Blocked Sh2.5bn in Africa worsens cash flow at KQ

Kenya Airways is owed an estimated $25 million (Sh2.5 billion) in blocked funds across African countries which it cannot recover due to foreign exchange constraints and defaults by bad debtors, the airline’s chief executive Mbuvi Ngunze has revealed.

The national carrier, known as KQ by its international code, says the funds locked in countries such as Nigeria, South Sudan, Angola and Mozambique, have greatly worsened its cash flow situation.

Mr Ngunze disclosed the figure in an interview on the sidelines of last week’s International Air Transport Association (IATA) annual general meeting where participants urged governments to help in the recovery of these funds.

“We sell in these (African) markets through agents but we have been unable to get dollars to repatriate our money,” said Mr Ngunze.

“As with any business, we have some problematic debtors from whom we are actively trying to recover funds. We are such a cashflow business that when you have blocked funds somewhere, it has a direct impact on the business,” he added.

IATA, which is made up of 264 airlines, estimates that its members’ blocked funds globally is in excess of $5 billion (Sh505 billion).

Venezuela and Nigeria account for the biggest proportion of these funds.

Venezuela has over 16 months chalked up $3.8 billion (Sh383.8 billion) in money it owes airlines while Nigeria is holding onto $591 million (Sh59.7 billion) since November.

Other countries that owe airlines substantial amounts include Egypt ($291m for four months), Angola ($237m for seven months) and South Sudan ($360m since February).

READ: African airlines tipped to close year at Sh51bn net loss

Tony Tyler, IATA’s chief executive, urged governments to ensure airlines repatriate their money, saying it would be unreasonable to expect them to continue operating in countries where they cannot efficiently collect payments.

“Blocked funds are a problem in a diverse group of countries, some of them undergoing significant economic challenges particularly with a fall-off in oil revenues,” said Mr Tyler.

“All five nations urgently need robust air connectivity and that is being hampered by airlines’ difficulty in repatriating funds. It is in everybody’s interest to ensure airlines are paid on-time, at fair exchange rates and in full.”

Cash-strapped KQ, which is seeking about Sh60 billion from shareholders and lenders, says governments can do more to facilitate repatriation of their funds.

Mr Ngunze said while countries like Nigeria and South Sudan are under intense financial strain, this bad scenario could get worse if airlines pull out.

“We are constantly trying to recover these funds and ending working relationships especially in the case of bad debtors,” said Mr Ngunze.