Resolve Article 65 Uncertainties on Land Holding

Land, is a basic factor of production and it remains an important component for the manufacturing sector especially Agro Based industries. For Agro Processors, who make up the largest value-add sector in Kenya, land is an essential input. As more and more locally owned agro-processing industries take shape, there is need to ensure that there is certainty on land ownership. The implementation of Article 65 of the 2010 constitution could negatively impact on investor confidence due to the uncertainty of extension of leases.

Under this clause, a non-citizen or a company not fully owned by Kenyans cannot hold title to land for any tenure exceeding ninety nine (99) years. A Kenyan company according to the Constitution is a company that is wholly owned by one or more Kenyans. All companies listed in the stock exchange, where there is a substantial presence of international investment and a number of other Kenyan companies with foreign investors would therefore not be considered to be Kenyan companies.

Recent media reports have raised further concerns as County Governors challenge the continued ownership of land in their counties by such companies and declarations that leases will not be renewed. There is an urgent need for clarity under the Land Laws on when the 99 years period for the previous leases of 999 years begins to run and the extent to which County Governments are permitted, under law, to challenge ownership of land in Kenya for genuine title holders.

While the first uncertainty can easily be resolved by the principle of the prospective rather than retrospective application of the law, the second one is rather sticky. With the counties and the national government retaining the right to repossess leased property upon the expiry of the lease and pre-emptive rights being to the immediate past holder of the leasehold interest, provided that such lessee is a Kenya citizen and that the land is not required by the national or the county government for public purposes.

For Example, what then happens to the pre-emptive rights of a company registered in Kenya, or one fully owned by Kenyans but which gains some majority foreign ownership by virtue of listing in the Nairobi Stock Exchange? Clause 54 of the Land Laws Amendment bill which seeks to amend section 13 of the Land Act has shied away from the pre-emptive right uncertainty issue and does not propose the amendment of the problematic section 13(1) of the Land Act 2012.

To solve this puzzle, an exception clause needs to be incorporated to the amendment Bill exempting the application of the section to companies incorporated in Kenya that gain foreign majority ownership by virtue of listing in the NSE as well as those companies registered in Kenya, own property and have put the land to commercial use and thereby generate the country revenue and create employment to Kenyan citizens. In addition, a clear and transparent process on the conversion of freehold land and leases of 999 years into the Constitutional 99-year leases should be laid out.

Further to this, in all instances the effect of the repossession of land for public use vis-a-vis the continued prudent economic use should be weighed before the repossession is authorized. This is particularly important where the land has, throughout the expired lease period, been put into  prudent economic use but has later on been earmarked by the county or the national government for repossession.  Improvements on the property would also need to be compensated as investors have spent capital in good faith and in the expectation of a return.

The definition of ‘public use’ should also be legislated so that it includes;  hospitals, parks, roads, etc and not, as we are seeing, be used a pseudonym for what is actually land re-distribution. If the underlying reason to repossess land is to re-distribute it to ‘locals,’ it should be treated as land buying, conducted at a market value and if necessary using the Settlement Land Trustees. Investors in productive land held under lease require protection and certainty on the pre-emptive rights of their lease titles.

The writer is the CEO of the Kenya Association of Manufacturers and can be reached on  ceo@kam.co.ke