Africa Watch – No more deal

During his State of the Nation address, Kenyan President William Ruto announced the cancellation of two major deals with India’s Adani Group. The first was a procurement process to award control of Kenya’s main airport, and the second was a $736-million, 30-year public-private partnership to construct power transmission lines. The decision follows the indictment of the group’s founder in the United States and concerns over transparency and value for money. Ruto cited “new information from investigative agencies and partner nations” as the basis for his decision. The deals had faced widespread criticism from politicians and the public over transparency concerns.

The Adani deal was signed in March this year, and part of its many faults as cited by critics (who mentioned a lack of transparency among others) was that the deal bypassed a competitive bidding process. A possible pointer to this is that it only became public when it was leaked on social media in July. The plan was to lease the Jomo Kenyatta International Airport (a build-and-operate deal to renovate the airport with a new runway and terminal) to the Adani Group for 30 years in return for an investment of & 1.85b. It drew protests from airport workers in September and a court injunction temporarily prohibiting its implementation in response to a suit brought to it by the Law Society and the Kenya Human Rights Commission.

Mr Ruto’s government pressed on with the deal despite overwhelming domestic opposition due to Kenya’s economic woes. In mid-2024, it tried to raise taxes through a Finance Bill to pay off its mounting debt and take on new loans. The plan was shelved after protests rocked the country for weeks, leading to the death of civilians at the hands of the police. Its economy expanded by 4.6% in the second quarter of 2024, the lowest real GDP growth it recorded since the second quarter of 2022 when it saw a 3.7% growth, and that is where the good news largely dries up. The African Development Bank, AFDB, states that the country needs $12 billion annually by 2030 and $2 billion annually by 2063 to close its financing gap and bring about structural transformation. The fact that its current tax-to-GDP ratio is 13%–significantly below its 27% potential provides an attraction for tax increases, which it has tried without success. Thus, Ruto’s decision to end the Adani project could be seen as self-defeating on the surface.

However, geopolitical realities may have underpinned such about-turn. In June, Kenya was designated a major Non-NATO US ally in an elaborate ceremony during Ruto’s visit to the White House. That status comes with the military and, equally importantly, economic benefits that Ruto’s government badly needs. Pulling the plug on the Adani deal may signal his way of remaining in America’s favour to unlock the economic benefits that could come with the MNNA status.

Given, however, that the indictment is a brainchild of the lame-duck outgoing Biden Administration, questions surround what will happen after Donald Trump returns to the White House in January. Given Indian Prime Minister Narendra Modi’s connections with the Adani Group, he could potentially leverage his influence with Donald Trump and his inner circle to secure a favourable outcome for the troubled conglomerate. This possibility is strengthened by the likelihood that a Trump return could further enhance India-US relations. His pick for National Security Adviser, Mike Waltz, is not only the current co-chair of the India caucus at the House of Representatives but has also, for a long time, pushed for closer ties between India and the US as a counter to China. The head of the conglomerate, Gautam Adani, has also signalled his intent to move towards the Trump world by congratulating Trump on his election victory in a way that could be described as kissing the ring. Therefore, if the incoming Trump Administration provides the expected soft landing for Mr Adani, Ruto has several options, which mostly include eating the humble pie–a meal he has been eating for much of this year.