Auditor flags ADC’s puzzling Sh500 per acre land leases

Auditor General Nancy Gathungu on June 05, 2024.

Photo credit: Jared Nyataya | Nation Media Group

State-owned Agricultural Development Corporation (ADC) leased land to an unnamed investor at more than 10 times lower than the market rate or Sh500 an acre annually, highlighting the misuse of government property in deals with investors.

The ADC leased 15,000 acres in Rumuruti, Laikipia County, to an unnamed tenant in 2015 for 15 years, the Auditor-General revealed in a deal that will cost taxpayers more than Sh1 billion over the period.

This illustrates the practice of State agencies offering public assets for use by private companies at far below market rates.

“The Corporation entered into an agreement with a tenant for the lease of land in Rumuruti measuring 15,000 acres for 15 years. The lease was effective from 1 October 2015 at a lease rent of Sh500 per acre per annum,” says a report by Auditor-General Nancy Gathungu. 

Leasing an acre of land for farming ranges between Sh6,000 and Sh10,000 in most parts of the country.

The audit shows that after five years of leasing out the 15,000 acres, the size was reduced to 13,103 acres in October 2019.

This means that ADC will have earned Sh103 million from leasing the land when the tenure of the deal ends in 2030.

At Sh6,000 an acre, the corporation would have earned Sh1.24 billion and Sh2 billion at Sh10,000 annually.

This shows ADC will have lost more than Sh1.1 billion in the sweetheart deal offered to the mystery investor.

“In a correspondence dated 27 February 2017, the surveyors had indicated that 1,897 acres had been lost due to illegal grazers invading the said piece of land. In addition, no further correspondence has been seen to explain what has since transpired with the 1,897 acres that are no longer in the custody of the tenant,” the audit established.

Most government institutions holding land and real estate properties turn to leasing to generate cash and ease liquidity challenges.

However, most of the firms have been found to offer the properties at far below market rates.

Cash-strained Moi University, for instance, opened up 1,500 acres of land within its main Kesses campus in Eldoret for farming leases early this year, noting that investors would take up the land for 60 months for maize farming.

The university made the announcement amid a push by the Ministry of Agriculture to open idle public land for revenue generation and improvement of food security under its land commercialisation initiative (LCI) targeting to lease up to 500,000 acres of idle land and attract at least Sh65 billion in agricultural investments.

“The government of Kenya seeks interested and qualified commercial agribusinesses and investors with demonstrated technical and financial capacity to undertake farming, (agri-)forestry, and other agriculture-related activities on land sites identified under the LCI,” the ministry said in a tender call for investors to take up land in Samburu and Kiambere held by the NYS and Tana and Athi Rivers Development Authority (Tarda) in February.

Other lands identified for the LCI include Egerton University where 200 acres have been set apart for an agro-science park, 10,000 acres at the Galana Kulalu irrigation scheme, and 25,000 acres of Bura Irrigation Scheme.

The ADC lease is one of the many issues affecting more than 20,000 acres of the corporation’s lands and which continue to risk the continued sustenance of its crucial role in supporting Kenya’s agriculture.

Close to 9,000 acres of its lands across the country have either been encroached on, have ownership disputes in court, or the corporation lacks titles to prove ownership.

The Auditor-General reveals the corporation lacks ownership documents for seven parcels measuring 5,982 acres while 475 acres are under ownership disputes in court.

The parcels include two in the Ndabibi area, Naivasha, Nakuru County, measuring 2,446 acres, which the audit notes are pending registration.

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