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January 17, 2019

From Eurobond confusion to JKIA terminal

I think I wrote before that I lost track of the number of explanations that CS Rotich had offered regarding the whereabouts of the Eurobond cash. And, confusingly, he just provided another one – according to the Treasury’s Twitter page, he now stated that ‘Government used Euro bond money to clear Sh 120 billion debt left by former president Mwai Kibaki's administration.’ Not only was this the nth explanation, but it also had little to do with what the government had promised to use the cash for: repaying the consolidated loan, some recurrent spending (a bit of a red flag in itself), and development expenditures.  

So here I am, confused, as the government sets off to gauge interest in another eurobond. I’m confused about where that money went in the first place, and a little worried about the government’s slight casual way in accounting for pretty large sums of debt.   And then there was another source of government-induced confusion for me: The media now report that the Kenya Airports Authority has announced the cancellation of the new Greenfield terminal at JKIA. This is, of course, not some little garden shed, but an infrastructure investment with a budget of USD650m. It had been launched in late 2013, so the timing for such a decision appears a little off.   KAA chairman David Kimaiyo told the Star over the phone that the Chinese contractors   who were to bring along funding via a sovereign guarantee, and presented commitments from China Exim Bank and China Development Bank   did not manage to raise the necessary money.  

This is a little confusing as the KAA acting MD had earlier said that the project had been abandoned due to the 'prevailing operational, economic and financial dynamics in the aviation industry, which have been on a downward trend over the last three years'.   Then you have the CS Transport, Mr Macharia, a bit more slapdash, but in the same direction, speaking to Business Daily: ‘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’. Wasn’t there some planning process to determine such issues before entering what is not an offer to buy a crate of onions from your local duka, but a fairly sizeable infrastructure project worth hundreds of millions?

For any larger project, you’d do a feasibility study to determine whether and how your idea can be realised. Sometimes, you need to change the initial idea – but that’s why you do a feasibility study, a careful analysis. And in this case, we’d gone way beyond the planning stages.   If you’re not confused enough, then how about this, from Mr Macharia’s principal secretary, Mr Irungu, quoted in the Nation that ‘they are only 'going slow' and that his boss was misquoted: "We didn't say we are cancelling, just that there are priority projects on the back of limited resources. GFT (Greenfield terminal) is a necessity if JKIA is to be an iconic airport and Nairobi an African hub."’  

The same article then also contradicts the lack-of-financing argument advanced by KAA: ‘Kenya reached a financing agreement with China Development Bank for the project during President Kenyatta's State visit to China in August 2013. While in China, the President is said to have held a meeting with China Development Bank president and they agreed to fast-track the financing agreement.’ The implementing contractor understandably appears ticked off about the whole thing and threatened to sue Kenya for breach of contract. However, I’m not sure the Chinese government would be keen to see this happen, given that Kenya might end up borrowing a total of USD10bn from China in total for its railway, upping its current Chinese railway debt from USD4bn.  

So here is what concerns me: We’re talking about massive sums of money that tax payers will have to repay. In the case of the eurobond, we’re still not sure what happened with it. In the SGR case, a contract for billions of dollars was single sourced. There are far cleverer people to do cost-benefit analyses of railway versus other investments, but if I’d spend billions in hard currency on an infrastructure project, I’d make bloody well make sure that I see different technically and financially competing offers to make sure I get the very best value for my money.  

And then I simply can’t get my head around the fact that officials in the highest positions of the country, dealing with hundreds of millions of dollar, and billions of dollars, can’t actually tell us straight what is going on.

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