The government is on the spot for converting the Sh24.2 billion debt owed by Kenya Airways into equity without the approval of Parliament.
Treasury Principal Secretary Julius Muia and KQ chief executive Allan Kilavuka had a rough time justifying the swap deal when they appeared before the National Assembly Committee on Public Accounts yesterday January 24.
What created more confusion is the fact that a presentation that Dr Muia had made to the committee chaired by Ugunja MP Opiyo Wandayi had a figure that did not tally with what Mr Kilavuka had presented.
While Dr Muia said the debt-ridden national carrier owed the government Sh27.6 billion, including interests and penalties, Mr Kilavuka stated it was Sh24.2 billion, as captured by the Auditor-General’s report on the accounts of the National Treasury for the financial year 2019/20.
The KQ boss also noted that the outstanding loan did not include penalties as claimed by Dr Muia before the committee. Mr Kilavuka told MPs that the loan saw the government’s shareholding in the carrier enhanced from 26 per cent to 48.9 per cent but worth only Sh12 billion.
This came as Mr Wandayi, Peter Masara (Suna West) and Dr Wilberforce Oundo (Funyula) questioned whether KQ is a viable entity worth the billions that the government has pumped into it.
“That bit of approval is the bone of contention. It makes the whole business of converting the loan into equity shrouded in mystery. Was the conversion approved by Parliament before you went ahead to execute it?” posed Mr Wandayi.
“Given more time, we can dig deep into the sequence of events to know what happened and when,” Dr Muia said as the committee gave him until February 3.
Mr Wandayi demanded that KQ produces the first correspondence from the National Treasury requesting to have the conversion done.
Mr Kilavuka said the deal that was sanctioned by the Cabinet and approved by the KQ board of directors.
“The authority to convert the loan into equity was approved by the Cabinet and communicated to us by the National Treasury,” said Mr Kilavuka, noting that KQ contributes about 4.2 per cent to the Gross National Product (GDP), about Sh360 billion.
At the time of the conversion, Dr Kamau Thugge was the Treasury PS before he was hounded out of office over a corruption scandal and succeeded by Dr Muia in July 2019.
The Cabinet reportedly sanctioned the deal on June 12, 2017 at State House. On June 28, 2017, Dr Thugge wrote to the then-KQ boss Sebastian Mikosz, conveying the Cabinet’s decision.
The KQ management called an extra general meeting (EGM) of the board of directors to approve the Cabinet decision.
But what drew the curiosity of MPs is that although the loan was dealt with, KQ has been flagged in the audit report as among the state agencies that owe the government billions of shillings.
“If the conversion of the loan into equity was done in 2017, why would it still reflect in the financial accounts of the National Treasury? Why is it that it was not cleared before the audit was compiled? What is coming out is that people are trying to play games with public money,” said Mr Wandayi.
Dr Muia took responsibility to apologise for the Sh24.2 billion captured by the audit report as “a regrettable error”.
“Unfortunately, in the audited accounts, the Sh24.2 billion is indicated as a prior matter. This is an error that is regretted because the loan has been converted into equity. The error emanated from us and it was not deliberate. We make efforts to submit the correct information to the Office of the Auditor-General,” said Dr Muia.
Attempts by Mr Kilavuka to go sentimental, invoking patriotism in an attempt to urge MPs to go slow on the financial woes at the national carrier were turned down.
“We are more patriotic than you think. We are here raising these issues because we are patriotic. Our mandate is to protect public money and that one makes us more patriotic,” said Mr Masara.
