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Inside ADC’s baffling Sh500 per acre land lease debacle

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A resident of Changoto village in Adu Ward, Kilifi County, looks out over a pineapple plantation on a piece of land also claimed by the Agricultural Development Corporation in May 2021. The State firm is beset with many similar disputes over land. 

Photo credit: File | Nation Media Group

The Agricultural Development Corporation (ADC) leased land to an unnamed investor at more than 10 times below market rate, or Sh500 an acre annually, underlining the blatant abuse of government property in dealings with business people.

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

“The lease was effective from 1 October, 2015 at a lease rent of Sh500 per acre per annum,” Ms Gathungu says in her report.

The cost of 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, while it would have made Sh2 billion at Sh10,000 per acre annually. It means the firm 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 with real estate holdings resort to leasing them out in a bid to generate cash and ease liquidity challenges.

Many of them offer the properties at far below market rates.

Cash-strapped Moi University, for instance, opened up 1,500 acres within its main Kesses campus in Eldoret, Uasin Gishu County, for agricultural leases early this year. It said investors would take up the land for 60 months for maize farming.

The university made the announcement amid campaigns by the Ministry of Agriculture to open idle public land for revenue generation and improvement of the country’s food security. Under its land commercialisation initiative (LCI), it targeted 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 while inviting tenders for investors to take up land in Samburu and Kiambere held by the National Youth Service and the Tana and Athi Rivers Development Authority in February this year.

Other lands identified for the LCI project were in Egerton University, where 200 acres were set aside for an agro-science park, 10,000 acres at the Galana Kulalu Irrigation Scheme, and 25,000 acres at Bura Irrigation Scheme.

The leasing of the ADC land is just one of the myriad of issues affecting more than 20,000 acres of the corporation’s lands and which continue to risk the continued sustenance of its crucial role to support Kenya’s agriculture. Close to 9,000 acres of its lands across the country have either been encroached upon, have ownership disputes in court, or the corporation lacks titles to prove it owns them.

Ms Gathungu revealed that the corporation lacks ownership documents for seven parcels measuring 5,982 acres.

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

In recent months, Ndabibi Farm in Naivasha has been in the spotlight as hundreds of residents protested the alleged takeover of the land by a powerful individual.

The audit also established that the ADC is in court over disputed ownership of three parcels of land measuring more than 475 acres, where other parties are claiming ownership.

The corporation has in the past lost its lands after they were grabbed by powerful people since its establishment 60 years ago and continues to struggle holding onto its properties that are valued at billions of shillings.

“Review of the loan records provided for audit verification, including the inventory of the title deeds for the land that the entity owns, revealed that two of the entity’s title deeds for parcels in Trans Nzoia County have been charged by a commercial bank for a loan owed to the bank which was valued at Sh156,389,000 as at 30 June, 2023 of which a monthly instalment of Sh4,600,000 was to be paid.”

“Review of the bank statement further revealed that within the financial year, only instalments amounting to Sh8,846,391 were paid leading to accrual of interest and default charges amounting to Sh17,659,485. In the circumstances, management was in breach of loan agreement and the entity’s land is at risk of being auctioned,” the audit notes.