Speculators in land near areas identified for public projects in Kenya will no longer have a say in how much they will get paid as compensation for its compulsory acquisition.

A draft legislation seeking to cap the amount of monetary compensation is proposing amendments to land laws that will make a government valuer the sole authority on how much a parcel earmarked for acquisition is worth, and will favour land swaps to allow projects to go on even as disputes are being resolved in court.

Reducing the cost of land compensation, currently estimated at $700 million annually, and reducing delays caused by judicial proceedings are some of the areas picked out in a recent World Bank Ease of Doing  Business report as key impediments to investments in Kenya.

“The government is concerned about the cost of land being inflated by people who are speculating and making it extremely difficult for us to implement mega projects. We are exploring alternative ways of compensating people,” said Lands Cabinet Secretary Jacob Kaimenyi.

For example, the standard gauge railway, several road projects, the Kitui coal mining, the Kwale titanium mining projects, and the Lamu Port-South Sudan-Ethiopia-Transport (Lapsset) corridor are among mega projects in Kenya that have had to negotiate the issue of compensation for land — one that which tends to generate political overtones when communities are involved.

Tanzania is experiencing its share of frustrations over acquiring land for projects such as the LNG pipeline construction as well as a road linking the country to Burundi, Kenya and Rwanda. Uganda also experienced similar hiccups with the Kampala-Entebbe Expressway, meaning Kenya’s move to tame compensation costs is being keenly watched across the region.

Uganda and Total have been on record as saying that the prospect of acquiring land for construction of a pipeline linking its oil fields to those in northern Kenya enroute to the Lamu port was one of the factors that forced them to choose a pipeline across Tanzania instead.

Kenya’s Attorney-General Githu Muigai told The EastAfrican that the Land Law (Amendment) Bill 2016 will overhaul the current compensation structure for private land owners by replacing all the existing statutes.

“This law will change other laws that are in place to streamline the process of compensation by removing speculative aspects, manipulation aspects and corruption. All these problems have been addressed in the new law,” said Prof Muigai. He said the Bill has been approved by the Cabinet.

The Bill proposes that the price quoted by government valuers will be capped for three years from the date of the acquisition notice; hindering appreciation that usually pulls in speculators betting on a hefty pay off. There is a provision that the cap will be lifted if the acquisition is not completed within the three years.

Transfer of titles for identified pieces of land will also be frozen during the period in order to block opportunistic changes in beneficial interest. This means that until compensation and acquisition are completed, all opportunistic land transfers through sales are frozen to stop land speculators.  

The Bill says the valuation will be done before the notice of acquisition is issued and before details of the project are made public.

Land swaps

Currently, Kenyan  property laws allow the government to forcibly acquire land for public projects as a last resort and gives landowners the right to contest the price quoted by the government.

According to proposals, monetary compensation will be abolished in favour of land swaps except in special cases that will be prescribed through regulation should the Bill become law. Land swapping refers to settlement on alternative land, desirably of similar value.

Land owners will also be compensated for developments on the existing parcel and relocation costs. In cases where owners seek legal redress, the government will proceed with the project pending determination of the cases.

Cases of individual citizens holding out on required project land, stopping project implementation and driving up public costs have been rampant in Kenya in the past 10 years. Two infamous cases are those of the City Cabanas interchange along the Eastern Bypass and the Bomas/Galleria Interchange along Lang’ata Road, both in Nairobi.

The new regulations were drafted by experts from the Ministries of Lands and Infrastructure, the National Treasury and the AG’s office.

“Whenever a public infrastructure project is announced, land speculators invade intended project corridors, acquire land and position themselves for windfall profits by way of compensation,” they said in the justification for the changes.

As a result, they said, valuation prices have been astronomical even in cases involving reclamation of public land from squatters.

The proposed amendments to the Land Act also come in the wake of delayed implementation of public projects and cost overruns due to disputes related to land compensation.

According to the World Bank, Kenya faces a significant infrastructure financing deficit estimated at $2.1 billion every year, posing a serious constraint to growth and to doing business in the Kenya.

However, it is estimated that Kenya is spending 30 per cent of project costs on compensating land owners.

According to Patrick Obath, an energy consultant and former chairman of the Kenya Private Sector Alliance (Kepsa), inflated land prices have increased the cost of government’s infrastructure development and pushed up the public debt.

“I think the biggest issue is infrastructure development by the government, which is going to be very expensive pushing up the value of our national debt. For the private sector, it means the cost of development is very high and this will drive away investors. In my view, land compensation should be based on ratable values,” said Mr Obath.

Nikhil Hira, a tax expert at Deloitte East Africa, said inflated land prices increases government spending leading to increased borrowing.

“Inflated property prices increases government expenditure causing it to take up more debt,” said Mr Hira.

Earlier this year, Uganda abandoned the multibillion-dollar crude oil pipeline project through Kenya and opted for the Tanzanian route, with Ugandan officials arguing that it would be more expensive for the oil pipeline to pass through northern Kenya to Lamu, partly due to land-related risks.

READ: As Uganda chooses Tanzania pipeline route, Kenya to go it alone

According to the Ugandan government the, land acquisition process in Kenya is estimated to be at least one year longer than in Tanzania.

For instance, in Kenya, the acquisition of land for the development of the standard gauge railway lasted more than two years because of land disputes.