Why the Kenya Airport Deal Flew Into a Storm

Sunday September 15 2024

Jomo Kenyatta International Airport

Motorists pass through security checks at the entrance of the Jomo Kenyatta International Airport in Nairobi. PHOTO | FILE | NMG

By The EastAfrican

The Jomo Kenya International Airport in Nairobi was engulfed in chaos earlier this week, as members of the Kenya Aviation Workers Union staged a strike in protest against a proposed lease of the facility to Indian infrastructure and airport management firm Adani Holdings.

Although government officials prefer to call the deal a public private partnership, the airport workers and the Kenyan public suspect it as a covert way of selling the family silver to Adani.

As part of his offer, Adani proposes to run the airport for 30 years and inject $1.8 billion in capital investment.

Among other developments, that would see the long-proposed but delayed second runway built at Jomo Kenyatta. A new passenger terminal would also be developed to accommodate the surging arrivals, which are already outstripping the capacity of the exiting facilities, as well as other aspects of modernisation.

Besides the industrial action, the Adani deal has run into opposition from professional groups who have petitioned the courts to block it.

There are two strands to the opposition – the belief that responsible officials have not negotiated the best terms for Kenya, and that a strategic national asset is being given away in perpetuity under the guise of a lease.

What President William Ruto and his government are dealing with, therefore, is by and large a question of trust. Grand corruption and impunity have, over the decades, eroded public trust in the custodians of power, to the extent that nothing they do or propose can be taken at face value.

The Adani deal is not irretrievable, but the government will have to change tack. There is no conceivable reason for hiding a good deal from the public. The general terms of the PPP can be disclosed, and ideally should be open to public scrutiny through designated offices. Alternatively, the deal could be deferred until such a time when public trust in government is restored.

The public is simply asking for transparency and their demands should be treated with respect. So far, all the information circulating about it is at best speculative.

Looked at on the surface, this is a proposal everyone should be applauding. PPPs or airport management contracts are becoming the norm in the development and maintenance of such facilities the world over.

But they should be approached with caution. Even as they offer advantages, such as better efficiency in operations, improved airport services and potential reduction in operating costs, they do have their pitfalls.

A private operator can access capital faster and on better terms, bring innovation, cost savings and turn what was once a drain on the public purse into a profitable operation. But those benefits can only accrue when the contract is properly structured, with effective oversight. The cost of investment and focus on profitability can translate into higher user costs.

The scope of responsibilities, performance benchmarks such as regulatory compliance and financial terms, including revenue sharing and operating costs ceilings as well as reporting standards, must be clearly defined to avert potential disputes and unexpected cost escalation.

The reluctance to make these terms public could be a red flag indicative of a poorly structured agreement.