US reveals Kenya’s secret Sh139bn coronavirus loan

National Treasury building. FILE PHOTO | NMG

By OTIATO GUGUYU
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Summary

• Kenya in June signed a secret Sh139.5 billion (1.06 billion euros) loan deal with a Belarusian and Canadian companies to build mobile clinics and upgrade hospitals in the counties amid fears of a sharp rise in coronavirus cases.
• The US Securities Exchange Commission (SEC) has disclosed the deal between the Treasury and Canadian firm Kallo Inc over the multi-billion shilling deal to upgrade Kenya’s health infrastructure to help contain Covid-19.
• Under the deal, Belarus-based Techno-Investment Module (TIM) provided financing for project labelled the Kallo Integrated Delivery System (KIDS), whose details remain scanty and were not made public in Kenya.

Kenya in June signed a secret Sh139.5 billion (1.06 billion euros) loan deal with a Belarusian and Canadian companies to build mobile clinics and upgrade hospitals in the counties amid fears of a sharp rise in coronavirus cases.

The US Securities Exchange Commission (SEC) has disclosed the deal between the Treasury and Canadian firm Kallo Inc over the multi-billion shilling deal to upgrade Kenya’s health infrastructure to help contain Covid-19.

The deal was signed in June last year in the wake of rising coronavirus cases that forced the government to impose restrictions, including a daily night curfew, closure of schools and pubs as well as curb of movement in and out of four counties, including Nairobi.

Under the deal, Belarus-based Techno-Investment Module (TIM) provided financing for project labelled the Kallo Integrated Delivery System (KIDS), whose details remain scanty and were not made public in Kenya.

Yesterday, the Treasury said it needed more time to respond to the Business Daily questions, including whether Parliament was made aware of the debt agreement and if Kenya received the loan.

Kallo Inc says on its website that KIDS provides a comprehensive healthcare infrastructure using both mobile clinics and fixed hospitals supported by a global telehealth system.

“On June 26, 2020, the company finalised contracts with the Republic of Kenya and Techno-Investment Module Limited for a project contract and a finance contract,” the SEC filings of March 3 indicate.

“Under the terms of the agreement, Kenya is seeking to borrow the sum of 1,068,932,543 euros from TIM and the funds are to be used primarily to build phase one of a planned National Healthcare Infrastructure in the Republic of Kenya to be undertaken by Kallo Inc.”

The loan is a 20-year facility charged at two percent plus Libor [London Interbank Offered Rate], which currently stands at negative 0.4 percent, the filings show.

Kenya was given a three-year grace period freezing payment of part of the loan, whose payments, including principal and interest, were to be done quarterly from 2023.

Techno-Investment Module Ltd was expected to pay the Sh139.5 billion loan directly to Kallo Inc once Kenya issued a guarantee technically called a standby letter of credit.

A standby letter of credit (SLOC) is a legal document that guarantees a bank’s commitment of payment to a supplier in the event that the buyer defaults on the agreement.

It helps facilitate international trade between companies that don’t know each other and have different laws and regulations.

The agreement exposes Kenya to legal suits and compensation should it turn down the loan, echoing the controversy over billions of shillings paid out to a firm linked to the Anglo Leasing scam, which involved state contracts worth Sh70 billion awarded to non-existent firms.

In 2014, the Treasury reached a negotiated settlement of the long-running legal dispute with one of the 13 Anglo Leasing companies, clearing the main hurdle that had delayed plans to raise the first Eurobond.

SEC filings show that Canadian firm Kallo Inc is expected to make payments to a firm called Magnitudo for supplies related to Covid-19.

The Business Daily failed to get details of the firm Magnitudo through an Internet search.

“Upon receipt of an invoice from Magnitudo for their B-SAFE National COVID-19 Lockdown Management, B-TEST National COVID-19 Screening, Local facemask manufacturing, and Essential PPE Supply, Kallo will transfer the amount due as per the Financial Proposal,” Kallo Inc says in Form 8-K filling -- a report that companies must file with the SEC to announce major events that affect shareholders.

Firms are required to make filings with the powerful SEC if their securities are publicly traded in America, raised funds in the US or have shareholders required to file corporate actions with regulators in Washington.

The Canadian firm expects to receive Sh21 billion from the Treasury deal despite the company’s alert that it had never undertaken projects similar to the one being implemented in Kenya.

It is not clear from the filing how the remaining Sh118 billion from the loan was to be shared.

“In accordance with the Finance Contract, Kallo Inc may receive up to four payments of 40,261,253 Euros in consideration for the goods and services that the Company is to provide under the Project Contract,” the company said in the report.

“While we believe that our KIDS system offers significant value in integrating a nationwide healthcare system in counties lacking such a system, we have no prior experience in installing, operating, or maintaining the KIDS system or any such a system in any country. As a result, we cannot assure you that we are able to achieve any financial success in conducting the business required in installing, operating or maintaining the KIDS system whether in the Republic of Kenya or elsewhere.”

The loan deal was inked at a time when Kenya had received grim predictions on the expected Covid-19 cases and deaths, which were expected to overwhelm the country’s rickety health infrastructure.