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KAA kept in the dark over airport takeover - auditor

Jomo Kenyatta International Airport
Jomo Kenyatta International Airport in Nairobi. FILE PHOTO | NMG 

The Kenya Airports Authority (KAA) was not involved in the preparation of a Cabinet memorandum that sanctioned the proposed takeover of Jomo Kenyatta International Airport (JKIA) by struggling national carrier Kenya Airways, a special audit shows.

Edward Ouko, the Auditor-General, says the airport takeover was shrouded in secrecy as his office was not furnished with key documentation for audit, including the Privately Initiated Investment Proposal (PIIP) presented by Kenya Airways #ticker:KQ in its bid to manage JKIA.

“There is no evidence of KAA management and board being involved in the Joint Cabinet Memorandum that was prepared and tabled in the Cabinet on May 29, 2018,” Mr Ouko says in a special audit of the proposed plan tabled in Parliament on Thursday.

“In fact, there is no evidence of any intervening exchange by KAA from June 19, 2018 when the Principal Secretary, Transport communicated the decision of the Cabinet until October 18, 2018 when the Special Board of directors was presented with the information.”

The feasibility study which could have informed the joint Cabinet memo meeting of June 29, 2018 was not made available for audit verification, he said.

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Investigations

National Assembly Speaker Justin Muturi allowed two parliamentary committees to resume respective investigations of the deal and report their findings to the House.

Mr Muturi directed the Public Investments Committee (PIC) chaired by Mvita MP Abdulswamad Nassir to look into the commercial arrangement.

The Transport team will assess policy, human resource, compliance with the law, as well benefits to the society and the nation. JKIA accounts for 83 percent of KAA revenues and 51 percent of recurrent expenditure. According to the special audit, the KAA operating revenue amounted to Sh16.9 billion and a surplus of Sh5.4 billion after tax as in 2017/18.

KQ, as is known by its international code, tabled the PIIP to KAA on grounds that the two entities were granted approval to enter into negotiations with a view to agreeing on a framework to restore Nairobi as a Civil Aviation Hub of choice in Africa thereby contributing to economic competitiveness.

The proposal will result in KQ operating, maintaining, developing, constructing, upgrading, modernising, financing and managing JKIA based on the PIIP.

Special purpose vehicle

It proposed to run the airport on a 30-year concession framework under which Kenya Airways will establish a special purpose vehicle (SPV) to manage and develop JKIA, leaving KAA to manage all other Kenyan airports and airstrips at a concession fee.

The PIIP involves inclusion of JKIA’s aviation infrastructure in the concession, retention of JKIA related liabilities (both actual and contingent) by KAA, initial secondment of staff and transfer thereafter at the discretion of the concessionaire or SPV of JKIA staff and engagement by concessionaire of external airport advisor to implement world class solutions and airport management best practices.

In KQ’s PIIP and financial model, annual concession fees have been set at $28 million (Sh2.9 billion in 2019, rising to $35 million (Sh3.6 billion) in 2028 and only peaks at $60 (Sh6.1 billion) in 2033, 15 years into the concession term.

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