The revocation of the Adani deals by President William Ruto turned focus on the possible cost implication that may arise from the breach of contract.
President William Ruto took the bold decision to order the cancellation of two multi-billion tenders involving the controversial Adani Group, even as the focus shifted to the cost of cancelling one of the contracts that had already been sealed.
Adani Energy Solutions had in October signed a Sh96 billion deal with the Kenya Electricity Transmission Company (KETRACO) to build and operate four transmission lines and two substations for 30 years.
The Adani Group was also in the process of signing another Sh238 billion deal with the Kenya Airports Authority (KAA) to expand the Jomo Kenyatta International Airport (JKIA).
The president on Thursday ordered procuring entities under the ministries of transport and energy to cancel the tenders, on a day when details of the indictment of Gautam Adani, the company's billionaire chairman, for alleged multi-billion bribery and fraud, were released. US prosecutors said Adani and seven other defendants, including his nephew Sagar Adani, agreed to pay Sh34 billion in bribes to Indian government officials.
“I have stated in the past, and I reiterate today, that in the face of undisputed evidence or credible information on corruption, I will not hesitate to take decisive action,” said the President.
He went on: “Accordingly, I now direct - in furtherance of the principles enshrined in Article 10 of the Constitution on transparency and accountability, and based on new information provided by our investigative agencies and partner nations - that the procuring agencies within the Ministry of Transport and the Ministry of Energy and Petroleum immediately cancel the ongoing procurement process for the JKIA Expansion Public Private Partnership transaction, as well as the recently concluded KETRACO transmission line Public Private Partnership contract, and immediately commence the process of onboarding alternative partners.”
The decision was a surprise climb down by the Kenya Kwanza administration, which had in the last couple of months deployed its top officials to defend the deals even in the face of major public uproar and several court cases challenging the deals.
The defence by the government continued as late as hours before the State of the Nation address in Parliament, when his Energy Cabinet Secretary Opiyo Wandayi told the Senate Committee on Energy that the contracts would go on despite the new evidence of fraud by Adani.
However, the revocation of the deals turned focus on the possible cost implication that may arise from breach of contract. In the botched JKIA Greenfield, two Chinese firms, Anhui Civil Engineering Group (ACEG) and China Aero Technology Engineering International Corporation (Catic), had sought Sh5.6 billion comprising the balance of contract for bill of quantities (BQ), extra cost claim, VAT and interest and penalties, that brought the total claim to Sh17.6 billion.
There were, negotiations with Kenya Airports Authority (KAA) that brought the award to Sh8.6 billion.
National Treasury CS John Mbadi on Thursday assured Kenyans there will be no money lost as a result of the cancellation of the JKIA deal but he was non-committal on the Ketraco contract.
“The Ketraco deal has progressed and will check if there is any possibility of exposure. However, for JKIA, there is no money lost. It was still at the initial stages as I had told MPs,” said Mr Mbadi.
As the Head of State took the bold decision, questions were raised about the Adani Group’s links to a Sh104 billion deal with the Ministry of Health as Dr Ruto failed to tackle the matter during his speech.
There have been concerns that Apeiro Limited, the largest shareholder in the Safaricom consortium that has been awarded the contract for the technology-based system for the Universal Health Coverage (UHC), has business links to the Adani Group.
The government awarded the consortium a contract to provide an Integrated Healthcare Technology System (IHTS) for the UHC programme.
Each of the three firms will contribute to the Sh104.8 billion needed to implement, maintain and support the IHTS system over the next ten years based on their shareholding.
Seme MP Dr James Nyikal, a member of the National Assembly’s Health Committee said that whereas the cancellation of the deals under the Transport and Energy Ministries was the best thing to do, he was concerned that the Head of State remained silent on the deal with respect to the Health Ministry.
“Adani cancellation is the best thing. I think we should have acted much earlier than this because we had information about this company so it ought to have happened earlier.
“But we are concerned with Adani in healthcare. We don’t know what that means because he has not come out clear on that. As somebody who sits on the health committee, this is something that is of great concern to us and we will have to push and find out if really they are going to cancel Adani from other contracts, we must also look at the one in health,” Dr Nyikal said.
Politician Jimi Wanjigi, a critic of the Kenya Kwanza administration, said President Ruto must come out clear on the Adani deal with respect to the Social Health Authority plan, even as he insisted that despite the cancellation of the deal in the Transport and Energy Ministries, there are still cost implications on Kenyans taxpayers.
“Any costs incurred or preferred on the taxpayers shall be surcharged to the officials responsible for this humongous corrupt disaster of a PPP,” Mr Wanjigi said.
He pointed out that since the country had already entered into contracts, a breach of the agreements must come with cost implications.
He also challenged President Ruto to come clean on the Adani-health deals which he remained silent on during his speech on Thursday.
“Adani is SHA and SHIF! This must also be cancelled henceforth! Adani will soon be bankrupted by this indictment,” Mr Wanjigi told Nation.
He went on: “These are the things that bring down a government and we are now clear about the trajectory this government is taking and Wananchi will continue to put it on the spot.”
Until Thursday morning, there were indications that the government would still push for the projects despite the latest indictment in the U.S of Adani.
Even as the fraud allegations against the multi-billion company were laid bare, Mr Wandayi defended the continuation of the Sh95.7 billion Ketraco-Adani project in Kenya.
"We have an elaborate mechanism for undertaking due diligence. The PPP directorate, in coordination with KETRACO, conducted two phases of due diligence. Phase I involved a documentary review of soft copy documents provided by the proponent to demonstrate their legal, technical, financial, and logistical capabilities," he told a parliamentary committee on Thursday.
Before the surprise pronouncement, the President has been in the forefront in defending the deal.
Speaking in Nakuru during the recent ground-breaking ceremony of the 35-megawatt Orpower 22 Power Plant at the Menengai Geothermal site, Dr Ruto lauded the Adani Group’s investment in the project.
“The Adani Group is investing Sh95 billion of its own money in the transmission line. Had we borrowed that money, it would have burdened the people of Kenya. This is now a private-sector investment, similar to the Naiorbi Expressway,” the president said.
Opposition leader Raila Odinga, who is working with President Ruto under the broad-based government arrangement came to his defence amid political pressure over the Adani deals.
In a surprise move, Mr Odinga defended the Adani Group as a reputable firm but warned that its entry to Kenya could be hindered by “ineffective legal frameworks.”
The company, he said, had shown interest in investing in Kenya since 2010 when he was Prime Minister under the then Mwai Kibaki's coalition government.
Mr Odinga had insisted that given the current financial status of the country, Public Private Partnership (PPP) was the only way out for cash-intensive projects.
“If we plant doubts in our capacity to handle PPPs, we must be prepared for a prolonged period of development drought and risk being overtaken by our neighbours,” he warned.
He said that the Energy and airport projects, which have now been cancelled, presented a critical test that could make or break Kenya’s ability to compete in the field of infrastructure development for a considerable period.
Members of Parliament while reacting to the President’s State of the Nation address said many Kenyans and stakeholders had raised serious corruption issues with Adani and lauded President Ruto for listening to concerns raised.
Likoni MP Mishi Mboko said while they are not opposed to private investors coming to Kenya, corruption issues raised by various stakeholders on Adani were serious and could not be ignored.
"We don't dispute that we need investors in our country but on this one, Kenyans have spoken and the president has listened," Ms Mboko said.
Kitui Central MP Makali Mulu said the cancellation of Adani deals was important as it now gives the opportunity for Kenyans to be carried along in such deals in future.
“The climax of the President's speech was the cancellation of the Adani deals, we are happy that the President has listened to Kenyans. In future, it is important as leaders to carry along Kenyans with us,” Dr Mulu said.
