Echoes of Sh45.5b botched Qatari 2009 JKIA bid in Adani deal

The raging controversy surrounding the proposed leasing of the Jomo Kenyatta International Airport (JKIA) has all the hallmarks of another botched deal involving Qatari investors.

In April this year, Indian conglomerate, Adani Group, proposed to Kenyan authorities to take over JKIA through a 30-year concession, over which it would refurbish the airport and invest in new infrastructure but also have a free hand in running affairs at the airport, including hiking passenger fees and rentals, which it noted that are largely undercharged.

The proposal to Adani Airport Holdings Ltd (AAHL) for a reported Sh238 billion has sparked public outrage, with opponents questioning the prudence of leasing one of the country’s strategic installations without competitive bidding.

It has since run into legal headwinds after the Kenya Human Rights Commission (KHRC) and Law Society of Kenya (LSK) moved to court to block the proposed takeover.

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However, in the weeks that followed, the project that emerged most prominent was the Sh45.4 billion proposal by little-known Qatari investors to transform Kenya’s largest airport and the region’s aviation hub.

In a surprise move on 15th January 2009, a few weeks after Kibaki’s visit from Doha, the Kenya Airports Authority (KAA) board of directors signed a concession and lease agreement with the Afro Asia Investment Corporation.

The deal was to lease 90 acres of government land owned by KAA to Afro Asia Investment Corporation (AAIC) for a period of 80 years. 

AAIC would then construct a five-star hotel with 450 rooms, two exhibition centres, two convention centres, five office towers, a 300-room four-star hotel, a 200-bed capacity tourist hospital, a power plant, warehouses and serviced apartments.

Construction was expected to begin in 2010 with the complex scheduled for completion by 2015 as the government drummed up the benefits of the multi-billion-shilling complex. 
“Kenya will have a unique, and probably the largest expo cum convention and trade centre ever established in the African continent, then Transport Ministry Chirau Ali Makwere told Parliament.

“Subsequently, the availability of this state-of-the-art facility, with the latest technology, will make Nairobi an attractive destination for meetings, conferences and exhibitions.”

However, despite the government’s spirited support of the project, some pertinent questions emerged around the project.

In the first place, KAA then-Managing Director George Muhoho, a close ally of President Kibaki and an uncle of then-Finance Minister Uhuru Kenyatta, was accused of single-handedly brokering the deal without the knowledge or approval of the board of directors.

The identity of the Qatari firm and its directors was also questioned. The government was accused of single-sourcing the multi-billion-shilling deal involving the long-term lease of a strategic asset to unknown individuals.

In a heated session that saw the newly elected Gwassi Constituency MP John Mbadi (now Treasury Cabinet Secretary) kicked out of Parliament, the government was hard-pressed to justify the shadowy deal. 

Kitui East MP at the time, Kiema Kilonzo, asked transport minister Ali Makwere whether the JKIA-Qatari deal was another Anglo-leasing in the making, referring to another scandal that had just rocked the grand coalition government.

“I want the minister to tell this House who are the directors of Afro Asian Company, how old the company is, and what the share capital of this company is,” he said. “If possible, I want the minister to table here their financial statement.”

Mr Kilonzo asked whether the project had undergone competitive bidding, why AAIC was being accorded undue privilege and whether KAA Managing Director George Muhoho had a valid contract.

“A day before the agreement was signed, the chairman and his board told us that the Managing Director had been sacked, just for him to appear on the material day to sign the contract,” said Mr Kilonzo.

“The minister himself confirmed that he was the appointing authority. What is the legality of this contract or is it another Anglo Leasing scandal in the making?”

Mr Makwere told Parliament that the project would be a public-private partnership (PPP) and that all requisite authorities and approvals had been obtained, including from the KAA board, the ministries of transport and finance, the Attorney General’s office, Public Procurement Oversight Authority and the Cabinet.

“The development will be carried out solely at the cost and risk of the investor,” stated Mr Makwere.

“That is without monetary contribution by the KAA, the Government or any other Government agency.”

Makwere told Parliament that this would be Kenya’s first PPP mega project and that the country was adopting a model used by other developing nations.

“This is a process that is done in countries like Malaysia, Djibouti and Rwanda,” he said. “I can assure the House that if there is any investor in the world today with $350 million (Sh45.5 billion) and a project that will create employment and improve our economy, then we will be ready to give that investor even more than 90 acres of land.”

Mr Makwere’s spirited defence of the deal, however, failed to pacify MPs, including Mbadi.

“Is the minister to tell this House that he flouted public procurement rules just to encourage foreign investment?” he posed. The question had him kicked out of the house for the remainder of the session.

The project never kicked off, and a groundbreaking ceremony scheduled for March 2009 with President Mwai Kibaki as the chief guest was called off at the last minute.

It later emerged that AAIC had failed to provide the Sh36 million bank guarantee required as security for the project construction to begin.

In September 2011, almost three years after the deal was signed, the KAA board advised the management of the parastatal to begin formal termination of the deal due to AAIC breaching its contract obligations.

“The lease agreement provided that immediately upon signing, the Investor would pay the costs and disbursements incidental to the Grant and Registration of the Lease,” said KAA in a submission tabled in Parliament.

“The investor did not provide requisite payments for perfection of the lease by way of registration.” 

in the case of the proposed Adani deal, the government has been accused of failing to conduct public participation as required by law and not engaging as stakeholders in the leasing plan.

Reports that the government had entered a commercial deal with the Indian company continue to elicit uproar among the public, leading to a July 23 protest dubbed “Occupy JKIA.”

However, Prime Cabinet Secretary Musalia Mudavadi later refuted the claims that the deal had already been signed, saying the proposal from Adani was being scrutinised and due process would be followed.

“This is a public asset, it is a strategic asset and if it was going to be sold, you can only do it after a full public process that Parliament endorses,” said Mudavadi.

Aviation workers, however, insist there is mischief in the deal and that the government is insincere, accusing the management of KAA of orchestrating the lease, and calling for their resignation.

“Beginning with the acting managing director Henry Ogoye, he has failed to engage us. He is negotiating this deal in secret,” said Kenya Aviation Workers Union (Kawu) Secretary-General Moss Ndiema.

“We are privy to information that he was promised that he would be given the position of chief executive officer.” 

Mr Ndiema also alleged that the privatisation of East Africa’s busiest airport will result in unemployment, accusing Adani of plans to scale down the workforce at the facility.

“Adani wants to take over the entire ground handling operations, which again will occasion job losses. They want to dilute terms of employment,” he said.