Secure property rights, efficient land ownership and use are the cornerstones of modern economy. Kenya has kept up with global trends in recognising the fundamental role that land plays in sustainable economic growth and has made efforts to ensure that property rights are secured and that the law is clear to foreign investors eyeing real estate in Kenya.
The Constitution required Parliament to revise and consolidate land laws that existed prior to its promulgation, which we have seen being implemented over the years. Parliament has recently tabled the Land Control Bill, 2022 (Bill), which aims to replace the Land Control Act (Cap 302) of 1967 (LCA) and align the law on transactions relating to agricultural land with the Constitution, the Land Registration Act and the Land Act, 2012.
Land use control is a useful and necessary tool for ensuring land is used efficiently. Currently, the LCA provides the framework under which transactions in respect of agricultural land are administratively regulated through land control boards which have statutory powers to grant or deny consent for controlled transactions.
Foreign investment in agricultural land continues to be a topic of great interest in Kenya with two distinct arguments, for and against. On the limitations, Article 65 (1) of the Constitution provides that a foreigner may hold land on basis of leasehold tenure only for a period not exceeding ninety-nine years. The LCA and the Bill also restrict ownership of agricultural land by non-citizens unless such ownership is exempted from their application by the President or Cabinet Secretary for Lands and Physical Planning respectively.
The noteworthy provisions of the Bill include the requirement for all companies to obtain the consent of the land control committee to engage in a controlled transaction (which includes disposal of shares in a public company owning agricultural land). This is a key departure from the LCA and an attempt to address the gap that is used by foreigners to own agricultural land through acquisition of shares in a public company which owns agricultural land.
Kenya’s economy has and continues to be heavily reliant on agriculture. According to USAID report on food security in Kenya, 2022, the agricultural sector contributes to approximately 33 percent of Kenya’s GDP.
Foreign direct investment in the agricultural sector could play a major role in achieving food security. As opposed to a blanket restriction on foreign ownership of agricultural land or leaving the discretion to the CS to exempt transactions from the application of the law, Parliament could consider broadening the scope of the land control board/ committee to authorise ownership of agricultural land by foreigners where the goal is to invest in the agricultural sector.
A delicate balance should be established between economic growth resulting from foreign investment, long-term sustainability of the agricultural sector, food security and protection of indigenous rights of ownership of land by nationals. This is a dynamic area that changes depending on the country's socio-economic needs. Kenya should consider a regulated environment of foreign ownership of agricultural land to secure its food basket.
Soar is a Partner in the Real Estate and Finance practice at DLA Piper Africa, Kenya (IKM Advocates), Nyakinyua (Senior Associate) and Wamache (Associate) within the same practice.