Doing business in Kenya starts with engaging local communities

Ensuring clear frameworks for land rights, local content and legal authority are priorities for a variety of sectors in countries around the world. Kenya is no exception and authorities have been working to address these issues, which have come to the forefront as part of the current devolution process.

Since the process was first legislated in 2010 — and began in earnest in 2013 — the devolution process has seen many formerly national-level responsibilities transferred to newly formed county governments, which has led to uncertainty over where legal authority for certain decisions reside, complicating previous ambiguity over issues such as traditional land ownership and community development.

Local Content

Securing approval from local leaders and communities is often a make-or-break aspect of large-scale investment projects, particularly in Africa. Community development and local content policies have become increasingly common on the continent, as governments look to ensure that the benefits of investment are felt by local communities. These policies range from levying a fee based on a percentage of total revenues from a project with the proceeds going to the local community, to setting employment requirements for local residents.

With increased activity in oil exploration and mining, and to help ensure the inclusiveness of investment in rural areas, Kenya has recently passed local content laws for extraction companies. These oblige licence holders to obligations for local hiring and procurement, as well as investment in impacted communities. The obligations must be detailed in annual local-content plans submitted to regulatory authorities, although they often have a positive side effect of strengthening relations between investors and county authorities. Failing to follow the local content laws to both the letter and the spirit of the law can have ramifications: a consortium that had invested $66m in a wind energy project announced in February 2016 that they had shelved the project due to local opposition. “Ministries and counties need to coordinate public-private partnership (PPP) policies to better harmonise processes; this could go a long way in increasing investor interest,” Stanley Kamau, director of the National Treasury’s PPP Unit, told OBG.

Land Ownership

Often the biggest challenge comes in the form of securing land and Kenya is not unique in this regard. In Ghana, for example, traditional land ownership often does not line up with formal land registries which has led to complications for extractive or agricultural firms looking to acquire large tracts. In Kenya the impact of fragmented land ownership, with land in rural areas often split equally among descendants for example, as well as confusion over traditional, local and national rights over land has lent itself to challenges in the past.

A plan to build an international crude oil pipeline through the country from Uganda was altered in 2016 by its investors to pass through Tanzania instead. One of the reasons for the change cited in local press reports was the more expensive and lengthy process of acquiring land and resettling inhabitants in Kenya relative to in Tanzania. Similarly, progress on the Standard-Gauge Railway, the government’s largest infrastructure mega-project currently under construction, has been held up recently due to multiple objections from landowners and civil society groups. In June 2016 the country’s High Court suspended building in another section when a landowner claimed that promised compensation from government for land had not materialised.

Solutions

One legal reform that could help in the specific area of land acquisition is the Community Land Bill, signed into law in August 2016. The law makes it easier for communities to claim title over their ancestral land and receive documentation. Clear titles are unavailable for about two-thirds of land, which has led to unauthorised sales in the past.