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Kenya Airports Authority to lose billions over duty free shops

By Standard Reporter | November 27th 2013
Transport and Infrastructure Principal Secretary Nduva Muli. (Photo:File/Standard)

By Standard Reporter

Nairobi, Kenya: Kenya Airports Authority (KAA) risks losing billions of shillings annually in concession fees for duty free retail shops at Jomo Kenyatta International Airport’s new Unit 4.

The Standard has learnt there was a plot by senior Transport ministry and KAA officials to give the tender to manage the duty free shops to a firm that has proposed to give the authority considerably lower concession fees.

KAA last week Friday shortlisted five firms expected to battle it out to be the duty free retail master concessionaire at the new Unit 4 upon completion next year.

A source familiar with the matter said there was a plan to award the duty free retail master concessionaire contract to a company that has proposed to give KAA a concession fee of 10 per cent.

This is well below the global standard of over 20 per cent.

The fee is the amount of money the company remits to the government from proceeds of sales in a financial year.

KAA in early October started the process of recruiting a retail master concessionaire to run the duty free shops at Unit 4 that is currently under construction. The unit is expected to start operations next year.

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“KAA wishes to engage a reputable duty free retail master concessionaire to manage its duty free offering at the new Jomo Kenyatta Terminal Unit 4… only firms with relevant experience as duty free master concessionaires in the travel retail business shall be considered,” said KAA in an international tender notice dated October 2.

Out of 10 firms that had bid to run the shops at the airport, only five met the requirements laid out in the tender documents by KAA, three of which want to give the authority a concession fee of under 13 per cent.

The firms that met the KAA requirements include Maritimes & Mercantile International LAC that proposed to give a concession fee of 10 per cent, SIA Kenya Holding Limited (5 per cent) and Nuance Group AG (12.5 per cent).

The other two firms that offered relatively higher concession fees are Dufry International Egypt Limited (20 per cent) and Unifree Duty Free AS (32.2 per cent).

Management of the duty free shops has often been marred with controversy.

The most memorable being the duty free operator associated with controversial businessman Kamlesh Pattni - Diplomatic Duty Free.

However, Transport and Infrastructure Principal Secretary Nduva Muli said the ministry was closely monitoring the process, adding that it had a duty to ensure KAA got the best possible deal.

“The role of the ministry is to make sure that KAA follows the law in procuring the services of a retail master concessionaire,” he said.

Muli added there is a procedure for aggrieved parties to lodge complaints.

“We also have a responsibility to make sure the authority gets the best duty free services provider in terms of the best concession fees and also one that will offer quality services to customers, who in this case are the travellers,” he said.

Transport House Committee Chairman Maina Kamanda, when contacted, explained that the team was yet to receive any complaint on the tendering process.

Pattni in September unconditionally gave back the duty free shops and other premises to KAA after years of legal battles, and also withdrew court cases.

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