A loan taken to construct the Lake Basin Mall in Kisumu County has risen to Sh 4billion due to accrued interest charged for failure to service the debt.
Calvin Odoyo Owidi Managing Director of Lake Basin Development Authority (LBDA) confirmed the debt increment and said that the interest is increasing by day indicating that the authority was being charged about Sh 30million a month, for the last eight years. The principal amount from Co-operative Bank for additional construction work on the controversy-ridden project in Kisumu was Sh 2.5 billion but it has piled up penalties.
“If the trend continues, and the loan is not settled in time, LBDA will lose Sh360 million a year, which defies the investment’s logic,” said Mr. Owidi.
Lake Basin Mall
The National Treasury is yet to give approval and funds to LBDA so that it can release the mall’s contractor from the loan obligation and take over the property. The loan was taken by a contractor, Erdermann Properties, which built the mall in Mamboleo. It has since been partly occupied by a number of State parastatals and private firms.
Erdemann was contracted to carry out the work under an engineering, procurement and construction contract. It then sought a loan from Co-operative Bank of Kenya to finance the construction. The certificate of completion was issued by the architect on April 19, 2016.
The Lake Basin Mall sits on a 22 acres of land, measuring about 60,000 square feet. The five-floor complex features 140 shops, a three-star hotel, showrooms, doctors’ plaza, an amphitheatre and children’s play area.
Six years after its construction, the Ethics and Anti-Corruption Commission (EACC) instituted a probe to establish the cost incurred to put up the mall. Owidi said when the loan was applied for in 2014, an acre in Mamboleo was valued at Sh 3million. LBDA agreed with the contractor to secure a Sh2.5 billion loan from the bank using the title as lien. This is what the contractor relied on as a right to keep possession of the property until the debt owed by the authority is discharged. The Treasury only needs to pay the Sh 4billion debt and the authority takes over the mall.
