KAA now terminates contract to build new airport terminal

Terminal 1A at the Jomo Kenyatta International Airport in Nairobi. The new terminal was expected to raise JKIA's passenger handling capacity by an additional 20 million people. PHOTO | FILE

What you need to know:

  • The KAA cited economic constraints as part of the decision to press the stop button on the project.
  • The move is expected to cost the taxpayers millions of shillings, including payments to the contractor for premature termination of the contract.

The Kenya Airports Authority has officially terminated the contract for the planned construction of a new terminal at Nairobi’s Jomo Kenyatta International Airport, leaving many questions in its wake.

The decision, which the KAA made public through a Press statement, is expected to cost the taxpayers millions of shillings, including payments to the contractor for premature termination of the contract.

The KAA cited economic constraints as part of the decision to press the stop button on the project despite the fact that the contractor had mobilise nearly all the equipment needed to do the job as well as completed 30 per cent of the project design.

The KAA said the decision to terminate the project had been occasioned by prevailing operational, economic and financial dynamics over the past three years.

Tuesday’s statement was the culmination of long-drawn contradictions among senior government officials who have been blowing hot and cold over the project.

Transport secretary James Macharia had earlier indicated to the Business Daily that a decision had been made to stop the project, but PS Irungu Nyakera said the plan was on but the ‘government had only gone slow on it.”

China Aero-Technology Import and Export Co-operation (CATIC), the Chinese contractor for the multi-billion project, is said to have dug the project foundation and mobilised 90 per cent of the required equipment, raising the question as to how much KAA will have to pay them for the untimely termination of the deal.

The Attorney- General’s office said the KAA may not have sought legal advice before terminating the contract, exposing the taxpayer to the burden of footing the heavy litigation and damage fees associated with the legal battle should the courts decide in the contractor’s favour.

“A decision of that nature with regard to a project of that magnitude ought to have passed through the AG’s office, but we haven’t seen it here,” the source said.

Even more controversial was the suggestion that there was no legally binding contract for the multi-billion shilling project in the first place as Mr Macharia had indicated to the Business Daily in an interview. 

“I am not certain that a contract had been signed with the contractor. He started the work before we formally entered into an agreement,” the CS said.

The Greenfield project was to turn the Jomo Kenyatta International Airport into Africa’s largest Aviation Facility in line with Kibaki administration’s vision of making Nairobi the region’s aviation hub.

Termination of the project also dampens the intense infrastructure expansion drive that the Jubilee administration launched upon coming to power in 2013.

Greenfield terminal construction was the second largest project after the Sh400 billion Standard Gauge Railway project whose importance was predicated upon the projected growth in the number of passengers passing through the airport.

Termination of the airport contract also came as a surprise to potential financiers of the plan, among them the African Development Bank (AfDB).

Gabriel Negatu, the AfDB regional director, said the bank had initiated preliminary discussions with the KAA for funding but had not been informed of the termination.

“We had initiated discussions for funding and we were awaiting the signal from the government. We remain strongly committed to supporting the Kenyan government and are happy to be engaged when other decisions are made,” Mr Negatu said, adding that no specific agreements had been reached on the level of funding required.

Such projects come with huge equipment costs and the fact that CATIC had done almost all the basics means the KAA may have to foot the demobilisation bill.

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

The Greenfield project has been dogged by a series of controversies, including the controversial 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.

In December 2013, President Uhuru Kenyatta presided over the ground-breaking ceremony for construction of the new airport terminal, saying the facility presented a great opportunity for the country.

Mr Kenyatta then directed the Kenya Airports Authority, the agency that manages all Kenyan airports, to ensure work on the project was completed on time, within budget and to world class standards.

“For the Kenya Airports Authority board and management, this airport cannot be run on a business-as-usual basis. It needs to be run as a commercial hub guided by business principles underpinning competition. All our airports must be operated to the highest standards,” he said when he presided over the groundbreaking ceremony.

The new terminal was expected to raise the Jomo Kenyatta International Airport passenger handling capacity by an additional 20 million people, making it one of the biggest aviation hubs on the continent.

The KAA said in its statement Tuesday that the ongoing reorganisation and modernisation of JKIA has expanded its capacity from 2.5 million passengers in 2013 to the current 7.5 million passengers though the airport handled 6.5 million passengers last year, leaving it with an excess capacity of one million.

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