President Uhuru Kenyatta has moved to cushion real estate investors from rising costs with the directive for a maximum cap on the environmental impact assessment (EIA) fees paid to the regulator.
The President said on Friday that the current regime where property developers pay the fees as a percentage of the value of projects is punitive and that the National Environment Management Authority (Nema) should revert to a flat rate.
Environment secretary Judi Wakhungu in September last year reviewed the EIA fees to a minimum of Sh10,000 or 0.1 per cent of project cost, without an upper limit. The regulation removed the maximum limit of Sh1 million that existed previously.
“It’s completely ridiculous that you charge as a percentage because this should be a charge for the service that Nema provides,” said Mr Kenyatta in Naivasha while commissioning a new 140 megawatt geothermal plant.
“I want it to be very clear that there must be a cap. You cannot say that you are making an investment of Sh1billion and then you charge on the basis of the investment.”
Last year’s review took place as Nema experienced financial shortfalls partly because of reduced revenues from issuance of licences.
“The cap (maximum) has often limited our ability to receive adequate funds to better manage our operations,” Nema director for environmental education, information and public participation Ayub Macharia said in an earlier interview.
For instance, due to the limitation, he said, Nema only received Sh1 million in the issuance of the environmental licence for the Sh2.5 trillion Lamu Port South Sudan-Ethiopia Transport project.
This is despite having spent more than Sh4 million engaging Lamu residents in discussions and paying its technical advisory committee.
“The money excludes that spent in processing the licence,” said Dr Macharia.
Had the law been in place Nema would have been paid Sh250 million. The environment agency said the deficit had to be bridged by the government, piling pressure on public coffers.
The State this year plans to allocate Sh700 million to Nema against the agency’s budget requirements of about Sh1.3 billion.
The agency said it is expected to raise about Sh600 million from fees, and a return to a flat rate regime would put it under pressure.
The new development comes at a time when Kenya has struck oil in northern Kenya and at the Coast, whetting the appetite of global firms for the local market. The removal of caps has been punitive to businesses undertaking large scale projects such as those in the oil sector.
Nema requires projects such as mineral processing, oil drilling, infrastructure development, real estate projects and waste disposal to be licensed before their implementation.
Real estate is booming with increased activities from high net worth investors looking to cash in on rising rents and home prices.
Rapid urbanisation, population growth and expansion of the middle class remain the main drivers of Kenya’s property market.