Is This The end Of KBC? The National Television Network Is Now Insolvent
From my days as a finance student, I know that insolvency is when an individual or organization can no longer meet its financial obligations with its lender(s) as debts become due.
And it would seem that KBC is not just bankrupt, it’s unable to meet it’s financial obligations to it’s staff and it’s creditors.
Kenya Broadcasting Corporation (KBC) has failed to service a debt it owes to Japan’s Overseas Economic Cooperation Fund that has accumulated to Sh32.3 billion.
The insolvency arose from a government-guaranteed loan of Sh8.2 billion that KBC took in 1989 from the Japanese Overseas Economic Cooperation Fund to acquire medium-wave equipment, but defaults, penalties and interest loaded on the principal have seen the liability surge.
KBC says the money was borrowed on the strength of cashflows expected from the sale of television permits — then at Sh1,000 per set. However, to the horror of the corporation, the permit fees were scraped with the liberalisation of the broadcasting sector in 1997, denying KBC more than Sh500 million a year in income.
In 1996, there were 730,000 television sets in use across the country compared to five million currently.
This constrained KBC’s efforts to settle the debt, which was informally taken over by the government on the understanding that the broadcaster would reimburse the money together with interest charged at 15 per cent per year.
The government has so far paid Sh9.29 billion and the outstanding balance as at June this year is Sh5.99 billion, according to official data.
“KBC has not paid GoK any portion of this loan, but has continued to accumulate the liability (principal and interest amounts) in its books,” said a recent report commissioned by President Uhuru Kenyatta on restructuring State-owned corporations.
“While it is important to retain the Corporation as a public broadcaster, there is a need to emphasise good governance so as to turn the corporation into a profitable venture,” the report recommends.
KBC management has in the past asked the Treasury to take over the Japanese loan given the broadcaster no longer collects the Sh1,000 levy.
This, together with increased competition from new players, saw KBC post a loss of Sh4.1 billion in the year ended June — making it the worst performing State corporation.
Unlike other commercial broadcasters, KBC has a mandate to ensure it offers services to almost all parts of the country regardless of whether it is making a profit or not.
This has forced it to invest heavily in expensive infrastructure and human capacity in what has put pressure on the State to continue funding the broadcaster.
The broadcaster received Sh1 billion from the state in the year to June.
Source: Business Daily
