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MWAMISI: Adani's investment to lift aviation revenue by Sh30bn

Influx of capital with little immediate cost on taxpayers is crucial in aviation race.

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by STAR REPORTER

Realtime20 October 2024 - 08:07
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In Summary


  • More importantly, the quality of services to be introduced by Adani is expected to elevate JKIA to international standards.
  • With Adani’s extensive experience in managing airports across the globe, Kenyan aviators and passengers alike will benefit from enhanced facilities, shorter wait times and more seamless operations.

The Jomo Kenyatta International Airport


BY CALEB MWAMISI

The Adani Group’s involvement in the development and operation of Jomo Kenyatta International Airport through a Public-Private Partnership has sparked significant debate in Kenya.

For years, JKIA has been a vital gateway not only to Kenya but also for the entire East African region. It serves as a critical hub for international flights, connecting Africa to Europe, Asia and the Americas. Despite its importance, the airport has faced numerous challenges, ranging from infrastructure limitations to operational inefficiencies that have affected the country’s aviation sector for eons.

Jomo Kenyatta International Airport (JKIA) has been struggling to manage the increasing flow of passengers and cargo, resulting in significant congestion and operational inefficiencies.

With the rising number of travellers using the airport, passengers frequently encounter long wait times and overcrowded terminals, which detracts from their overall travel experience. The airport's current infrastructure, including check-in facilities and baggage handling systems, has not been adequately updated to accommodate the growing demand. This inadequacy poses a risk to Kenya’s competitive position as a premier aviation hub in East Africa, particularly as neighbouring countries ramp up their airport modernisation efforts.

In contrast, nations like Ethiopia and Rwanda have made considerable strides in enhancing their aviation infrastructure, positioning themselves as viable competitors. Addis Ababa’s Bole International Airport has emerged as a significant transit point for international airlines, largely due to Ethiopian Airlines’ expansive network and strategic marketing initiatives.

Similarly, Rwanda is developing Bugesera International Airport through a PPP model, highlighting how strategic investments can revolutionise a country’s aviation landscape. These advancements in neighbouring countries threaten to erode Kenya's traditional dominance in the region's aviation sector. To retain its status, Kenya must act swiftly to upgrade JKIA, making partnerships like the one proposed with the Adani Group not just beneficial but also essential for the nation's economic future.

The government is increasingly turning to PPPs as a strategic approach to address the significant infrastructure deficits facing the country. With a high public debt burden constraining fiscal space, the government recognises that traditional funding mechanisms may not be sufficient to meet the demands of large-scale projects, particularly in the transport and energy sectors.

Engaging private entities like the Adani Group allows the government to leverage private capital, expertise and efficiency, while minimising the immediate financial burden on taxpayers. This shift aligns with global best practices, where PPPs have been successfully implemented to enhance service delivery, spur economic growth and foster innovation in various sectors.

By utilising the Build, Operate and Transfer model, the government can ensure that critical infrastructure, such as JKIA, is developed and managed by experienced private operators, while retaining ownership and control over the asset.

The advantages of PPPs over traditional investment avenues are significant and multifaceted. Firstly, PPPs can accelerate project delivery by enabling the private sector to mobilise resources and expertise more efficiently than public agencies, which often face bureaucratic hurdles.

This model also facilitates risk sharing between public and private entities, allowing the government to transfer some of the financial, operational and market risks associated with infrastructure projects to the private partner.

Furthermore, PPPs can lead to improve quality and innovation in service provision, as private operators typically bring in cutting-edge technology and best practices to enhance operational efficiency.

Ultimately, these partnerships not only help alleviate the immediate funding pressures on the government but also promote sustainable economic development by cultivating an environment where private investment can thrive, thereby creating jobs and stimulating local economies.

Through strategic partnerships, Kenya can harness the expertise and resources of leading global players like the Adani Group to transform its infrastructure landscape and drive long-term economic growth.

The financial benefits of this partnership are clear. JKIA is a significant source of revenue for Kenya, earning about Sh10 billion annually. However, with Adani’s planned expansion, these revenues are expected to increase significantly, driven by higher passenger volumes, improved cargo handling and more efficient airport operations.

The deal is projected to generate an additional Sh30 billion annually once the expanded facilities are operational, a substantial increase that could provide a much-needed boost to the economy.

More importantly, the quality of services to be introduced by Adani is expected to elevate JKIA to international standards. With Adani’s extensive experience in managing airports across the globe, Kenyan aviators and passengers alike will benefit from enhanced facilities, shorter wait times and more seamless operations.

The introduction of new technologies, better customer service protocols and state-of-the-art infrastructure will not only improve the travel experience but also make JKIA a more attractive destination for international airlines. This, in turn, could lead to increased tourism and business travel, further boosting the country’s economy.

While concerns have been raised about the transparency of the deal, and fears of losing a national asset to foreign investors have circulated, it is important to clarify that the partnership is structured in such a way that Kenya retains ownership of the airport.

Furthermore, the country stands to gain far more in terms of revenue, job creation and enhanced global standing. The comparison with Rwanda’s Bugesera International Airport is telling.

Rwanda, despite being a much smaller economy, has managed to secure a partnership with Qatar Airways, which has significantly raised the profile of its aviation industry. Kenya, with its larger economy and more strategic location, has the potential to achieve even greater success through the Adani deal. It presents a crucial opportunity for Kenya to revitalise its aviation sector and strengthen its position as a regional hub.

While it is essential to address public concerns through transparency and effective oversight, the potential benefits of the partnership — from improved infrastructure to increased revenue and job creation — make it a necessary step for the country’s long-term economic growth. Kenya is set not to lose but to gain immensely from this well-structured public-private partnership.


 


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