The government’s fear of having the National Aviation Management Bill 2020 shot down by MPs led to its withdrawal from the businesses lined up for consideration by the National Assembly during a special sitting on Thursday.
The Bill seeks to nationalise Kenya Airways (KQ), the country’s national carrier.
Leader of Majority Amos Kimunya (Kipipiri) requested House Speaker Justin Muturi to have the Bill shelved after MPs threatened to shoot it down in protest over delays by the Treasury to release their National Government Constituency Development Fund (NGCDF) money.
The National Treasury is yet to disburse Sh10 billion of the Sh41 billion allocated to the constituencies in the current financial year.
The Sh13.7 billion owed to the kitty in pending bills for the previous financial year was, however, included in the first supplementary budget for 2020/21 that MPs passed on Thursday.
“Members had come prepared to shoot down the bill. That is the reason why it was withdrawn,” deputy majority whip Maoka Maore (Igembe North) told Sunday Nation.
The MPs were to debate and vote on the bill for its progression to the next stage – third reading or the amendment stage.
The House rules provide that if a bill is lost at the debate stage, it can only be reintroduced after six months.
Six months
But with the government determined to have the process of enacting the bill fast-tracked, waiting for another six months would have been weighty.
However, it is not all gloom and doom for the aviation bill that has so far weathered a fair share of turbulence even before takeoff.
Mr Maore confirmed to the Sunday Nation that the bill will be coming up for debate on Tuesday when the House resumes sittings after a short recess.
“As the deputy majority whip, my duty is to mobilise members to come and vote for it on Tuesday,” said Mr Maore.
The bill proposes to merge KQ with Kenya Airports Authority (KAA) and the Aviation Investment Corporation (AIC) to create Kenya Aviation Corporation (KAC), a holding company.
The bill gives effect to the report of the National Assembly Committee on Transport, Public Works and Housing.
The committee chaired by Pokot South MP David Pkosing in its report tabled in the House on June 17, 2019, recommended the nationalisation of the debt ridden national carrier after an inquiry into KQ Privately Initiated Investment Proposal (PIIP) to KAA.
But even as the government is determined to have the bill enacted, economists, private laws firms and the Law Society of Kenya (LSK) are reading mischief.
To them, it doesn’t make sense for loss making KQ to take over KAA, a profitable company.
KQ, whose debt portfolio stands at about Sh220 billion, reported Sh12.9 billion loss for the financial year ended December 2019.
Mr Tony Watima, an economist, says that the proposed nationalisation does not solve the perennial management problem that affects KQ.
He argues that KQ financial situation will wipe out KAA profits of approximately Sh2.5 billion, resulting in a net loss of Sh10 billion.
“KQ has a cost-efficient problem and there is no evidence to suggest that the entity being created will correct that. It puts the KAA assets at risk,” says Mr Watima.
KAA valuation
Documents in parliament show that KAA has an asset base of about Sh1.3 trillion.
The KAA valuation done by government valuers, according to the records, indicate that the assets range from huge tracts of land, critical government installations among other property.
“There is no economic incentive for KQ to be an efficient company but will instead hide its inefficiency behind this proposed holding corporation. This spells worse on the future of KQ as a sustainable airline,” notes Mr Watima.
The fear of those opposed to the bill, including MPs, is that the failure by the Transport committee to inform the nationalisation process by valuation reports of the KAA and KQ assets and liabilities could be a scandal in the waiting.
Mr Evans Lagat, a managing partner at Silas, Evans and Stevens (SES Law) Advocates, notes that public funds may be lost if the bill is rushed and passed in its current form.
Mr Lagat notes that KAC, the holding company to be created, may restrict the use of the country’s airports and other facilities by other airlines and airport operators, who are already concessionaires of KAA.
“There is an imminent risk that there may be pilferage and loss of public funds especially given the debt situation of the airline should the nationalisation and merger proceed unchecked,” Mr Lagat says in a memorandum opposing the bill filed in the National Assembly.
The takeover by KAC also raises potential abuse of competition policy concerns by KQ which already holds a substantive stake in the domestic airlines market and also in the cargo and passenger flights into and out of Kenya.
“To ensure that the merger starts well, there is a need to undertake valuation of the assets and review of the liabilities of the KAA, KQ before the same are transferred to the new operating entities,” an MP, who did not want to go on record, said.
Mr Lagat notes that with a change of ownership, it is foreseeable that the debt and liabilities would immediately fall due leading to huge payouts from the public funds.
Alternatively, he argues, if the debts are not immediately paid, current creditors, bondholders, lenders would require a government guarantee that their dues will be paid at the expense of the public. “This would contribute to the joint collapse of both KQ and KAA,” says Mr Lagat as he pushes MPs to ensure that KQ makes full disclosure of all businesses and operations that it intends to undertake under the new arrangement. BY DAILY NATION