KAA broke, reels under Sh45b debt

Kenya Airports Authority is in the red and is struggling to settle debts amounting to over Sh45 billion, a parliamentary committee heard yesterday.

The liabilities according to the management have been accrued as a result of failed projects, penalties and interest charged in delayed projects.

In a presentation to Public Investment Committee (PIC), KAA managing director Alex Gitari said the debts include Sh17.6 billion a demand note from a Chinese company contracted to build the Greenfield Terminal which was cancelled by the government.

Two Chinese firms, Anhui Construction Engineering Group and China Aero-Technology International Engineering Corporation (Catic) have slapped the authority with the demand note for canceling the tender even after they were paid Sh4.2 billion as commitment fee.

Solomon Kitungu, Transport Principal Secretary told the committee that he had formed a committee to address the issues affecting the authority.

The authority is also facing another hefty charge of Sh8.7 billion awarded to Mulolongo Brothers Association.

Kenya Revenue Authority (KRA) has also come calling with a tax claim of Sh4.2 billion.

Stalled projects

The debts were incurred as a result of stalled or cancelled projects in various parts of the country.

The authority has since requested a cash bailout from Treasury amid piling debt, its management has said.

Gitari said a decision by the Treasury to mop up Sh12.5 billion surplus cash from its coffers in 2019 left it broke and unable to settle supplier debt.

“We are facing a serious cash crisis owing to the decision by the Treasury to recall Sh12.5 billion from our reserves in December 2019,” he told the committee.

“The situation has been made worse by the grounding of airlines due to Covid-19 pandemic and the failure by our debtors to clear their debts,” he added.

Apart from the Greenfield project, others which were stopped by the government for either being not viable or lack of funds, are, the refurbishment of the Kisumu

International Airport, rehabilitation of Kibish Airstrip, and the construction of runway and upgrade and rehabilitation of aircraft pavement at Jomo Kenyatta International Airport (JKIA).

The authority also owe businessman Kamlesh Pattni Sh 4.9 billion for the duty-free shops tender issued by KAA to 3rd parties.

“The businessman was seeking a declaration that the shops tenders were issued by the authority to 3rd parties in respect of the same were in breach of the March 1989 agreement granting the claimant exclusive rights over the said duty free shops,” Gitari told the committee chaired by Mvita MP Abdulswamad Nassir.

World Duty Free

On December 5, 2012, Justice J Togbor (retired) ruled in favour of World Duty Free and directed KAA to pay them $49 million or (Sh4.9 billion).

The authority however, filed an application before the High Court seeking to have the award set aside.

“We succeeded but Duty Free appealed the ruling and the matter is still pending before the Court of Appeal,” Gitari said in the documents given to Parliament.