How complex land rights affect crucial projects

Recently, Kenya has initiated a number of infrastructure-related investments, majority of which focus on transport and energy. This, coupled with the country’s potential for scalable renewable energy projects, strongly positions the country to play an instrumental role in the African energy market.

For many of these types of projects, however, issues relating to land have cast a dark shadow on their actualisation.

Being an integral part of any infrastructure project, the complex and bureaucratic processes associated with its acquisition, disagreements over its compulsory acquisition and cancellation of titles over irregular ownership are now becoming more commonplace.

To allay investors’ fears, this is what needs to be done.

First, and perhaps the most significant issue, the Land Control Act makes it mandatory for parties to obtain this consent for sale, transfer, lease, charge and subdivision of agricultural land, which includes land not within a municipality or township.

Given the land-intensive nature of energy infrastructure projects, most project sites are located in rural areas invariably making the land agricultural.

The Land Control Boards are charged with ascertaining that certain conditions are met. More importantly, a Land Control Board is required to refuse consent where the application is by a non-citizen or a private company having any non-citizen shareholder, yet being capital intensive, most infrastructure projects have some level of foreign investment.

The Land Act however provides for an exemption from the Land Control Board consent requirement where presidential exemption has been gazetted but considering the complexity in obtaining such exemption, majority of project developers have been forced to create project companies which are initially wholly-owned by Kenyan citizens or incorporating or converting project companies to public companies, which curiously are not as limited in terms of ownership of agricultural land.

The recently enacted Energy Act, 2019 requires national and county governments to facilitate acquisition of land for energy infrastructure development.

One suggestions is that the government could facilitate such land acquisition by exempting all infrastructure projects, from the provisions of the Land Control Act. If granted, this would definitely go a long way towards easing the set-up of projects in Kenya.

The second issue lies in the fact that non-Kenyans cannot hold a Freehold land title because foreigners are only allowed to hold leasehold interest of a maximum of 99 years.

This restriction is common on the continent and countries such as Uganda and Ghana have similar requirements, in contrast to countries such as South Africa and Egypt where foreigners can own land on freehold title.

The silver lining in the Kenyan context though, is that the maximum duration of the leasehold interest (99 years) is longer than the expected life of energy projects which span between 20 and 30 years.

Third, community engagement. Inadequate or inconsistent community consultation can be fatal to a project, especially where community members hold a subjective and inflated estimation of their entitlement.

It is not unusual for disputes to arise where the community is concerned over what it considers to be poor compensation for land, the effects of projects on the community and the perception of meagre benefits from infrastructure projects.

Project developers must consult with communities to ascertain legitimate land rights, assess the impact of the project on local land rights and livelihoods and establish conditions for a productive relationship with the community.

Finally, in addition to acquiring land rights over the main site where the plant will be developed, developers also have to consider easements and other analogous land rights to cater for the transmission and distribution networks for the power that the proposed plant is to generate.

This challenge affects both the private sector and government agencies.

Furthermore, Kenya has gained some notoriety on the issue of protecting proprietary rights. Having a decentralised and somewhat manual land registry system has meant that the validity of a title documents can be hard to verify.

Further, the conflicting judicial interpretation of property rights has made it a risky business to invest in land in Kenya. This is why digitisation of the land registry is a welcome move in the fight against fake title deeds.

In conclusion, land acquisition challenges can be a disincentive for investors in the infrastructure development space in Kenya. Positive strides are already being made to address the concerns enumerated above but there is still more to be done.

Although land related project challenges are not peculiar to Kenya, the situation is exacerbated by the prevalence of small parcels of land which are either privately-owned or which constitute community land. This inevitably means that a project investor will have to dedicate significant time and resources to deal with a series of land related hurdles.

Conversely, in neighbouring Tanzania, all land is vested in the government to hold on behalf of its citizens.

Foreign companies can obtain a right of occupancy from the government, provided that they have a Certificate of Incentives issued by the Tanzania Investment Centre.

Uganda on the other hand has similar land ownership structures to those of Kenya but the Uganda Investment Authority has a one-stop shop for investors, which includes an embedded land registry function which assists in verification of ownership.

Kenya can borrow some aspects from her neighbours to reduce the current land acquisition difficulties faced by investors in the energy sector.

Beatrice Nyabira, partner, IKM Advocates, E-mail: [email protected]; Judy Muigai, director, E-mail: [email protected]; Jane Nduati, associate, E-mail: [email protected]. IKM Advocates.