Treasury defends StanChart loan used for voter kits

The Treasury buildings in Nairobi. The Treasury has defended its decision to opt for a loan from the Standard Chartered Bank for the acquisition of the controversial Biometric Voter Registration (BVR) kits. Photo/Salaton Njau  Nation Media Group

By EDWIN MUTAI

In Summary

• Outgoing permanent secretary Joseph Kinyua said the loan, negotiated between the government and the Standard Chartered Bank UK, was cheaper than the syndicated loan of $600 million (Sh5.1 billion) contracted in May 2012 since the Export Development Canada (EDC) provided a guarantee.

The Treasury has defended its decision to opt for a loan from the Standard Chartered Bank for the acquisition of the controversial Biometric Voter Registration (BVR) kits.

Outgoing permanent secretary Joseph Kinyua said the loan, negotiated between the government and the Standard Chartered Bank UK, was cheaper than the syndicated loan of $600 million (Sh5.1 billion) contracted in May 2012 since the Export Development Canada (EDC) provided a guarantee.

Mr Kinyua Thursday told Parliament that over and above the repayment of the principal amount of Sh7.2 billion (euro 65.1 million), there will be an all-in-all cost for the facility of 5.12 per cent (Sh368.6 million) per year.

The cost includes interest margin and premium for the guarantee, among other charges on the loan that will be repaid in 19 instalments, Mr Kinyua told members of the Public Accounts Committee (PAC).

“This is reflected in the lower interest margin of 2.75 per cent compared to 4.75 per cent for the syndicated loan. However, there was a premium for the guarantee of 1.59 per cent and a fee charged by Canadian Commercial Corporation (CCC) of 0.5 per cent of the facility. All in all costs for the facility was 5.12 per cent per annum,” Mr Kinyua told the committee chaired by Budalangi MP Ababu Namwamba.

(Read: Canada State firm earns Sh1bn from BVR kits loan deal)

The PS said the country has already paid out a total of euro 752,485.07 (Sh84.27 million) in terms of interest and euro 26,376.76 (Sh2.95 million) as commitment fees to the CCC and the financial institution that secured the government-to-government agreement to supply 15,000 BVR kits, which largely failed during the March 4 General Election.

He, however, cautioned that the loan repayment could cost more or less of the principal amount given the fluctuation in exchange rates.

The committee is investigating the procurement of the BVR kits in a process Mr Namwamba said will be expanded to cover other procurements, including the failed Electronic Voter Identification (EVID) kits, poll books and the electronic results transmission system that collapsed on Election Day.

(Also read: MP wants House team to probe election kits procurement)

Mr Kinyua said the commercial contract for the supply of 15,000 kits was signed between the Independent Electoral and Boundaries Commission (IEBC) and the CCC on September 24, 2012.

The commercial contract, he said entailed a payment schedule of 40 per cent down payment on the signing of the contract, 45 per cent on delivery of the kits, five per cent upon acceptance of the central system and 10 per cent upon generation of the certified register of voters.

Mr Kinyua revealed that the government failed to beat the deadline of October 15, 2012 to secure 40 per cent of the price as stipulated in the commercial contract due to tight deadlines and thus had to pay the full price to CCC before the facility was in place. This amount was subsequently reimbursed from the proceeds of the facility,” he said.

“We were operating in extremely tight election timelines.... There was no time to consider other options,” he said.