Economy

Macharia stops the building of Sh56bn terminal at JKIA

JKIA

Jomo Kenyatta International Airport’s International Arrivals section. The Greenfield terminal was to handle 20 million passengers or three times the existing capacity. PHOTO | FILE

Summary

  • Minister says the Sh56bn project would yield little value, roots for work on second runway.
  • The minister did not, however, indicate what would happen to the contractor and whether there were any plans to compensate them for premature termination of the agreement.
  • The Kenya Airports Authority (KAA) recently wrote to the Attorney-General seeking legal opinion on the intended cancellation of the contract by the end of this month.

The plan to construct a new Sh56 billion terminal at the Jomo Kenyatta International Airport (JKIA) in Nairobi has been shelved, putting an end to the project which was among the first ones President Uhuru Kenyatta launched upon coming to power in June 2013.

Transport secretary James Macharia told the Business Daily that the cancellation of the plan was informed by a recent finding that the terminal would yield little value for money and that the funds are better used constructing a second runway.

“We have stopped the Greenfield project because it has no value for money. We would rather spend that cash building a second runway as opposed to a new facility,” he said.

The minister did not, however, indicate what would happen to the contractor and whether there were any plans to compensate them for premature termination of the agreement.

The Kenya Airports Authority (KAA), the agency that manages all Kenyan airports, recently wrote to the Attorney-General seeking legal opinion on the intended cancellation of the contract by the end of this month, according to documents seen by the Business Daily.

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The Greenfield terminal project was to address the increasing number of passengers passing through Kenya’s main airport and was to be built by a Chinese firm over a period of 36 months.

The Chinese firm, China National Aero-Technology International Engineering Corporation (Catic) won the contract to design and build the facility that was to be financed by a loan from the African Development Bank (AfDB).

Now that the contractor is required to move out of site with the cancellation of the plan, the KAA stands the risk of being made to bear the cost of such demobilisation.

The KAA says in documents seen by the Business Daily that the contractor had already mobilised 90 per cent of the equipment required for the execution of the work.

Thirty per cent of detailed designs had been submitted and reviewed while 60 per cent was on-going at the time the decision was made to discontinue the project. Excavations for foundations have been ongoing as well.

Financial documents show that the project was to be financed 85 per cent by a consortium of local and foreign banks, including the AfDB, with a 15 per cent counterpart financing from the Kenya government.

The project has been dogged by a series of controversies, including the battle over the award of the tender that at one point implicated former KAA managers in corrupt deals before the Ethics and Anti-Corruption Commission (EACC) cleared them.

The officials had been accused of failing to comply with the provisions of the Public Procurement and Disposal Act while procuring a contractor for the project.

KAA chairman David Kimaiyo said he was not aware of the cancellation even as he confirmed that the board would support any decision made by the government.

“I am not aware of any cancellation of the Greenfield terminal as the chairperson of KAA, but I will support any decision reached by our parent ministry,” Mr Kimaiyo said, adding that he would have no problem with such a move as long as the right procedure was followed.

“In the process of cancellation, every move has to be undertaken within the framework of the law in order to safeguard the interest of the taxpayers as well as the contractor.”

Catic had been tasked with the construction of a new passenger terminal building measuring about 178,000m2, with 32 contact gates and eight remote gates, associated apron with 45 stands together with linking taxiways, car parks and landside road access and other utilities.

Parliament has not allocated any funds for the Greenfield terminal in the coming 2016/17 financial year as the Jubilee government shunned mega infrastructure projects commissioned by former President Mwai Kibaki at the tail end of his 10-year tenure.

The Treasury, through the budget ceilings approved by the National Assembly, set aside Sh4.4 billion for air transport, meaning that no funds have been allocated for the multi-billion shilling project.

Other key Kibaki projects that have stalled or have been placed on a slow motion due to inadequate funding are the Lamu Port, South Sudan, Ethiopia Transport (Lapsset), and the Konza Technopolis.

Greenfield was set to be Kenya’s second-largest infrastructure project after the standard gauge railway that is now 70 per cent complete, according to the Kenya Railways Corporation.

The new terminal was to handle 20 million passengers or three times the existing capacity at JKIA.

Kenya has been implementing a number of recommendations by the US government to enhance security, among them separation of passenger arrival and departure terminals, clearing the flight path and fencing off the airport in pursuit of Category One status that would enable direct flights between the two countries.

Mr Macharia said Kenya remained on course to achieving the Category One status, with May as the target date for commencement of direct flights to the US.