Airports agency in the dock, just as I feared

I reported on November 8 that the multi-billion shilling five-year contract awarded to Dufry International AG to run duty free shops at the expanded and modernised Jomo Kenyatta International Airport would likely be challenged in court for being skewed against local firms to favour the Swiss company.

The Kenya Airports Authority is in the dock. Last week the Kenya Consumers Federation filed a case in the High Court naming the authority, Dufry and the Cabinet Secretary for Transport and Infrastructure and the Attorney-General as respondents.

LOCAL ENTREPRENEURS LOCKED OUT

The suit challenges the concession agreement (contract) for the development and management of duty free master licence to Dufry, which granted the firm exclusive rights.

This in effect, locked out local entrepreneurs in a discretionary manner contrary to the law.

In an interesting twist to the case, the consumer federation argues the effect of the concession signed on January 22, is biased and prejudicial since it locks out local firms and its own interest and that of the larger Kenyan tax paying public because “the arrangement complicates realisation of optimal tax revenue.”

How is the concession deemed to be prejudicial to Kenya Airports Authority?

On February 19, 2015, the authority’s chairman, Mr David Kimaiyo, wrote to then managing director Lucy Mbugua reminding her of a letter written to her on December 19, 2014 regarding the concession by the Ministry of Transport and Infrastructure.

KIMAIYO DEMANDS

According to Mr Kimaiyo, the ministry demanded the following from the Ms Mbugua: one, immediate formal explanation as to how Kenya Airports Authority entered into an agreement that is prejudicial to its interests; two, that the agreement be immediately cancelled and reviewed to ensure that it is in line with the tender documents and government policy guidelines and regulations; and three, this matter be brought to the attention of the board of directors at the earliest opportunity to enable it investigate and revert with action to be taken.

The board, wrote Mr Kimaiyo, resolved at its 213th meeting on February 18 to instruct Ms Mbugua to apply for 30 days leave from 19 February, 2015. “Your application should be received by close of business 20th February, 2015.”

INDEPENDENT PROBE

The board resolved to carry out independent probe on the “contract relating to exclusivity in the concession agreement”, a ministerial demand for “an immediate formal explanation as to how Kenya Airports Authority entered into an agreement prejudicial to its interests. The letter explicitly demanded that the matter be brought to the board to enable its investigations.’’

And the plot thickens. You will remember that in my article I had stated that bidders were told that there would be no exclusive rights given to the winner and added that this changed somewhere along the way.

GEORGE KAMAU

A letter from the corporation’s secretary, Ms Katherine Kisila, dated December 22, 2014 fingers legal officer George Kamau.

It says “he championed the inclusion of clauses in the concession agreement that granted Dufry the following: one, the right to develop and operate retail areas at temporary facilities for arriving and departing passengers on a priority basis; two, priority over concessions in terminal facilities developed by the Authority other than the terminal; and three, that the Authority shall regularly consult with the concessionaire to discuss the arrangements of new space for the maximisation by commercial benefit of both parties.’’

Ms Kisila concluded that the “effect of the above provisions is that they allow the Authority to enter into arrangements and contracts not contained in, or contemplated by the tender document and without going through a procurement process as required by law.”

It is instructive to note that Ms Mbugua and Mr Kamau are no longer with Kenya Airports Authority.

CLOUD OF SUSPICION

And, recall that I reported that Dufry had left Mauritius last August under a cloud of suspicion following police investigations into its contract with Mauritius Duty Free Paradise.

This fact about Dufry and that the authority itself called into question the concession, but it was still awarded will be presented before the court.

So, who pulled the strings? Must be a very powerful Kenya Airports Authority insider backed by an equally powerful outsider.

Fingers are pointed at an influential member of the legislative arm of government.

Another question: Does the area documented as covered by the duty free shops correspond with what is on the ground? I doubt it does.

Opanga is a media consultant.