Water companies unable to repay Sh12.3b loan from German bank

Lake Victoria North Water works development agency Chairman Julius Bakasa commission Shipalo primary school bore hole water supply project in Ikolomani Kakamega county on July 27 2021. [Benjamin Sakwa, Standard]

Water service providers in Western Kenya are unable to repay a loan of over Sh12 billion they took to develop water infrastructure a decade ago.

The loan was advanced by the German Development Bank (KfW) and the Belgium government to finance mega water projects in Kakamega, Vihiga, Uasin Gishu, Busia, Bungoma, and Trans Nzoia counties.

Lake Victoria North Water Works Development Agency (LVNWWDA) acted as a guarantor and implementer of the projects.

The agency developed the water infrastructure and handed it over to county governments in compliance with provisions of the Water Act, of 2016.

Beneficiary water firms were Kakamega County Water and Sanitation Company (Kacwasco), Busia Water and Sanitation Company, Amatsi Water Services Company Limited, Nzoia Water and Sanitation Company (Nzowasco), and Eldoret Water and Sanitation Company (Eldowas).

“The water service providers have an accumulated debt of Sh12.3 billion,” said Antony Kisaka, the Chief Executive Officer at LVNWWDA.

According to Kisaka, Kimilili, Mumias, and Eldoret, water treatment works gobbled up Sh4.7 billion while Kitale, Bungoma, and Webuye water projects consumed Sh5.9 billion.

He said the Vihiga water cluster project was financed by the Belgium government to the tune of Sh1.7 billion.

“Eldowas Water and Sanitation Company which was part of the agency is the only one that has been servicing its loan,” said Mr Kisaka.  The rest of the companies have defaulted on loan repayment.

Eldowas has since been moved from LVNWWDA to North Rift Water Works Development Agency.

Mr Kisaka said they are mulling over asking the National Treasury to recover the money on behalf of LVNWWDA.

“Before devolution, it was easy to push the water companies to repay the loan, however, county governments were reluctant to recognise the loan after they took over,” said the official.

Kisaka said a percentage of loan repayment is normally factored in water tariffs charged by the companies yet the firms end up not remitting the funds to the agency responsible for transmitting the same to the National Treasury as per the arrangement.

“They (water companies) even have a loan account where the money is supposed to be deposited but that has not been happening. Financial mismanagement and a bloated workforce are partly to blame for the companies’ financial woes,” he argued.

Kacwasco Managing Director Michael Ogol concurred with Mr Kisaka’s assertions saying it was true the firms were not repaying their debt as anticipated.

Mr Ogol disclosed that they are currently grappling with a debt of Sh4.2 billion that was advanced to them by KfW.

“We have been unable to repay the loan since the revenue we collect is not sufficient to cater for operation costs, pay salaries, and have part of it offset the loan,” he said.

He said increased operation costs against static water tariffs and non-revenue water which stand at 41 per cent are to be blamed for the water shortage.

Ogol is confident that the problem will be corrected once the last mile water connectivity project is completed.

Eric Wabuyabo, the Kacwasco commercial and finance manager said that the loan has already attracted an interest of Sh365 million.

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