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China halts Kenya loans amid debt reprieve bid

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China halts Kenya loans amid debt reprieve bid


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Treasury Cabinet Secretary Ukur Yatani. FILE PHOTO | NMG

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Summary

  • China has frozen disbursements of active loans to Kenyan projects in the wake of differences over Nairobi’s bid to extend debt repayment holiday to December.
  • Chinese-funded projects are facing a cash crunch, with contractors reporting delayed payments from banks like Exim Bank of China.
  • Executives at State-owned firms say the projects risk delays due to the funding hitch.

China has frozen disbursements of active loans to Kenyan projects in the wake of differences over Nairobi’s bid to extend debt repayment holiday to December.

Chinese-funded projects are facing a cash crunch, with contractors reporting delayed payments from banks like Exim Bank of China.

Executives at State-owned firms say the projects risk delays due to the funding hitch.

Sources familiar with the delay say the Chinese lenders, especially Exim Bank, are uncomfortable with the terms of the Kenyan request for extension of the debt service suspension beyond June.

“Payment to contractors working on Chinese projects and paid under direct method have delayed since last month. We are told Chinese banks are not settling invoice because of the moratorium,” said a CEO of a State corporation who spoke on condition of anonymity.

The direct method involves Kenyan firms with Chinese loans sending notices for supplier payments to Chinese banks through the Treasury.

China is one of Kenya’s biggest foreign creditors, having lent Sh758 billion as at April 2021 to build rail lines, roads and other infrastructure projects in the past decade.

Yesterday, the Chinese embassy in Nairobi acknowledged the funding hitch, adding that the matter was being addressed by officials of the two countries.

“To my knowledge, the relevant parties of the two sides are in close communication on specific issues under the DSSI framework,” said Huang Xueqing, the Chief of Information and Public Affairs section at the embassy, said in email response to the Business Daily questions on delayed release of loans.

“They are in communication with each other on this matter also under the framework of DSSI (Debt Service Suspension Initiative (DSSI).”

Kenya’s Treasury officials denied delays in release of Chinese loans, saying the country had received positive response from all countries where they sought an extension of the debt repayment relief.

“Not true,” Finance Cabinet Secretary Ukur Yatani said.

“I am not aware. All creditors have been very responsive,” Director of the Public Debt Management Office Haron Sirma said.

In January, China and other rich countries under the under the Debt Service Suspension Initiative (DSSI) gave Kenya a six-months debt repayments relief.

The impact of the Covid-19 pandemic has battered Kenya’s tax revenue collection at a time when more of its debts are falling due and as it is still grappling with gaping fiscal deficits.

Now, Kenya is seeking deals to suspend debt service with the rich nations under the Paris Club and other creditors, including China, covering the six months to the end of December.

The G20 countries, including Belgium, Canada, Denmark, France Germany, Italy, Japan, Republic of Korea, Spain and the USA, rescheduled payments of Sh32.9 billion in principal and interest due between January and June to the next four years with a one year grace period.

The International Monetary Fund (IMF) has disclosed that Kenya had sought an extension of the debt relief from G20 countries to December, saving an additional Sh39 billion ($361 million).

While China is a G20 member and a signatory to the deal, a large proportion of its loans to Kenya has been made on a commercial basis by government agencies, quasi-public corporations and by state-owned banks, such as China Development Bank and Exim Bank of China.

China has sought to negotiate its debt relief deals separately, but applying the same terms as the G20 countries while reserving the right on size and which loans will attract the moratorium.

The World Bank had estimated that Kenya could save Sh55.9 billion from China between January and June under the DSSI deal in principal and interest payment freeze.

But China announced that Kenya would be granted a Sh26 billion ($245 million) relief.

It is unclear how much relief the government was asking for and which specific loans were waived. But parliamentary disclosures indicated a portion of the relief came from the standard gauge railway financier China Exim bank.

President Uhuru Kenyatta’s administration has largely taken loans from China since 2014 to build roads, bridges, power plants and the SGR.

This started after Kenya became a lower-middle income economy, locking her out of highly concessional loans from development lenders such as the World Bank.

China’s influence on Kenya’s infrastructure development, however, started in earnest with the construction of the Thika Superhighway between January 2009 and November 2012 at a cost of nearly Sh32 billion during the last term of President Mwai Kibaki.

The deal to fund the first phase of the SGR, Kenya’s single-largest infrastructure project by cost since independence, saw China overtake Japan as Kenya’s largest bilateral lender.



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KQ resumes Mumbai flights after 4 months

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KQ resumes Mumbai flights after 4 months


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A Kenya Airways aircraft at JKIA. FILE PHOTO | NMG

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Summary

  • Kenya Airways will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.
  • The airline in a notice to its customers yesterday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

Kenya Airways #ticker:KQ will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.

The airline in a notice to its customers Monday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

The airline will then resume full operations on the route on September 20, flying three times per week on the Indian route, which is one of the most lucrative destinations on its network.

Passengers on the route will part with Sh46,000 ($419) for one-way air ticket on economy class seats from Nairobi to Mumbai- prices that are relatively the same compared to what it was charging before the Covid-19 pandemic.

“Welcome back onboard! Fly from Nairobi to Mumbai starting Thursday 16th September with normal schedules resuming from Monday 20th September 2021,” said the airline in a notice to its customers yesterday.

KQ Suspended passenger flights to and from Mumbai on April 30 until further notice, following a government directive on travel between India and Kenya due to a Covid-19 crisis in that country.

The airline said on Friday that passengers who had booked tickets after May 1, the date of the last flight from Mumbai to Nairobi, will have to change their plans.

Affected passengers, KQ said, could also take vouchers for the value of their fare for future travel within 12 months.

India has seen soaring infection rates in the recent days, since the discovery of a new virus variant. Last month, India put on lockdown one of the states following a spike in cases of Covid-19.

Other countries that have banned flights to India include France, the UK Bangladesh, Oman and Hong Kong that have banned travel to and from India or asked their nationals coming from the Asian country to isolate themselves in government-approved hotels.

India has so far detected 33,264,175 corona virus cases with the number of deaths hitting 442,874 as at September 13.

A large number of patients from Kenya also travel to India every year for specialised medical treatment, especially cancer care, helping to drive medical tourism in the densely populated country that boasts affordable and easily accessible healthcare.



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Lower import volumes push mitumba prices to new highs

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Lower import volumes push mitumba prices to new highs


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Man pulls a cart loaded with second-hand clothes at Gikomba Market in Nairobi. FILE PHOTO | NMG

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Summary

  • Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.
  • Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.
  • Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

The average price of a tonne of second-hand clothing items imported into the country crossed the Sh100,000 mark for the first time last year on reduced volumes in the wake of safety protocols and guidelines to curb spread of coronavirus.

Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.

Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.

Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

Last year’s drop was the first dip since 2011 when 76,533 tonnes were shipped in compared with 80,423 tonnes the previous year, the official data collated by the Kenya National Bureau of Statistics (KNBS) shows.

The import bill for the merchandise amounted to Sh12.24 billion, a drop of 31.11 percent, or Sh5.53 billion, year-on-year.

TIn imposing the temporary ban on used clothes, Kebs had applied a standard which prohibits buying second-hand clothes from countries experiencing epidemics to ensure disease-causing microorganisms are not imported into Kenya.

Higher quality and relatively lower prices for mitumba has continued to drive demand for used clothes at expense of locally-made products amid higher margins enjoyed by traders largely operating in informal markets.

The lucrative second-hand clothing market has seen traders from China —a key source market for the merchandise —open shops in Gikomba, Kenya’s largest informal market for mitumba, in recent years to cash in rising demand.

Earnings from exports of articles of apparel and clothing accessories fell 5.32 percent to Sh32.92 billion last year compared with 2019, data indicates.



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Court backs Atwoli union in horticulture membership feud

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Court backs Atwoli union in horticulture membership feud


Cotu boss Francis Atwoli

Cotu boss Francis Atwoli. FILE PHOTO | NMG

Summary

  • A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.
  • Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.

Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

Mr Atwoli is the secretary-general of KPAWU. The rival union claimed KPAWU had encroached on its area of workers’ representation.

Justice James Rika, however, dismissed the claim and ruled that the dispute should have been taken through conciliation, and was therefore presented in court prematurely.

He also stated that Kefhau must go beyond its registration and recruit sufficient members from the employers, to be granted recognition and organisational rights.

“Registration on its own, does not afford the claimant (Kefhau) recognition. Until there is proof that Kefhau has satisfied Section 54 of the Labour Relations Act, the status quo must be maintained,” said the judge.

“Kefhau must recruit at least 50 percent plus one, of the unionisable employees in the floriculture and horticulture industry, members of the Agricultural Employers Association to be considered for recognition,” he stated.

He noted that there is a Recognition Agreement and CBA, binding Mr Atwoli’s union and Agricultural Employers Association, affecting 73 Flower Growers Group of employers, and over 60,000 employees.

“It is objectionable for Kefhau to be allowed organisational rights, and the legitimacy to receive trade union dues and agency fees, from over 60,000 employees, just on the strength of registration as a trade union,” said the judge.

Kefhau wanted the court to declare that it is the sole trade union, which is allowed by its constitution to carry out activities in the export floriculture and vegetable industry, and an order restraining Mr Atwoli’s from representing workers in that area.



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