Sonko’s billions of debt giving suppliers nightmares


The Nairobi County Governor Mike Sonko is heavily an indebted man.

City Hall has accumulated additional debt of Sh10.1 billion under Sonko’s administration, hurting Nairobi suppliers and contractors.

Official data indicate that Nairobi County government debt rose from Sh55.5 billion in July, 2017 to Sh66.6 billion in June, 2018, representing an increase of 18.1 percent.

Nairobi County Finance and Economic Planning executive Winfred Gathagu says revenue underperformance is behind the ballooning debt.

Top on the pile of those owed by City Hall are pension funds– Lapfund and Laptrust—that are demanding Sh13.8 billion, legal creditors (Sh5.4 billion) and suppliers and contractors (Sh5.2 billion).

City Hall also owes KRA (Sh5 billion), Sh3 billion in bank loans, Sh875 million for utilities like KPLC and water bills and is yet to pay Sh134 million as benefits for retired or deceased employees.

Revenue collection by City Hall fell by Sh1 billion in the first 10 months under Sonko, compared to a similar period during the Evans Kidero-led government.

Nairobi collected Sh8.8 billion in the 10 months to June, a 10 per cent fall from Sh9.8 billion generated in a similar period to June 2017.

Fees from parking, building permits, inspection of buildings, land rates and Wakulima Market fell despite election pledges by Mr Sonko to reduce levies while plugging leakages to grow revenues.

The mounting debts are worrying the Central Bank of Kenya, which reckons unpaid supplier debts by the government is to blame for the bankers mounting bad debts.

Central bank governor Patrick Njoroge said last month that delayed payments to suppliers, the bulk contracted by the government, was the driver of the bankers’ bad loans.

The bad loans stood at 12.8 percent of the total in February, one of the highest level in more than a decade, up from 12.0 percent in December.

“The county inherited huge debts from the defunct City Council of Nairobi relating to statutory creditors, National Government guaranteed loans and on lent water loans,” Ms Gathagu stated in the document tabled before the County Assembly last week.

Ms Gathagu said the historical debt to NSSF has continued to be serviced through a debt swap against their property rates owing the county while the county has also been making continuous payment to KPLC to clear outstanding debt owed which was Sh640.7 million as at June last year.

She, however, explained that there is a pending case in court regarding way leaves debt owed by KPLC to City Hall which would have been swapped against the existing debt.

The Finance executive stated that City Hall has adopted various strategies in order to keep the debts at sustainable levels including negotiating with the National Government for the release of long outstanding debts that will be deployed in the payment of debts and debt asset swaps as in the case between the county and NSSF.

There is also adoption of cash management where all payments are done through IFMIS to curb expenditures being done outside the budget, audit of all pending bills and debt rescheduling or negotiations where the county has initiated the rescheduling of the KCB loan and restarted negotiations with statutory creditors for waiver of penalties

“Payments to NSSF are made through a debt swap as provided for in the debt strategy paper. Also payment of the debt when they fall due will avoid accrual of interest and penalties. Also revenue enhancement will avail more funds to be allocated to clear debts,” she said.

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