Loss-making Portland Cement was unable to pay the loan in September.
Lafarge owns 41.7 per cent of EAPCC, Treasury (25 per cent) and NSSF (27 per cent).
Ageing plant, state interference and board fights coupled by intense competition in the cement market have hurt Portland Cement.
Portland’s debt dropped 36 per cent over the past four years to Sh1.4 billion as at June last year from Sh2.2 billion in 2013.
Taxpayers settled a Sh199 million loan that East African Portland Cement Company (EAPCC) was unable to pay a Japanese corporation, underlining the burden of sustaining parastatals.
Loss-making Portland Cement was unable to pay the loan in September, prompting the Treasury, which had guaranteed the debt, to take it over.
“A new guaranteed loan by EAPCC, which had not been projected in the current period (half-year to last December) has been taken over by the government,” say Treasury documents.
Lafarge owns 41.7 per cent of EAPCC, Treasury (25 per cent) and NSSF (27 per cent). The company borrowed Sh1.7 billion in 1990 at a concessional rate of 2.5 per cent, but despite servicing it since 2000 it still has more than a billion to settle due to the strengthening of the Japanese yen against the Kenya shilling.
The loan matures in March, 2020, and is paid twice a year in March and September based on the prevailing exchange rate.
Ageing plant, state interference and board fights coupled by intense competition in the cement market have hurt Portland Cement have seen the listed cement maker struggle to meet its obligations.
It has been struggling to raise cash to modernise its plant. This comes as rival firms invest billions of shillings to capture expected rise in cement demand, fuelled by a burgeoning middle class with higher disposable incomes, as well as government-fuelled infrastructure expansion across the country. The company’s revenues for the six months to December dropped 19.4 per cent to Sh3.72 billion. Its losses narrowed to Sh533.7 billion in the half-year compared to Sh745 billion in the same period a year earlier.
Portland’s debt dropped 36 per cent over the past four years to Sh1.4 billion as at June last year from Sh2.2 billion in 2013. In 2011 the company had swapped a portion of its Japanese yen denominated loan with dollars, a decision that has recently haunted it as the dollar gained against other global currencies, including the shilling.
Treasury documents indicate that taxpayers will also shoulder the burden of paying debts for state broadcaster, KBC, at Sh365.5 billion and Sh163.5 billion for Tana and Athi River Development Authority.
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