THE Kenya Broadcasting Corporation (KBC) is trying to wriggle its way out of a technical insolvency that threatens to undermine its mandate of steering the country into the digital television era, writes Okuttah Mark in Business Daily.

The insolvency arose from a government guaranteed loan of Sh2.3 billion (almost R230m) that KBC took in 1991 to acquire medium-wave equipment, but defaults, penalties and interest loaded on the principal have seen the liability surge to Sh20 billion (almost R2bn).

KBC managing director, Mr David Waweru, says the money was borrowed on the strength of cashflows expected from the sale of television permits — then at Sh1,000 per set.

The permit fees were scrapped with the liberalisation of the broadcasting sector in 1997, denying KBC over 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, six times the interest rate of 2.5 per cent that NEC was levying on the debt.

The government has so far paid Sh5.2 billion and the outstanding balance to NEC as at June this year is Sh5.3 billion.

"We are asking the government to take over the Japanese loan since we no longer collect the levy," said Mr Waweru.

Besides the NEC loan, KBC owes Telkom Kenya Limited and Kenya Revenue Authority (KRA) Sh600 million.

The Telkom Kenya debt dates back to the Moi administration when the corporation used to air live local and international presidential visits using Telkom Kenya radio links and the KRA debts stem from non-remittance of taxes.

Information assistant minister, Mr George Khaniri, says the corporation is technically insolvent and in the absence of a government bailout, could soon find it difficult to attract funds in the market for expansion.

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