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Business Daily : October 14th 2013
19 Monday October 14, 2013 | BUSINESS DAILY BY GEOFFREY IRUNGU Kenya is ranked the third biggest bor- rower of World Bank loans in Africa over the past five years, a new report by the global lender has showed. Nigeria and Ethiopia are ranked the biggest and second biggest recipients of World Bank Loans in this period. Kenya has received a total of Sh53 billion World Bank loans since July 2008, indicating the country’s heavy reliance on the institution for de- velopment and infrastruc- ture funding. Since 1945, a year after the World Bank’s forma- tion, Kenya has borrowed a cumulative total of Sh732 billion, the sixth-largest amount on the continent. Other big African borrowers are listed as Egypt, Morocco and Tanza- nia in the World Bank’s Annual Re- port 2013. Kenya has been borrowing from the bank to finance development and infra- structure projects over the years. However, out of the amount of Sh274 billion ($3.2 billion) made available to the country in the past five years, less than half or Sh130 billion has been disbursed. The reasons for the slow disburse- ment are however unclear from the report. The Controller of Budget Agnes Odhiambo has said in recent reports on Budget implementation that donors have sometimes been slow to release funds because the govern- ment has not committed its expected contribution to co- sponsored projects. An official in the Minis- try of Devolution and Plan- ning Sabina Maganga said last week that donor cash often failed to be disbursed because of inability of min- istries and department failure to meet the strin- gent conditions that some times change midstream and disagreements on procurement rules. “Resources are occasionally not released by donors because minis- tries are unable to meet the stringent conditions set, and which sometimes change midstream,” Ms Maganga told a Parliamentary Public Accounts Com- mittee meeting while presenting the case for an external resources policy at the Treasury to regulate relations with donors. The World Bank is the single largest lender to Kenya, with loans given for projects in a multiplicity of sectors ranging from agriculture to energy and other infrastructure. “Wherever feasible or appropri- ate, future projects to expand access to electricity will include clean energy dimensions. For example, the Lighting Africa project, which has developed off- grid solar lighting markets in Kenya and Ghana, will be replicated across the continent, as well as in India, with the goal of reaching 250 million people by 2030,” said the report. Most of the funds have been chan- neled to Kenya through International Development Association (IDA), the bank’s concessional lending arm. The funds are supposed to have a grant el- ement of at least 35 per cent and also carry a grace period. Grants and concessional loans help to minimise external debt obligations that impact on foreign exchange re- serves and budgetary allocations. The World Bank country director Diarietou Gaye and Treasury secretary Henry Rotich signed a new loan agree- ment last month for Sh22 billion, which is not included in the report which cov- ers up to June this year. The cash is in- tended to supplement a Sh13.5 billion government allocation designed to fi- nance cash transfers to the vulnerable groups such as orphans, the elderly and those living in abject poverty. Through IDA, the bank is financ- ing the Eastern Electricity Highway that is intended to improve electric- ity transmission. The project should also facilitate the import of electricity from Ethiopia to Kenya. The total cost of the project is Sh109 billion ($1.263 billion). The bank is financing the Sh36 bil- lion ($413.1 million) National Urban Transport Improvement project aimed at improving regional transport efficien- cy, strengthening institutional capacity in the urban transport sub sector, and promoting private-sector participation in transport systems operation. The Judicial Performance Improve- ment project, which is being carried out at a total cost of Sh10.3 billion ($120 mil- lion), is financed by IDA. It supports im- provements to the administrative and case management performance of the judiciary to provide services more ef- fectively and accountably. email@example.com ECONOMY & POLITICS NEWS I REVIEWS I ANALYSIS Kenya ≥anked thi≥d la≥gest ≥ecipient of Wo≥ld Bank loans FUNDING Country has received a total of Sh53 billion from WB since July 2008 A road under construction. Kenya has been borrowing from the bank to finance development and infrastructure projects over the years. FILE Resou≥ces a≥e occasionally not ≥eleased because minist≥ies a≥e unable to meet st≥ingent conditions SABINA MAGANGA, MINISTRY OF DEVOLUTION OFFICIAL Top World Bank Borrowers from Africa since 1945 (Sh ‘bn) Kenya is the sixth largest receiver of aid from the Bretton Woods institution in the past 68 years SOURCE: WORLD BANK ANNUAL REPORT 2013 Tanzania opens second bank IPO to fo≥eign investo≥s BY JOHN GACHIRI Tanzania has opened a second initial public offering (IPO) to foreign buyers including Kenyan investors, indicating a new level of openness for an economy that has previously restricted sale of its businesses to non-citizens. Mwanza Community Bank’s IPO, the second such offer that is open to non-Tanzanians, is expected to close at the end of this month. The bank is seeking to raise Sh146 million through the sale of 5 million shares at TSh550 (Sh29) and is giving equal treatment to Kenyan and other foreign investors. “The offer is for 5,000,000 ordinary shares at a nominal value of Tsh550 per share and is open to Tanzanian and non-Tanzanian persons,” says the offer prospectus. This is the second Tanzanian lender, after Maendeleo Bank, to give equal status to foreign investors. It could be a sign that the neighbour- ing market is warming up to the East Africa Community’s ambition to have a single market. Christian-focused lender Maendeleo Bank’s Sh216 million IPO, which was open to all East Africans, is expected to close tomorrow and will list on the Dar- es-Salaam Stock Exchange’s (DSE) En- terprise Growth Market, a segment for listing small firms, on October 21. Mwanza Community Bank will also list on the DSE’s EGM on Decem- ber 13. By opening up investment to inves- tors in the region the listings represent a change of heart for Tanzania whose economy has been largely closed. The Tanzania Breweries Ltd offer of 2011 gave locals priority over other regional investors and the country’s regulator the Capital Markets and Se- curities Authority barred locals from participating in the Safaricom IPO of 2008. Industry players said that Tan- zanian’s sudden change in outlook may be influenced by its firms having shown ambition to expand beyond its borders. The Kenya Association of Stockbro- kers and Investment Banks chief execu- tive Willie Njoroge said that in future the community banks may expand to Kenya and other markets and having local shareholders will smoothen ac- ceptance in the new markets. “It will be much easier because they have that recognition,” said Mr Njoroge. Kenyan, Rwandese and Ugandan firms have been the most open EAC members. Kenyan and Ugandan firms have gone further and had their shares cross-listed on the various exchanges. Regulators have not been left behind and under their umbrella body, the East African Securities Regulatory Authori- ties, they have proposed future stock and bond listings to be done across all markets. Mwanza Community Bank is al- ready assured of getting 12 per cent subscription from the current share- holders. “So far, a total, 600,000 ordi- nary shares worth Tsh340million (Sh18 million) have been subscribed for and paid by the founder members,” says the prospectus. The bank will use the proceeds to strengthen its capital base as per the banking regulator’s directive. Share sale Bank is seeking to raise Sh146 million through the sale of five million shares at TSh550 (Sh29).
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