SAM’S SENSE: Events at JKIA - The Kenya, India airport brief

On the 11th of June this year, the cabinet of Kenya under the chairmanship of President William Ruto approved the national aviation policy and the JKIA medium-term investment plan. The decision was taken on the premise that the JKIA was lagging behind in adjusting its capacity of 7.5 million passengers to the growing demand documented at 8.6 million passengers in the preceding year.

Inside those two documents was the plan that there should be built a new passenger terminal building, refurbish the existing terminals, build a second runway and enhance cargo handling facilities.

The government has been reviewing a privately initiated proposal from an Indian company, Adani Airports Holdings since March 2024. And the public debate has raged, Kenyans asking questions of accountability which I now seek to enumerate.

First, how did Adani Holdings present a proposal to build a Ksh.260 billion shilling worth of infrastructure, three months before the cabinet of Kenya approved a critical infrastructural investment plan?

Let me illustrate that, Prime Cabinet Secretary Musalia Mudavadi in a statement on 30th July 2024, indicated that the Kenya Airports Authority received a privately initiated proposal in March 2024. However, the cabinet of Kenya approved the national aviation policy and the JKIA medium-term investment plan on Tuesday the 11th of June 2024, which essentially should have informed the presentation of any proposal. How did that happen?

A section of Kenyans have questioned why it is only a proposal from Adani being considered. But I refer to Section 40 of the Public-Private Partnership Act which provides: “A private party may submit a privately initiated proposal to a contracting authority”. Indeed, it is within the right of Adani Holdings to present a proposal.

But wait, how did they learn that the Kenya Airports Authority was considering expanding its infrastructure at the JKIA?

Yet I acknowledge that they are in the business of doing business. Who in government is in the same business?

The PPP Act provides that a contracting authority, in this case, the KAA, may consider a privately initiated proposal if the project is aligned with National infrastructure priorities and meets a demonstrated societal need.

Does this explain why a cabinet memo was drawn and approved three months after the Adani proposal was received? To comply with, “aligning with National infrastructure priorities?”

The prime cabinet secretary has indicated that guided by the PPP Act, the Adani proposal is being assessed on the value for money and will be taken through stakeholder engagement, national treasury approval, clearance by the attorney general, cabinet approval and where required, approval by parliament before any agreement can be signed.

Section 41 of the Act provides that the directorate of PPP in coordination with the contracting authority shall conduct due diligence to confirm that the private entity has not been debarred by any country or any international organization from participating in public entity PPPs.

That such an entity is not corrupt neither has it engaged in acts of corruption. That it’s not insolvent, under receivership or bankrupt. That it is tax-compliant in all jurisdictions. That the entity and its directors or officers have not been convicted of any criminal offence related to professional conduct within a period of five years. That is the Kenyan law. What did the Directorate and the KAA find when assessing Adani holdings?

Please note, that the PPP Act provides that a contracting authority shall be guided by the principles of transparency, cost-effectiveness and equal opportunity.

Staying with the law, the Act provides four methods of procurement: they are Direct procurement, competitive bidding, restricted bidding and privately initiated proposals.

PCS Mudavadi indicated that should the Adani Proposal be found not satisfactory, the government will have recourse to other options, which may include consideration of alternative proposals. Does this mean that there are other proposals already received or is it that the government hopes to invite other proposals?

Whatever the case, competitive bidding is still an option as per the law, but is it in this case?

But there is a history that doesn’t like the idea of competitive bidding.

The Auditor General in 2023 released a report of how external loans were procured by the government of Kenya.

The auditor found that between the financial year 2019/2022 and 2021/2022, of the six external loans that were sampled, there was a pattern that most loans were procured without comparison with alternatives. Those loans were approved without proper planning and preparedness by the procuring entities. In effect, there were stalled projects while in some the commencement was delayed.

The auditor found that in such external loans taken, there was no public participation conducted, meaning the intended beneficiaries were unaware. The auditor stated that financiers approached ministries directly even before projects were conceptualized. The financiers identified target projects based on the strategic plans of government departments. In some instances those same financiers funded feasibility studies.

Because of those gaps and the single-sourcing of external loans, credit terms were never compared with alternatives. Only one creditor was identified for each loan and ahead of time, the country was disadvantaged on currency charges, penalty fees and other contractual charges given that they were not adequately evaluated.

A few questions then emerge: has there been a feasibility study for the JKIA expansion project? Who conducted it? Who financed it?

Was information about the intended project available to a variety of private entities? How did Adani learn of it? How is it that it is only Adani’s proposal being considered?

What are the details of the proposal? What is the immediate cost implication for the Kenyan taxpayer? What are the proposed contractual terms? Who will own the new infrastructure?

If Adani is proposed to manage the infrastructure upon completion, for how long? At what cost? At what point whether financial or time shall the government of Kenya take back the asset? What is the currency of the proposed contract? What happens to future forex fluctuations?

These are just some of the questions that if answered may well help Kenyans to make a determination at a time that increasingly, questions of public participation are costing the government important future-oriented decisions.