Government continues to pay billions for fertiliser company that never was

Kenya: As at June 2011 Kenya’s soaring public debt included Sh3 billion owed to foreign banks on account of the Ken-Ren Chemical and Fertilizers Company Limited that was never constructed. 

At the time, the Government had already paid Sh2.4 billion for Kenren.  The balances of Sh974,728,657 and Sh2,019,577,803 were due to an Austrian bank, BAWAG, and a Belgium entity of DUCROIRE respectively.

The Kenya Government was required to pay Euro16,635,156.16 (Sh1.3 billion) twice a year, on every March 31 and September 30.

“However, no fertiliser factory had been constructed by Ken-Ren, thus making the entire expenditure of Sh3,600,085,952.05 incurred on the project as at June 30, 2011 nugatory,” said a report of the Auditor General for the year 2010/2011.

In a case filed in May 1988, by Ducroire of Belgium against the Government, the Tribunal sitting in November 2002, awarded the Belgian bank Euro21,181,992 (approximately Sh1.7 billion) and a further US$87,500 (Sh6.7 million) in respect of legal costs.

After further negotiations, the debt due was agreed at Euro32,520,319 (Sh3.2 billion) payable between July 2004 and June 2015.

The Government had as at June 30, 2011 paid Sh2.4 billion that includes Sh1.8 billion and Sh626 million as principal                and        interest respectively.

And in a case filed by BAWAG of Austria on June 29, 1992 before a Tribunal, an award of Euro 16,635,156.16 (approximately Sh1.3 billion) was made in favour of the Austrian bank.

According to information available, the Government delayed in honouring the award, and following several negotiations involving the bank, a restructuring agreement was reached and signed on November 14, 2004.

As at 30 June 2011, the Government had paid Sh1,172,901,484.90 made up of principal and interest of Sh959,864,103.35 and Sh213,037,381.55, respectively.

According to Mwalimu Mati's anti-corruption lobby group, Mars Group, the Ken-Ren Fertiliser Factory was a joint venture entered into in the mid 1970s between the Government and a now bankrupt American firm known as N-REN Corporation, to form a company registered as Ken-Ren Chemical and Fertilizers Company Limited.

The plan was to save Kenya huge amounts of money then being spent on importing fertilizer.

The firm was to build a factory at Changamwe, Mombasa to manufacture fertilizer for domestic consumption.