Ouko pokes holes in JKIA takeover plan

Says KAA would lose out as it gets 83 per cent of income from main airport

In Summary

• No evidence KAA prepared and submitted any proposal on takeover

• No reason why restricted procurement was used to settle on transaction adviser – MMC Africa.

JKIA arrivals and departure terminal. /FILE
BAD DEAL? JKIA arrivals and departure terminal. /FILE
Image: FILE

Auditor General Edward Ouko has poked holes in the proposal by Kenya Airways to take over management of JKIA.

KQ seeks to enter into an arrangement that would lead to it taking over the day-to-day running of the country’s largest airport for the next 30 years.

But in a special audit on the plan birthed by a Cabinet resolution, Ouko has warned the concession agreement would deprive Kenya Airports Authority a significant amount of revenue.

He holds that there is no evidence of KAA management and the board being involved in the Cabinet memo tabled in the May 29, 2018 meeting.

JKIA accounts for 83 per cent of KAA's income, hence it may not have enough money to maintain the other airports under its jurisdiction.

Furthermore, the audit reveals that KQ owes KAA Sh3.8 billion as at December 2018. KAA reported earnings amounting to Sh16.9 billion and a surplus of Sh5.4 billion after tax in 2017/18 financial year.

Ouko has further reported that there is no evidence that KAA management ever prepared and submitted any proposal to the board on the takeover – baptized ‘Project Simba’.

“There is no evidence of any intervening exchange by KAA from June 19, 2018, when Transport PS communicated the Cabinet decision until October 2018 when the board was presented with the information,” he said.

The auditor also reported that KAA management has not satisfactorily explained why restricted procurement was used to settle on transaction adviser – MMC Africa.

Ouko said he was not furnished with the inception report which informed the payment of Sh15 million to the firm.

“Further, the payment voucher and the supporting documents for the advance of Sh15 million was not made available for audit.”

Also, there was no evidence that the procurement of the transaction adviser was factored in KAA’s 2018/19 budget.

“We have not been presented with a feasibility study which could have informed the joint cabinet memo from the May 2018 meeting.”

The KQ-KAA deal has been a subject of power intrigues, largely expressed in the clamour by two House committees to probe the matter.

The Public Investments Committee chaired by Mvita MP Abdulswamad Nassir and that of Transport chaired by David Pkosing were embroiled in a tussle as each sought to handle the issue exclusively.

Yesterday, Speaker Justin Muturi put the matter to rest in his direction that PIC handles matters of finance while the Transport committee deals with matters policy.

“PIC must confine itself to the financial and expenditure aspects of the reservations of the Auditor General as well as omissions and/or commissions on the part of the Kenya Airports Authority,” Muturi ruled.

“The Transport committee must confine itself to matters of policy, human resource, compliance with due process of law and generally addressing any issues of concern to the people as contemplated under Article 95 of the Constitution.”

KQ in earlier communication said the JKIA takeover plan will boost its market share in the East African airspace.

Muturi said that Kenya Airways being a listed company at the Nairobi Securities Exchange cannot be devoid of public scrutiny in as far as its operations are concerned.

Critics say the proposal is a plot by powerful forces in government to use the public-private partnership to profit from JKIA.

According to the Privately Initiated Investment Proposal (PIIP) by Kenya Airways, the annual concession fee has been set at Sh2.9 billion. This is projected to rise to Sh3.6 billion and peaking at Sh6.1 billion in 2033.