NYONG'O: Adani deal signals the execution of KQ

I started these series of articles by showing how Adani will be the final executioner of Kenya Airways. I now end with ‘the act’ based on revelations from the secrecy that has surrounded this deal. Unfortunately, we missed what was going on. From the very beginning, there has been a general pattern by the government to hide from the public what is contained in the Adani deal on Jomo Kenyatta International Airport.

On the whole, while the PPP Act 2021 is clear on the definition of how the private sector can contribute to the development of public entities, the government has deliberately taken a path that will lead to high fraud and loss of taxpayer’s money using the Act. The Act has multiple provisions on investments that would be above board, the key being competitive bidding, but these have largely been overlooked. There is a forceful justification on the use of PIP by none other than a member of the national Cabinet, the highest decision-making organ in the country, yet fraud is so evident through PIP, like a nine-month long pregnancy that is being denied.

The inferences from ignoring the inherent limitations of PIP are that money has already changed hands and there is no turning back. Past similar projects that circumvented transparent dealings and formal institutional mechanisms litter our history as major scandals and gravitate around one hegemonic class in business. This predatory group uses our justice system as a warm blanket. For instance, Kamlesh Pattni was implicated in the 1990s in the Goldenberg scandal but was acquitted in 2013. He was also associated with duty-free shops at JKIA. Yagnesh Devani, a businessman was linked to the Sh7.6 billion Triton Oil scandal. The Triton Scandal was allegedly carried out by Devani's company, Triton Petroleum Limited.

Ketan Somia was an obscure timber merchant who rose to the global stage through the kleptocratic Kanu regime. He was a paper billionaire who skimmed millions of pounds from unsuspecting 'friends' and was also at the centre of the Goldenberg scam. Anura Perera was behind the Anglo Leasing scam in which a contract for more than Sh860,500,000 by a French firm was awarded to a British firm, Anglo Leasing Finance, at 30 million euros. The same French firm was subcontracted to do the work. The tender was not publicly advertised. And now Adani.

Recapping from the Greenfield Project, we missed the importance of forensic scrutiny that failed to find expression in the space of public interest, which was necessary to prevent loss of public resources. In the end, more than Sh5 billion was paid when the contract was terminated but there was no project. These monies could have built an ECD centre or equipped a rural dispensary. Was this the planned end game? In the Mawingu Plan, we missed the vacillating nature of the political leadership that permeates the country, in using deeply rooted illicit economic networks based in questionable tax havens to enter into lease contracts that continue to fleece KQ without remorse.

In KQ’s own PIIP, we missed the importance of supporting our own homegrown company whose proposal on aviation asset consolidation, price bundling model and travel inventory system were way ahead of its competitors. Instead, it was mistreated by KAA, yet without the cargo and passenger traffic it brings, KAA would be as dead as a dodo. Meanwhile, its competitors namely Ethiopian Airlines and RwandAir have copied the KQ PIIP and are now taking over KQ’s once-coveted crown in Africa. What do we want to miss in the Adani PIP?      

Adani’s PIP, nothing new

Adani’s PIP has plagiarised KQs PIIP and more. KQ made the same proposals in 2018, including a 30-year concession to run JKIA and streamline other on-ground services to consolidate and market the KQ brand. The rationale for this strategy was simple; it would boost KQ’s revenues, helping it gain a competitive edge through pricing. KQ, like most airlines, have optimised their core ticket costs but an increasing percentage of passenger spending is in ancillary purchases. Ancillaries are additional services and products airlines offer beyond the base airfare and can include hotel bookings and car rentals. It demands that an airline takes control of the kind of services it gets from its base airport and re-packages these services as the airlines’ own on-ground services. Qatar Airways adopted this strategy with its name emblazoned on every product and service offered at their base airport, Hamad International Airport. The consolidation of assets around the airline contributes nearly 30 per cent of the GDP of the State of Qatar.

From recent interrogations by the Senate covered widely by mainstream and social media, it is clear that the hidden hand of KAA is painfully conspicuous in Adani’s PIP. It would seem KAA had initially prepared a document that would invite multiple bids in a competitive process replicating the Greenfield project when 116 applications were received and evaluated. Apparently the KAA Board has not endorsed Adani’s PIP and were for a competitive process.

According to the Board, there is nothing exclusively unique in running an airport that would be deemed proprietary to Adani. And it’s not only Adani who have the financial resources after the government admitted it lacked the fiscal space to undertake this project. It does not require a deep level of detail to conclude that Adani must have paid up front, a hefty price for exclusivity. Irrefutable evidence is in the formation of a local company by Adani (through a Dubai entity) to run the JKIA project, pointing to a deal that has already been closed, despite denials by the government.

What have we missed! Adani’s strategy targets air travel that is associated with business travellers and high-income households. It doesn’t matter which airline brings the traffic and cargo to JKIA, Adani stands to gain through high profits from on-ground services in addition to a lease that guarantees it minimum 18 per cent return on investments. How will KQ be executed? The sword is in Adani’s hands and it’s raised. Like Pontius Pilate, it is waiting for the Government of Kenya to give the okay to execute. In 2019, KQs’ own PIIP was rejected. The search for a strategic investor only got harder.

Adani’s unsavoury reputation globally

Adani seems to have a firm grip on the ruling class in Kenya by the way it has pushed through this deal behind the scenes. The tacit support of a foreign company is perhaps symptomatic of the bumbling ineptitude of the current regime; the only class in the republic paid to lie to the country that Kenya has no local capacity to pull through a project of this magnitude. Called upon to tell the truth about Adani, all agencies of the regime are clutching at straws made of lies muddying the waters still further. Adani’s reputation globally is in tatters. Here are a few snippets of the known:

Hindenburg Report (2023): The report accused Adani Group of stock manipulation and accounting fraud, causing a $100 billion loss in market value.

SEBI Investigation (2023): The Indian Securities and Exchange Board investigated allegations of insider trading and violations of public shareholding norms by Adani entities.

Australian Carmichael Coal Project: Environmental concerns and accusations of overstating job creation and economic benefits plagued Adani's coal mining project in Queensland.

Mundra Port SEZ Controversy (2011): Adani was accused of environmental violations and illegal land acquisition related to its Special Economic Zone in Gujarat, India.

Deloitte Exit (2023): Deloitte resigned as the auditor of Adani Ports, reportedly due to concerns about transactions with related parties and lack of transparency.

It is also emerging that they are way deep in the energy sector to construct a new grid that signals an inevitable increase in electricity prices to finance. Kenya’s electricity is not known to be cheap and the struggling manufacturing sector faces further struggles. A form of business paternalism is emerging where only one firm is gifted with all major contracts to the exclusion of all else. At best, it’s always extractive and mired in corruption.

At worst it’s a surrender of our sovereignty. The government, it would seem, is under siege to transform itself from the rhetoric of elections into an entity that can govern and deliver on much-needed development. It is profoundly getting it wrong. As in many post-election contexts, political elite competition is already both intense and contradictory within the party that is in power, forcing together a broad-based coalition, ostensibly for inclusivity but in reality to survive the youthful uprising and underlying discontent.

The alternative

What should we have done differently? KQ’s PIIP provided the way forward in a context of local belief that after 60 years of independence, we as a country can deliver such projects successfully. Regardless of criticism levelled against KQ, it maintains the moral high ground of a home company that has performed well in the past, liberated the country from a lack of self-belief in a national sense and has the potential to sharpen its abilities from past failures.

Its closest competitors have emulated its growth strategies and are now doing well. Within the industry ecosystem are groups like KALPA and KAWU; a powerful constituency of workers who, well-organised, can be part of KQ’s success story in labour provision and minority ownership, entrenching a form of local hegemony. But with the Adani deal and its emerging tentacles in other sectors, there is a real possibility of same old, same old. Corruption.