Tag Archives: kenya

Kenya’s Trade Challenges Amid Political Instability

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Kenya’s economic landscape has recently been overshadowed by an incessant wave of political drama and populist rhetoric, which has undeniably diverted attention from fundamental economic issues, particularly in the realm of cross-border trade. At the heart of these economic shifts is the Democratic Republic of Congo (DRC), which has emerged as a fast-growing export market for Kenya and a key player in East African regional trade. With the DRC joining the East African Community (EAC), Kenya expected to solidify its dominance in the region’s export landscape. However, the country’s engagement in political theatrics, combined with challenges in policy implementation, has led to a noticeable decline in its trade performance. This has opened the door for other nations, especially Tanzania, to make substantial gains in the DRC, overtaking both Kenya and Uganda as major trade partners.

KTN News Report

In recent times, Tanzania’s strategic focus on improving trade corridors with the DRC, notably the $2.2 billion trade route investment, has paid off handsomely. The expansion of Tanzanian exports to the DRC threatens Kenya’s traditional influence, particularly in the lucrative mining sector, which is now pivoting toward renewables​. In contrast, Kenya’s trade policy has lacked the same degree of focus and innovation, partially due to the country’s internal struggles with political stability and governance. According to a 2023 briefing by the European Parliament on Kenya’s trade relations, the country has historically played a significant role in intra-African trade. Still, political gridlock has stymied its ability to capitalize on emerging opportunities​. While Kenya remains a strong regional player, its recent trade surplus of Ksh42 billion with Africa does little to mask the under-performance compared to its regional peers, with Tanzania poised to make further gains.

The DRC’s rapid growth as Kenya’s key export destination within the EAC bloc is a double-edged sword. On one hand, Kenya has benefited from increased exports to the DRC, driven by agricultural products like tea and other raw materials​. On the other, political instability, rising costs of doing business, and Kenya’s deteriorating trade policy framework have limited the country’s ability to leverage its geographic and economic position fully. Instead, countries like Tanzania, which have been more focused on infrastructure and logistics, are edging out Kenya in the competition for dominance in Central African markets. In a time of internal strife, Kenya risks losing further ground unless immediate corrective action is taken to refocus on economic fundamentals.

References:

The Citizen DRC overtakes Kenya, Uganda as Tanzania’s leading export market

The EastAfrican DRC overtakes Kenya, Uganda as Tanzania’s leading export market

The EastAfrican DRC now Kenya’s fastest-growing EAC export market

Business Daily Why DRC is fertile hunting ground for Kenyan firms

Somali Magazine Congo (DRC) Ranked the most Rapidly Expanding export Market for Kenya within EAC

Building Fiscal Buffers: Strategies for Economic Stability

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The outcomes of economic reform efforts depend heavily on the ability to manage fiscal risks effectively. One potential path to success is the stabilization of national debt through renegotiation and prudent fiscal management. Drawing from global best practices, a key strategy is to build fiscal buffers—reserves that can cushion the economy against future shocks. By setting aside funds during periods of economic stability, nations can better manage external crises without resorting to unsustainable borrowing. Additionally, diversifying revenue streams and improving tax collection efficiency can reduce reliance on debt while boosting domestic resources.

2 Minute Economics Report

To mitigate risks from the financial sector, stronger regulatory oversight is essential. Insights from international fiscal strategies suggest that adopting a risk-based approach to financial supervision—focusing on systemically important institutions—can help manage vulnerabilities. Ensuring that banks and financial institutions maintain robust capital reserves can safeguard the economy from financial instability that might arise from exposure to public debt. This approach emphasizes prevention and resilience, reducing the likelihood of fiscal shocks originating from the financial sector.

In terms of international partnerships, promoting public-private partnerships (PPPs) offers a pathway to attracting foreign investment while maintaining control over national assets. Transparent PPP frameworks that involve local stakeholders can increase the legitimacy of large infrastructure projects and ensure that benefits are widely shared. Structured renegotiation clauses in international deals allow nations to retain strategic control over critical infrastructure, minimizing risks of foreign overreach. A clear communication strategy that explains the long-term benefits of such projects can also help manage public expectations and build political consensus. For emerging economies, these strategies provide a balanced approach to navigating fiscal and economic challenges in a globalized world.

References:

Nairobi Leo How Cancelling Adani Deal Unprocedurally Will Hurt Kenya – CS John Mbadi

The Star JKIA-Adani project is in negotiation phase, says CS Mbadi

The Kenyan Wall Street CS Mbadi Seeks Public Views on Kenya’s Economic Situation

Political Pressures and Fiscal Policies in Kenya

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Despite Mbadi’s progressive ideas, the broader challenges he faces are immense, multi-layered and deeply rooted in fiscal imbalances. Kenya’s public debt has reached unsustainable levels, consuming a large percentage of national GDP. Debt restructuring efforts are often constrained by the need to continue funding development projects, putting nations like Kenya in a difficult position as they attempt to service debts while fostering growth. This creates a constrained fiscal space, limiting the capacity to implement reforms without triggering further economic downturns. Balancing debt management with development needs is a central issue for many emerging economies.

Citizen Digital Report

Political pressures also compound economic challenges. In countries where parliamentary or legislative scrutiny of fiscal policies is intense, any missteps or delays in implementing reforms can lead to significant political fallout. For example, debates over tax reforms and budgetary decisions often spark fierce opposition, with questions being raised about fairness, transparency, and long-term impact. This political friction is further complicated by the need to maintain public trust amid rising inflation and the high cost of living. Public sentiment around austerity measures or new tax regimes can easily turn negative, making it harder to implement necessary but unpopular policies.

International partnerships and foreign investments present additional complexities, especially when critical national assets are involved. Ongoing negotiations with foreign companies over infrastructure projects—like the management of airports or other strategic assets—can become flashpoints of political and public concern. Transparency and clear communication around such deals are essential to mitigate backlash. The challenge for governments lies in securing the economic benefits of foreign investment while protecting national interests and maintaining public support. Ensuring that these partnerships are structured in a way that benefits the domestic economy without compromising national control is key.

References:

The Standard Adani deal: Treasury CS Mbadi to appear before Senate

The Kenyan Wall Street CS Mbadi Seeks Public Views on Kenya’s Economic Situation

The Star I’m shocked! Sifuna censures CS Mbadi for failing to appear in Senate

How John Mbadi is Shaping Kenya’s Economic Future

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Since taking the helm as Kenya’s Treasury CS, John Mbadi has advocated for progressive economic reforms aimed at restoring stability to a fragile economy. A key element of these reforms is the reinstatement of the progressive aspects of the Finance Bill 2024, which had previously been rejected. The proposal focuses on recalibrating tax policy to create a fairer system. By increasing taxes on corporations and higher-income earners, while providing relief for lower- and middle-income groups, the aim is to reduce income inequality and foster a more inclusive recovery. This progressive taxation approach acknowledges that long-term economic stability must be built on a foundation of fairness.

Kenya Digital News Report

In addition to structural tax reforms, there has been a notable shift toward public engagement in economic policymaking. Opening up channels for public input into the economic discourse is seen as a move toward transparency and accountability. This engagement allows diverse perspectives to be considered, fostering a stronger connection between government policies and the needs of the people. Increased dialogue between the public and policy-makers is critical in an era where trust in government institutions is often low, particularly in countries facing severe economic pressures.

On the global stage, efforts to balance international partnerships with domestic interests are also coming to the fore. Negotiations with foreign investors—such as in infrastructure projects—highlight the importance of maintaining national sovereignty while attracting crucial capital inflows. Ensuring that international deals are mutually beneficial, transparent, and legally sound is central to fostering trust and securing the necessary resources for development. This balance between foreign investment and national control reflects the broader challenge of managing globalization in ways that support long-term national prosperity.

References

Nation I’ll reinstate ‘progressive’ parts of rejected Finance Bill, 2024, says Treasury CS John Mbadi

Business Daily Mbadi says to reinstate ‘progressive’ provisions in the rejected Finance Bill 2024

Citizen Digital Treasury CS Mbadi hints at reinstating clauses of rejected Finance Bill 2024

Capital Business Treasury plans to reinstate suspended provisions in 2024 Finance Bill

Kenya’s Social Health Insurance Fund: Key Changes and Challenges

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Kenya’s healthcare system has been undergoing significant reform with the introduction of the Social Health Insurance Fund (SHIF), aimed at replacing the National Hospital Insurance Fund (NHIF). This shift is intended to create a more equitable and sustainable method of healthcare funding, providing universal coverage for all Kenyans. Since its inception, SHIF has seen a series of developments, directives, and challenges. Initially, the government pushed for widespread registration, including mandating school-going children and civil servants to enroll in the program before key deadlines. The goal was to bring all citizens under SHIF’s umbrella to ensure that even vulnerable populations, such as students and public employees, had access to healthcare. By September 2024, over 1.2 million Kenyans had already registered, but the government faced hurdles, particularly legal challenges and confusion regarding implementation. A court ruling temporarily halted the mandatory registration for students, creating uncertainty about the planned October 1 rollout. Despite these setbacks, the government pressed on, continuing to promote SHIF as a critical part of its healthcare reform agenda.

NTV Report

The SHIF rollout has not been without its complications. The transition from NHIF to SHIF faced resistance, especially with the legal challenge against the registration of students. Courts intervened to halt the process temporarily, pending a hearing, which created further delays in an already ambitious timeline. Public awareness also remains a significant challenge, with many Kenyans unsure about how SHIF differs from NHIF, its potential benefits, or the process of registration. Moreover, there are growing concerns about the system’s capacity to handle the influx of new registrants and ensure timely service provision. Healthcare providers are cautious about the new scheme’s operational readiness, fearing delays in claims processing and service delivery. These issues, coupled with the pressing October 1 deadline, have put additional pressure on the government to address public concerns and streamline the registration process, especially in rural areas where access to information is limited.

As the registration deadline looms, the government has intensified its efforts to encourage compliance, particularly among civil servants, who face strict enrollment requirements. However, the success of SHIF’s implementation hinges on resolving ongoing legal and administrative challenges, such as the delayed student registration and the gaps in public understanding. If the government manages to overcome these hurdles, SHIF holds the potential to revolutionize Kenya’s healthcare system by providing more equitable access to medical services and ensuring the sustainable use of resources. Drawing from past reforms under NHIF, the lessons learned could guide the government in fine-tuning SHIF to meet the country’s healthcare needs. Still, the outcome remains uncertain. A successful rollout could set a precedent for healthcare reforms across Africa, but any failure to meet expectations could lead to dissatisfaction and delay the benefits that SHIF promises to deliver to all Kenyans. As the October 1 date approaches, much hangs in the balance as Kenya navigates the complexities of this bold healthcare transformation.

References:

The Star Court halts directive requiring learners to register with SHIF

Kenya News Agency Kenyans urged to register for SHIF as October 1 deadline approaches

Nairobi Wire Kenyan Students Exempt from SHIF Registration Until Court Decision

Nation Court halts mandatory registration of school-going children under SHIF

Business Daily Students ordered to register with SHIF before schools reopen

Capital News Over 1.2mn registered for SHA ahead of Oct 1 rollout

Capital News All civil servants directed to register for SHIF by October


The Future of UDA: Succession Challenges Ahead

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As the relationship between President Ruto and Deputy President Gachagua continues to evolve, the future of the United Democratic Alliance (UDA) becomes increasingly precarious. What initially appeared as minor differences in governance style has now escalated into a significant leadership struggle. Gachagua’s consolidation of power in the Mt. Kenya region, coupled with his growing public presence, signals broader ambitions that may eventually clash with Ruto’s agenda. While the president remains focused on implementing his economic reforms, Gachagua is methodically building an independent power base that could reshape the internal dynamics of UDA.

Citizen Digital Report

The growing rift between the two leaders reflects the broader challenge of leadership succession within political parties in Kenya. Historically, leadership transitions have rarely been smooth, often marred by tribalism, personal rivalries, and a lack of formal processes to resolve disputes. As Gachagua solidifies his influence, the risk of a fragmented UDA increases. Political observers have noted that this type of leadership rivalry is not unique to Kenya, as other African political parties have struggled with similar issues. Without mechanisms to mediate these conflicts, the party risks internal implosion, particularly as Gachagua’s ambitions continue to rise.

Additionally, other key figures in UDA, such as Kithure Kindiki, who was once considered for the running mate position, may find themselves as kingmakers in this evolving power struggle. Kindiki, who has largely kept a low profile since being passed over in 2022, remains a respected figure within the party and could play a crucial role in shaping UDA’s future direction. His supporters, still nursing grievances from the 2022 election cycle, could realign with factions disillusioned by the Ruto-Gachagua fallout. Looking ahead, the absence of a clear succession mechanism in UDA, coupled with these internal divisions, sets the stage for a potentially splintered ruling coalition ahead of the 2027 elections. The next few years will be critical for UDA as it navigates this delicate balance of power​.

References:

The Standard Why Gachagua’s survival depends on ending alliance with Ruto

The Star Gachagua: Our 17-hour talk and how Ruto settled on me as DP

Shahidi DP Ruto Nominates Mathira MP Rigathi Gachagua As His Running Mate

Mpasho Ruto: Reason I chose Gachagua as my deputy

Nairobi Wire DP Ruto Explains Why He Chose Gachagua Over Kindiki as Running Mate

The Star DP Ruto picks Rigathi Gachagua as his running mate

The Star Kindiki, Gachagua leave Ruto residence as deputy naming hits snag

Pulse Live Details of the heated 17-hour standoff on Ruto’s running mate

Nation DP Ruto explains why he settled on Rigathi Gachagua as his running mate

Ruto-Gachagua: Tensions Emerge in Kenya’s Leadership

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As the Ruto-Gachagua administration settled into power, early signs of tension between the president and his deputy began to surface. While the two leaders publicly presented a united front, their divergent approaches to governance became increasingly clear. Rigathi Gachagua, who had been a staunch defender of Mt. Kenya’s economic and political interests, quickly positioned himself as the de facto leader of the region. His approach was bold, often emphasizing the region’s historical marginalization and demanding a greater share of national resources. Gachagua’s assertiveness appeared to overshadow Ruto’s broader national vision, which focused on economic reforms and bottom-up development for all Kenyans.

Citizen Digital Report

The growing divergence in their agendas became more apparent as Gachagua’s influence expanded within the Mt. Kenya region. Political observers noted that his comments and initiatives occasionally seemed to contradict Ruto’s priorities, fueling speculation that the two were not always on the same page. Gachagua’s increasing visibility and strong regional support made it clear that he was not content with being a mere figurehead. Instead, he sought to build an independent power base, sparking concerns within UDA about the unity at the top. This kind of internal power struggle is not unique to Kenya; leadership transitions in democracies are often marked by personal ambition overshadowing collective party goals​.

Looking ahead, UDA faces significant challenges if it cannot reconcile the ambitions of its top leaders. Political analysts, drawing from Helms’ (2020) work on leadership succession, note that when successors begin to outshine their leaders, it often leads to party rifts. Gachagua’s moves to establish himself as a regional kingpin in Mt. Kenya could destabilize the party, particularly if he continues to act independently of the president. In democratic systems, where leaders are supposed to be held accountable by party structures, these kinds of internal conflicts can weaken the party’s electoral chances. The absence of clear succession mechanisms in UDA raises the possibility of deeper divisions as Gachagua’s influence grows​.

References:

Nairobi News Rigathi Gachagua ‘chose’ Ruto because of money
Nairobi Wire DP Ruto Explains Why He Chose Gachagua Over Kindiki as Running Mate

The Star DP Ruto picks Rigathi Gachagua as his running mate

The Star Kindiki, Gachagua leave Ruto residence as deputy naming hits snag

Pulse Live Details of the heated 17-hour standoff on Ruto’s running mate

Nation DP Ruto explains why he settled on Rigathi Gachagua as his running mate

The Star Speculations rife as Ruto to name running mate anytime

Ruto’s Running Mate: Gachagua’s Strategic Gamble Explained

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At the height of the 2022 election season, Kenya’s political landscape was buzzing with speculation. The biggest question on everyone’s mind was who Deputy President William Ruto would choose as his running mate. Among the frontrunners were Kithure Kindiki, a professor and seasoned lawyer from Tharaka-Nithi, and Rigathi Gachagua, the fiery MP from Mathira. Political pundits expected Kindiki to be the likely pick due to his technocratic demeanor, but Ruto surprised many when he announced Gachagua as his running mate on May 15, 2022. This decision was not only pivotal for his campaign but also a strategic gamble with long-term implications for the United Democratic Alliance (UDA) party.

NTV Report

The decision to pick Gachagua over Kindiki was not without controversy. Sources close to the negotiations revealed heated debates within Ruto’s camp. Both Gachagua and Kindiki had their respective strengths, but in the end, Ruto’s decision came down to securing the crucial Mt. Kenya vote. Gachagua, with his deep grassroots connections and strong regional backing, seemed like the best bet. Kindiki’s supporters were disappointed, quietly nurturing grievances that would later play into the party’s internal dynamics. Despite Ruto’s attempt to pacify the situation by hinting that Kindiki had a future role in his administration, tensions simmered beneath the surface.

The early signs of conflict over the running mate choice are crucial in understanding the future leadership struggles within UDA. Leadership succession, particularly in democracies, often revolves around balancing the ambitions of powerful party members. Helms (2020) argues that successful leadership transitions in democratic regimes rely on institutionalized processes that limit individual power grabs. In UDA, however, the decision to bypass Kindiki in favor of Gachagua demonstrated the fragility of internal party democracy. This lack of a clear succession plan sowed the seeds of future tension, and as the party moved into government, these tensions were bound to resurface​.

References:

The Star Gachagua: Our 17-hour talk and how Ruto settled on me as DP

Shahidi DP Ruto Nominates Mathira MP Rigathi Gachagua As His Running Mate

Mpasho Ruto: Reason I chose Gachagua as my deputy

Nairobi Wire DP Ruto Explains Why He Chose Gachagua Over Kindiki as Running Mate

The Star DP Ruto picks Rigathi Gachagua as his running mate

The Star Kindiki, Gachagua leave Ruto residence as deputy naming hits snag

Pulse Live Details of the heated 17-hour standoff on Ruto’s running mate

Nation DP Ruto explains why he settled on Rigathi Gachagua as his running mate

The Star Speculations rife as Ruto to name running mate anytime

The Star Ruto hints Kindiki is his possible successor in 2032


Comprehensive Approach to Kenya’s Civil Service and Pension Reform

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The pension crisis in Kenya’s civil service, a deep-rooted issue stretching back to 2009 under President Mwai Kibaki’s administration, continues to intensify. Initially, the government raised the retirement age from 55 to 60 years, a move intended to delay the financial burden of pensions. However, this merely postponed the inevitable strain on the treasury, as evidenced by the 2014 crisis when 20,000 civil servants neared retirement. Today, the situation is even more dire, with 85,000 public servants approaching retirement age, putting immense pressure on an already overstretched pension system. Compounding the problem are the government’s recent actions, such as freezing salary increments, which have fueled widespread discontent among civil servants. Many workers, facing severe reductions in their take-home pay due to high deductions, have resorted to strikes and go-slows, protesting poor pay and working conditions. The government’s attempts to manage the bloated wage bill, amid a labor market that is increasingly strained, have only further complicated the crisis, highlighting the urgent need for comprehensive reform.

Citizen Digital Report

To navigate this crisis, Kenya can look to international examples of successful pension and civil service reforms. Sweden’s pension reform in the 1990s offers a valuable model. Faced with an unsustainable pension burden, Sweden transitioned from a defined-benefit system to a defined-contribution system, where pensions are directly linked to contributions made during an individual’s working life. This reform not only stabilized the pension system but also encouraged longer working lives, thereby reducing the pension burden on the state. Similarly, Brazil’s civil service reforms in the early 2000s addressed a looming public sector pension crisis by raising the retirement age, increasing employee contributions, and capping pension benefits. These measures proved effective in stabilizing Brazil’s pension system and alleviating fiscal pressure. Kenya could adopt a similar multifaceted approach, gradually shifting to a defined-contribution pension system while implementing necessary adjustments to the retirement age, employee contributions, and benefits caps to address both the immediate and long-term challenges.

However, pension reform alone will not suffice. Kenya must also undertake broader civil service restructuring to address the underlying causes of the bloated wage bill and pervasive labor unrest. This restructuring should include measures to streamline the civil service, improve efficiency, and ensure that salaries and benefits are sustainable over the long term. Without such comprehensive reforms, Kenya risks perpetuating a cycle of financial crises and workforce dissatisfaction, which could ultimately undermine the effectiveness and stability of its public sector. The government must act decisively, drawing on international experiences and adapting them to Kenya’s specific context, to secure the long-term viability of the civil service while addressing the immediate needs of its workforce.

References:

Nation Strike season? Nightmare for government as civil servants’ go-slow looms

Nation Civil servants challenge government freeze on salary increment 

The Star Kenya’s civil service is ageing, but adjustments aren’t being made

The Star Pension dilemma as more civil servants hit retirement age

The Standard Treasury faces expenditure crisis as 20,000 Kenya’s civil servants set to retire

Nation Pension crisis deepens with 85,000 public servants set to retire

Adani Group in Kenya: Balancing Economic Benefits and National Interests

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Adani Group, led by Gautam Adani, has been making significant moves into Kenya’s infrastructure, particularly in the aviation and energy sectors. Recently, the conglomerate proposed a $1.84 billion investment to manage and expand Nairobi’s Jomo Kenyatta International Airport (JKIA) through a 30-year concession deal. This proposal, part of Adani’s broader push into Africa, has sparked widespread controversy in Kenya, with concerns raised over the transparency and potential risks to national sovereignty. Kenyan MPs and aviation workers have voiced strong opposition, fearing that the deal could lead to job insecurity, undervaluation of strategic assets, and a loss of control over critical infrastructure.

Citizen Digital Report

The controversy surrounding Adani is exacerbated by the troubling track record highlighted in the Hindenburg Research report, which alleges widespread fraud, stock manipulation, and money laundering. These dubious practices have raised serious concerns about Adani’s financial integrity and long-term viability, prompting Kenyan authorities to approach the conglomerate’s intentions with caution. The group’s aggressive expansion strategy, often outpacing regulatory scrutiny, further amplifies these fears, suggesting potential conflicts of interest and ethical lapses.

In addition to the airport deal, Adani has secured approval for a $900 million power transmission line project in Kenya, underscoring the group’s growing influence over the country’s critical infrastructure sectors. While these investments could bring economic benefits, they also carry the risk of monopolization and financial instability. The approval of the power project, coupled with the airport deal, indicates Adani’s positioning to dominate key national assets in Kenya, raising alarms about the potential for reduced national control and increased dependency on a single foreign entity.

Kenyan President William Ruto’s inconsistent stance on the Adani deal has further fueled public mistrust, complicating the situation and amplifying calls for greater transparency. As Adani advances its plans and secures approvals, it is crucial that Kenyan authorities rigorously vet these deals. Transparency, public consultation, and robust regulatory oversight are essential to ensuring that Kenya’s national interests are protected and that the long-term implications of Adani’s involvement are fully understood. Given the extensive controversies surrounding Adani’s operations, Kenya must approach these deals with caution, rigorously evaluating any agreement with the Adani Group to align with its long-term economic goals and preserve the integrity of its vital infrastructure.

References:

The Star MPs want Adani JKIA deal stopped

Aviation A2Z Aviation Staff Calls Off Strike against Adani Group in Kenya

The Star Aviation workers suspend strike for one week

OCCRP Kenya’s President Ruto: There is no Airport Deal with Adani Group

Business Daily Proposed Adani, JKIA deal risky and morally unfair to taxpayers

The Kenyan Wall Street Inside Adani’s US$ 1.84 Billion JKIA Proposal

Nation Kenya sued over tycoon Adani JKIA deal

Techcabal Adani Energy gets approval for a $900 million power transmission line in Kenya 

The Hindu Business Line Adani group’s Africa push, submits investment proposal for Nairobi airport

The Standard Secrets of 30-year Adani deal to takeover JKIA in November

The EastAfrican India’s Adani sets up Kenyan subsidiary amid push for JKIA deal

Pulse Live Adani sets up new Kenyan company to manage airports [Shareholding details]

Hindenburg Research Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History, 2023