How KPA ‘hoarded’ Sh6.2billion out of Sh22billion SGR revenue

The Kenya Ports Authority (KPA) management headed by Director General Captain William Ruto is on the spot after a fresh audit by the Auditor General Nancy Gathungu’s office revealed the authority illegally hoarded Sh6.2billion out of the Sh22billion freight income tied to the Standard Gauge Railway (SGR) contrary to the law.

According to the damning audit report submitted to Parliament, Gathungu blew the whistle on how colossal amount derived from taxpayers’ money was diverted from the escrow account set up for repaying the SGR loan that exposed the Kenya Railway Corporation (KRC) to loan default and unable to settle its debt commitments.

Members of Parliament are now keen to establish how the Managing Director Captain William Ruto’s led institution flouted the Public Finance Management Act by withholding SGR revenues to its accounts.

The MPs are also keen to know the whereabout of the interest generated by the Sh6.2billion withheld monies and how the finances have been expended.

The Auditor General findings show that a large portion of the money collected from goods hauled on the Mombasa-Malaba line did not make it to the escrow account set up for repaying the SGR loan.

In her report to the National Assembly Public Debt and Privatization Committee, Auditor-General Nancy Gathungu explained that the KPA kept part of the freight collections instead of transferring the full amount to Kenya Railways’ loan account as required.

The retained funds, she noted, were withheld despite the terms of the agreement guiding SGR revenue usage.

The audit shows that from July 2023 to December 2024, KPA collected Sh22billion from cargo moved on the railway.

However, only Sh16billion was directed to the escrow account, while Sh6 billion remained in the ports agency’s hands.

“The audit established that the retained revenues catered for potential refund claims arising from tariff disputes and discounts, despite lack of a provision for the retention in the Take or Pay Agreement,” reads the report.

The report stresses that the Take or Pay deal under which KPA collects freight income for the railway requires full remittance after deducting an agreed service fee.

Gathungu pointed out that the arrangement leaves no room for keeping extra funds.

“This unauthorised revenue retention deprived Kenya Railways of sufficient funds required for loan repayment. It further indicated KPA’s non-compliance with the agreement and adversely affected Kenya Railway’s financial obligations towards repayment of on-lent loans,” reads the document.

The audit further highlights that the withheld money weakened the state rail agency’s ability to service the loan acquired for the SGR extension to Malaba.

The analysis on on-lent loans shows Kenya Railways is struggling to repay the Sh568 billion borrowed from China to build the line in phases. The credit agreements, signed in 2014 and 2015, covered four stages of the railway project.

“Review of loan records and interviews held with the Managing Director, Kenya Railways Corporation was not meeting revealed that the corporation was not meeting its loan obligations for three on-lent loans totaling to Sh569 billion inclusive of capitalized interest accrued during the grace period,” reads the report.

The revelations add to growing questions over the financial model behind Kenya’s flagship rail project and cast a spotlight on the fragile balance between state agencies tasked with collecting and managing key public transport revenues.