9 October 2012

Kenya: Broke City Hall Turns to Equity for Salaries

Faced with an imminent go slow by unpaid employees of the City Council, town clerk Tom Odongo was yesterday forced to 'clarify' on the issues surrounding the controversial Sh5 billion loan from Equity Bank.

In a paid-up statement, Odongo said that "the council appreciates the public interest the loan has generated over time, saying the council wishes to put the matter to rest by putting across matters that may have not been given adequate attention in these discourses."

The council has not paid employee salaries for September, which has turned out to be a baptism of fire for the new town clerk's one month's stay in office.

However, highly placed sources at Equity Bank intimated to the Star that the bank has been irked by incessant negative publicity it has been receiving in regards to the loan they advanced City Hall.

This forced Odongo to put up the advert to appease the council's bankers as they negotiate for another overdraft to pay salaries for last month before the employees patience runs out.

The council's wage bill is Sh580 million, but the net is Sh300 million with the remaining Sh280 million which forms statutory deductions being paid daily under a standing order to KRA, NSSF, NHIF, LAPTrust, and LAPFund.

"In view of the foregoing, the council wishes to put the record straight by appreciating the help Equity Bank offered the council during its hour of need by coming forward to offer the council cheaper credit compared to other banks.

"Ultimately this has enabled the council meet its obligations by paying salaries to its employees promptly among other service delivery obligations," Odongo adds in his statement.

A senior manager at Equity Bank who sought anonymity said yesterday that "former town clerk Kisia wrote to us (Equity Bank) sometime in 2011 asking us among other banks whether we could loan City Hall Sh5 billion.

"We wrote back and immediately started negotiations after other banks chickened out, but since then, we have been receiving negative publicity for something that was done above board, and as an institution we need a name to stay afloat in the competitive banking sector," added the manager, who has access to the council's accounts at their branch in Upper Hill.

Despite collecting Sh1.1 billion last month in the just concluded rates waiver exercise, the council's account are still bleeding, as most of the money was used to pay debts the council owed Equity Bank.

"By the time the interest waiver window came to a close, City Hall had overdrawn their overdraft account by more than Sh1 billion and so much of the collected cash went towards offsetting their overdrawn account.

"On top of these overdrawn account, we paid for the council's medical insurance as they had no money in their accounts," added our source at Equity Centre in Upper Hill.

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