Kenya Railways’ Sh5.5bn loss raises viability queries

A Sh5.5 billion loss at Kenya Railways has cast doubts on the viability of funds pumped into various parastatals bail them out of cash crises.

An audit report by the Office of the Auditor General further shows the railways parastatal is unable to settle a Sh34 billion accrued debt.

Auditor General Edward Ouko, in a review of KR accounts for the year ending June 2018, castigated the management after it failed to give reasons for the non-payment of the debt.

Taxpayers may have to dig deep into their pockets to foot some of the bills as the entity is yet to employ measures to reverse the trend.

“The conditions are indicative of material uncertainty that may cast significant doubt on the corporation’s ability to continue operating,” Ouko said.

Fears over the viability of SGR and other planned investments persist – especially in Nairobi since KR expended Sh14.9 billion in operation costs against revenue earnings of Sh4.3 billion.

The entity’s major revenue sources are the SGR, concession fees, rent, museum, training institute, investments, and government grants.

Despite the dismal returns of 2018, Kenya is expected to pay Sh18.7 billion to China Development Bank this financial year, being part of the Sh327 billion borrowed for the SGR’s first phase.

Works on the second phase of the line from Nairobi to Naivasha is also underway at Sh150 billion.

Apart from the transporter, there are notable failures of state corporations in Kenya, some of which provide key services.

Kenya Meat Commission, KICC, public-sector owned sugar companies, Agricultural Finance Corporation, Kenya Airways, and National Bank are just but a few that have made huge losses.

A number of them are linked to Sh116.8 non-performing loans that the government has been grappling with, some for over 10 years.

Kenya Airways, for instance, has not had a change in fortunes despite getting billions from the government – the last being Sh20 billion it was lent to repay a loan with China’s Afrexim Bank.

Budget reports for the current financial year show that the government wrote off Sh27 billion loans in favour of various state agencies.

Of this, Sh24 billion was owed by KQ – being part of its Sh200 billion debt portfolio amid a Sh7.5 billion loss this fiscal year.

Among them were agencies that have received money from the Exchequer without the investment translating into profits.

Advancements of about Sh3.5 billion to Mumias Sugar is also yet to bear fruit in the wake of the company’s struggles.

The Coffee Board, Pyrethrum Board, Kenya Industrial Estates, Kenya Cooperative Creameries, Uplands Bacon Factory, Postbank, East African Portland Cement, Agrochemicals Company, and Cotton Board are equally struggling.

In explanatory notes, Kenya Railways earned a total of Sh10.8 billion but spent Sh16.4 billion on rail operations and to run offices.

The entity argued that part of the loss, that is about Sh307 million, was as a result of deterioration of property, plant, and equipment.

Kenya Railways blamed its underperformance in the year 2018 on the slow pick up of SGR cargo; low uptake of rental space; locomotive breakdowns, poor track maintenance, and high cost of fuel.

Ouko further queried illegal allocations of 529 parcels of railways land in the face of efforts to repossess only 27.

Worst-case scenarios were reported in Limuru, Kikuyu, and Mombasa where private developers were irregularly allocated land, some already dotted with permanent structures.

“From the foregoing, I am unable to confirm the accuracy and validity of property valued at Sh24 billion,” the auditor said.

KR was also found in breach after it paid Sh1.043 billion in excess for compensation to project affected persons without supporting documents.

Beneficiaries were expected to present copies of ID, KRA PIN certificate, and title deed surrender from the National Land Commission.

A number of NLC officers led by former chairman Muhammad Swazuri are in court over claims the compensation was inflated.

The auditor reprimanded Kenya Railways for failing to recover Sh8 million, being part of Sh14 million paid to landowners who were entitled to Sh1 million.

(edited by O. Owino)

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