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The Resource Curse: Farmland and FDI in Kenya

December 29, 2019

 

The African subcontinent has undergone a set of varied changes that has seen a surge of growth and development. This includes a series of changes in the places of Kenya, Zimbabwe, Benin, Malawi, Ghana, Liberia, South Africa, Zambia and Namibia. The previous decade has perceived a tranche of legal and political changes in Kenya. There has been a sudden surge in the Foreign direct investments in Kenya. Additionally, this has opened doors for a diverse set of opportunities to the Kenyans. This has brought in a new buzz of enthusiasm and excitement and has ignited opportunities for poverty reduction. This transformation in a developing country has targeted the rural section and has brought in a new idea of hope and vision. Developing countries must elicit positive stories of growth and poverty reduction with vistas of lit up villages and local initiatives catalysed by the infrastructure and ancillary opportunities.

 

Land in Kenya

Land has always occupied a special place in the history and politics of the nation. Every election circle the country witnesses’ incidences of tensions, skirmishes and terrible backlashes between communities centred on land and land rights. The land reform process started before the country attained its independence and is still ongoing. Sessional Paper 3 of 2009, which became the National Land Policy of 2009, identified the issues marring land and the administration of land in Kenya.

 

Chapter 5 of the Constitution of Kenya 2010, which deals with land and environment borrowed heavily from the National Land Policy. This article is the anchor of land reform in Kenya and has given rise a new land law regime comprising substantive and procedural land laws which include the Land Act No. 6 of 2012, the Land Registration Act No. 3 of 2012, the Community Land Act, and the National Land Commission Act No. 5 of 2012.

 

Under the Constitution of Kenya, land is categorized as public, community and private. The constitution further defines what public, private and community land entail. Public land vests in and is to be held by either the county government in trust for people resident in that county or the national government. Private land is enumerated to be registered land held by any person under any freehold or leasehold tenure and any other land declared private land under an Act of Parliament. That said and as indicated above, there are gaps in the law and this has brought new challenges. These gaps and challenges are particularly manifested when considering foreign investors with projects anchored in land.

 

 

The Land Problem

Land ownership and use in African countries have been influenced by European settlement that dictated patterns of economic development and types of crops produced, as shown by the histories of British colonialism in Zimbabwe and Kenya. These countries exhibit diverse tenure arrangements, rules governing access to land, utilization and transfer. Although all the governments have declared some policy changes and enacted legislation affecting land rights, land transactions, size of holdings and imposed land taxes since attaining political independence, the substance of the law and the extent to which laws are enforced differ widely.

 

The magnitude of land available for cropland expansion is still not well established, despite a large number of estimates produced over the last decade. estimates of potentially available cropland (PAC) are very sensitive to assumptions about what constitutes ‘‘potentially available’’ (and to a lesser extent to different data sources). There seems to be a consensus that arable land is abundant in the region as a whole, although exactly how much of this stock is utilizable (and by whom) is far from clear. Many estimates have emphasized the production potential of unutilized land, drawing on geo-referenced data on land and climate characteristics and associated biophysical production characteristics, with relatively little emphasis on the extent to which unutilized land is already ‘‘owned’’, or the forces shaping the current and future allocation of remaining arable lands.

 

The 1954 Swynnerton Plan granted secure individual land titles to African farmers, and the Plan was reinforced further by the Native Lands Registration. Ordinance 1959, replaced after independence by the Registered Land Act 1963 and the Land Adjudication Act 1968 (Migot-Adholla and Place, 1998). While the registration process might have increased tenure security for many landowners, it has also created new forms of disputes, such as challenges over registered land and conflicts over land sales (Shipton, 1988).

 

Injection of the Foreign Brand in Kenya

Kenya is becoming a favoured business hub, not only for oil and gas exploration but also for manufacturing exports, as well as consumer goods and services. Arguably the renewable energy sector in Kenya is the most vibrant in the region with active projects in wind, geothermal, small-scale hydro and biofuels. Some recognisable projects in renewables include The Lake Turkana Wind Project (LTWP), Kipeto Wind Project, and Kinangop wind project. The increased inflow in FDI to Kenya can be credited to the investor-friendly policies being enacted by the government.

 

 

The increased inflow in FDI to Kenya can be credited to the investor-friendly policies being enacted by the government. An example is Kenya’s move to abolish restrictions on foreign shareholding in listed companies as competition for capital heats up among Africa’s top capital markets. Investment in agriculture and agribusiness is paramount to the economy of Kenya and this is evidenced by the large scale exporting of cash crops and horticultural produce. The recently enacted SEZ Act contains incentives relating to tax and work permits in order to encourage investment in Kenya. The Dongo-Kundu SEZ Project is a first in a series of projects which are intended to be model zones across the country.

 

What is Stopping This Development?

There are a set of legal restrictions facing foreign investors in Kenya where land is involved. This discloses the challenges that invariably affect growth and investments. These legal restrictions in regard to ownership of land by non-citizens have brought inconsistency and challenges which could potentially scare away foreign investors.

  • Weak and dispersed legal framework: there were more than 20 statutes regulating land use and development. The laws lacked uniformity and result in a convoluted conveyance system. For example, freedom to contract was severely curtailed by the statutes that inhibit property rights through archaic procedures and regulations

  • Weak and dispersed registry system: there were many registries, which were manual, inefficient, uncoordinated and inconclusive. This situation was exacerbated by the practice of using the registries as tax collectors;

  • Weak enforcement procedures: the judicial system was identified as failing to protect property rights and generally being a major hindrance to lenders’ ability to raise security;

  • Absence of automation: there are still many registries, which are manual, inefficient, uncoordinated and inconclusive. This situation is likely to obtain until the registries are automated and record-keeping as well as the conveyancing practice become automated.

  • Registries as Tax collection points: There is a worrying practice of using the registries as tax collectors. At the moment, the registrars are effectively collectors of stamp duty.

  • Sanctity of Title: the judicial function has often failed to have a uniform interpretation of the law on the sanctity of title. There is a growing trend of conflicting judicial interpretation regarding the protection of property rights. In a recent judgment, the high court declined to protect the rights of innocent purchasers of value without notice who were facing eviction by the Government to enable a road to be built. The state was proceeding on the basis that 30 years before it had compulsorily acquired the land and paid the previous owners. The acquisition by the state was however not completed since the “owner” was left with the title and the records at the registry were not changed. This enabled the compensated owner to sell the same land to an unsuspecting developer who built homes on the disputed land. The Judge failed to uphold the rights of the innocent registered buyers. They were not compensated for their loss. The judge went against a long line of judicial pronouncements protecting the property rights of the innocent and declared that the public duty to build a road outstripped the owners’ property rights and all she could say is that she was sorry about their fate. 

 

 

The Way Ahead

The immensity of Kenya’s achievement should not be taken for granted, however long overdue. An excellent basis for securing majority rural land interests has been laid. However, seeing this through in the form of community land entitlements is yet to get underway. Doubts have been raised that achieving this will not be easy or swift, and that contradictions or shortfalls in the law still have plenty of opportunity to evolve into serious impediments to promised security. Risks loom. Old truisms that the law is never enough, that law can be interpreted in many ways, should not be allowed to work against the weaker party, communities. To do so would throw into jeopardy the founding equity that the Constitution gives to communities as landowners. Instead of resolving longstanding land injustices, a new layer of land injustice could be laid.

 

Views expressed are solely those of the author.

 

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About the Author

Ananya Satish is a budding lawyer and is currently pursuing B.A. LLB from National Law University, Odisha. She is a passionate speaker and has participated in many Model United Nations Conferences and debate competitions in the  school level and also has many citations in her name. Ananya also enjoys the law school tradition of mooting and has developed a keen interest and passion for the same. She is an avid reader and has a taste for classics and crime fiction. She is a trained bharatanatyam dancer and  aspires to pursue legal journalism post law school.

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