Auditor General report claims State owed Sh21 billion in loans granted to firms

A Kenya Airways plane takes off. The national; career is one of the state corporations known to have sought loans from the Government to stay afloat. (PHOTO: COURTESY)

In recent times, it has become a habit for the State to bail out institutions that are in dire financial stress.

Institutions whose existence is critical for the overall economic wellbeing of the country have sought loans from the Government to stay afloat as happened in the case of Mumias Sugar and Kenya Airways.

It is unfortunate that over the years, the list of defaulters has been growing steadily. A total of 31 institutions have defaulted on State loans by the end of the 2015 financial year. This has exposed taxpayers to losses of over Sh21billion.

In his latest report, Auditor General Edward Ouko said these institutions owed the Government Sh21.4billion as of June 30 2015, an amount that is part of the Sh198.8 billion outstanding loan balance as reflected in the State's consolidated statement of outstanding loans.

"These institutions have not made any efforts to repay their respective loans upon maturity," Mr Ouko said.

The Agricultural Finance Corporation (AFC), which has been notorious for defaulting, owed the State Sh505million by the end of the year under review. The corporation blames its poor repayment record on farmers who are slow in repaying their own debts.

Other defaulters include Agricultural Settlement Fund & Central Lands Board, which owes Sh70.7million, Associated Sugar Factory Ramisi with Sh15.8 million being demanded from it, and Cotton Lint, which owes Sh19.6 million.

Of more appalling interest is the inclusion of Cooperative Bank, which owes the Government Sh266 million. The inclusion of the leading lender on the list of defaulters has raised concern on the seriousness of the State in collecting its debts.

Other notable  defaulters include the Coffee Board, which owes Sh560 million, East African Sugar Industries Ltd with Sh172 million, Halal Meat Products with Sh27.7 million and the Kenya Industrial Estates with Sh323 million.

The Lake Victoria Water, Eldoret Municipal Council and the struggling Kenya Meat Commission are some of the biggest defaulters, owing Sh4.1billion, Sh1 billion and Sh940 million respectively.

The Local Government Loans Authority is the single largest defaulter with Sh7.5billion of Government money.

The Government also holds Sh587million worth of shares in companies under receivership such as Pan African Paper Mills, Kenya Poultry and Kenya Farmers Association, among others.

"These companies are either dormant or under receivership and as a result, the
value of investing in them is doubtful," Ouko said.