the Rural Development Department — which failed to repay money it borrowed from Jica.

Poor cash flow has been the hallmark of Tarda and KBC, the two institutions thrust in the news lately as details of their liquidity troubles became public.

The Treasury also completed to repay a loan that the defunct City Council of Nairobi borrowed from USAid to build Umoja Estate more than three decades ago.

The 30-year loan was to be repaid by 2014 but City Hall has defaulted, leaving the Treasury to pay the residual amount plus interest.

All the CCN liabilities and assets have been transferred to the Nairobi County government, arguably the richest county in Kenya.

The transfer of CCN’s assets to the county government did not, however, relieve the national government of the burden of paying millions to service the City Hall debt.