China Eximbank provides RMB 716.9 million government concessional loan for the Kenyatta University Teaching Research & Referral Hospital Construction Project (Linked to Record ID#34174)

Project narrative

The Kenyatta University Teaching, Referral & Research Hospital project was conceptualized in 2008. The Government of Kenya, through various line ministries, supported the idea developed by Kenyatta University Management led by the then Vice-Chancellor, Prof Olive Mugenda. The idea came to fruition with the signing of an MoU on April 21, 2011, between the Chinese and Kenyan governments. Then, on June 17, 2011, China Eximbank and the Government of Kenya’s National Treasury signed an RMB 744,560,000 government concessional loan (GCL) agreement for the Kenyatta University Teaching Research & Referral Hospital Construction Project. The face value of the loan was subsequently revised to RMB 716,983,703.70. The loan carried the following borrowing terms: a 2% interest rate, a 20.75 year maturity, and a 7.25 year grace period. The loan was scheduled for semi-annual repayment installments beginning on September 21, 2018, and ending on March 21, 2032. The National Treasury on-lent the proceeds of the GCL to Kenyatta University Teaching, Referral & Research Hospital (KUTRRH), which is a Kenyan state corporation. The proceeds of the loan were to be used by the ultimate borrower to finance a commercial contract between the Government of Kenya and China Jiangxi Corporation for International Economic and Technical Co-operation (CJIC), which was signed on August 12, 2010. The borrower made principal repayments worth RMB 27,576,296 between July 1, 2020 and June 30, 2021 (Fiscal Year 2020-2021) and RMB 55,152,592.00 between July 1, 2021 and June 30, 2022 (Fiscal Year 2021-2022). The loan’s amount outstanding was RMB 661,831,110.11 as of June 30, 2020, RMB 606,678,517.52 as of June 30, 2021, and RMB 551,525,924.93 as of June 30, 2022. The project involved the construction of Kenyatta University Teaching Research & Referral Hospital (肯雅塔大学教学转诊医院) in Nairobi. The hospital covers an area of more than 600 acres with a total construction area over 80,000 square meters, has a total of more than 650 beds, 8 high-grade operating rooms, 1 maternal center, 1 neonatal intensive care unit (NICU), 1 intensive care unit (ICU), 1 special intensive care unit (HDU), as well as medical imaging center, central supply room, oxygen, and medical gas system, boiler and laundry, medical waste treatment, funeral facilities, restaurant, teaching center, dormitory, and other supporting facilities. Construction of the 650-bed hospital involved the expansion and equipping of anatomy and basic science laboratories and the establishment of pre-clinical and clinical teaching departments at the university. The Report of the Auditor General on Public Universities for 2021-2022 notes that "the ownership and compensation of the land on which the Hospital is built could not be confirmed." According to another Auditor General report, as of November 2023, Kenyatta University medical students were not able to access the facility due to unresolved protracted disputes related to ownership of the hospital between the Ministry of Health and Kenyatta University. CJIC was the contractor responsible for implementation. The project was originally scheduled to enter implementation in 2012 and reach completion by June 30, 2019. Construction commenced on November 1, 2012 and ended on December 14, 2016. A formal project handover ceremony took place on May 24, 2019. However, the hospital did not open its doors to the first patient until October 28, 2019 after successfully conducting a ‘dry run’ from September 27, 2019 to October 27, 2019, followed by a successful 'soft run' from October 28, 2019 to November 24, 2019. To operationalize the first 160 beds, the hospital operationalized the oncology, renal dialysis, accident and emergency, trauma and orthopaedics, ICU, radiology, laboratory, pharmacy, mortuary, and other allied services. The hospital was designated as an isolation and treatment center on March 24, 2020 with over 400 beds designated for COVID-19 patients. A formal hospital opening ceremony took place on September 10, 2020. Then, in October 2021, an advanced cancer imaging center (known as the Integrated Molecular Imaging Centre Hospitality and Accommodation Centre) was launched at the hospital. There are indications that the China Eximbank loan for the Kenyatta University Teaching Research & Referral Hospital Construction Project financially underperformed vis-a-vis the original expectations of the lender and Kenya's National Treasury. As of October 17, 2018, 85% of the China Eximbank loan (worth 8,756,025,600 Kenyan shillings) had been disbursed and utilized. However, the remaining 15% of the loan (worth approximately 1.37 billion Kenyan shillings) had not yet disbursed in support of the personnel and capacity building component of the loan because disbursement was conditional upon the training of personnel (who were yet to be recruited by Kenyatta University due to ‘budgetary constraints’). KUTRRH was ultimately unable to meet its loan repayment obligations (due to the fact that it was generating insufficient revenue) and the National Treasury had to step in to ensure repayments to China Eximbank. Then, in December 2021, it was revealed by the Kenyan Government that KUTRRH was converted into an independent parastatal entity (and severed from Kenyatta University) on January 25, 2019 in order to use its future revenues to recover the funds needed to repay the China Eximbank loan.