One of the greatest challenges that investors face in the realm of public infrastructure investments, is that of securing access to land. This challenge is particularly pronounced where a public entity is required to contribute land or provide land access rights to a private investor for project development, e.g. through lease or licence.

A critical first step involves determining whether the procuring entity has identified and set aside adequate land for the project. This can be a daunting task when considering projects such as roads and transmission lines, which typically involve vast stretches of land.

The next step is to determine how to effectively make this land available to the successful bidder (in this case, the private entity) for project implementation.

Public land is widely defined under Kenyan law, to include ‘any land not classified as private or community land under the Constitution.’ The Constitution goes on to establish the National Land Commission (Commission), which it confers with the responsibility of managing public land on behalf of the national and county governments. Accordingly, except for land held by national state organs, any transactions involving public land under the jurisdiction of the national government, national state agencies, county governments or county agencies, requires engagement and consultation with the Commission.

A practical concern that emerges is the detailed process for consultation with the Commission, and the question as to who is to be held liable where a public body abdicates its role. By way of example, in the case of Republic v Chairman National Land Commission & 5 others Ex Parte Cordison International (K) Limited [2018] eKLR, an investor (Investor A) sought approval from the County Government of Lamu for allocation of land in Kiongwe, Lamu for a wind project.  The County Government wrote to Investor A approving the implementation of the project and separately to the Chairman of the Commission, confirming that it wished to lease the suit land to Investor A. Subsequently, Investor A and the County Government finalized and executed a lease agreement for the implementation of the project.

Unbeknown to Investor A, a different investor (investor B) applied to the same County Government for allocation of the same parcel of land, for a different wind project. The application was approved by the County Assembly and the Commission subsequently issued a letter of allotment to Investor B over the same site.

A tussle ensued over the project site and the matter ended up in court. The issue for determination was which entity between the County Government and the Commission had power to allocate public land to the investors for the said projects. The judgement of the High Court was upheld by the Court of Appeal.

While the decision of the court is aligned with applicable legislation, this case highlights the challenges that investors often face.

To compound matters, section 9(3) of the Land Act, stipulates that, ‘any substantial transaction involving the conversion of public land to private land shall require approval by the National Assembly or County Assembly, as the case may be.’

A "substantial transaction" is in turn defined to mean " a transaction that involves the transfer, leasing or licensing of land to a local or foreign investor either alone or in a joint venture to carry out developments in agriculture and other approved ventures with direct developmental benefits for Kenya through:(a) a commitment for improving food security for Kenya through technology transfer leading to innovation, productivity increase and the requirement for a certain minimum percentage of the crops produced to be sold on local markets;(b) infrastructural developments from which the public can benefit;(c) demonstrable strong backward and forward linkages to other industries in Kenya;(d) generation of substantial foreign exchange through import substitution and exports; and (e) sustainable agricultural practices and sustainable forest management which can contribute to addressing climate change concerns."

Considering that a majority of the public investment projects would qualify as substantial transactions, one of the questions frequently raised by investors is the interpretation to be accorded to this requirement. Does this mean that any lease or licence of alienated public land by state agencies or county corporations to investors constitutes conversion of public land to private land, thus requiring parliamentary or county assembly approval?

The implications of such interpretation are profound. If all such transactions are deemed conversions, this could significantly impact the speed and efficiency with which public infrastructure projects are rolled out. Furthermore, this could lead to increased regulatory hurdles to an already complex procurement process, especially for competitively procured PPP projects.

It is notable that, the lease or licence term granted to investors will be less than the term held by such state agencies or county corporations under the overarching title. This means that after the lease or licence period, the land reverts to the said state agencies or county corporations. Strictly speaking therefore, it is arguable that while most infrastructure projects inherently qualify as substantial transactions, they do not involve the conversion of public land to private land (since the land will ultimately revert back to the state agencies or county corporations) and as such, should not require approval by the national assembly or county assembly.

As far as we are aware, this interpretation is yet to be validated by the Commission or a court of law. Practitioners and investors need clarification on this position so as to not only protect public interests, but also foster an environment conducive to private investment, which is crucial for economic growth and development.

Lastly, in recent times, there has been a notable preference by state agencies to grant licenses (instead of leases) for infrastructure projects. This shift is partly informed by public mistrust of any grant of land to private entities for development as well as the use of such land as collateral for project development.   Many investor projects span upto 20 to 30 years, aligning with the term outlined in the PPP Act and this shift raises legal and bankability concerns.

As compared to a lease, a licence is a temporary right (which may include grant of exclusive possession) to access a property with ownership remaining with the licensor. Importantly, a licence does not constitute a legal interest registrable against the title document.

Investors and lenders are cautious about committing to projects unless they have assurance regarding the land's status and ownership. Without the registrability and legal protections offered by leases, sometimes lenders view licenses as insufficient collateral for large-scale infrastructure projects.

All in all, stakeholders must engage in a comprehensive dialogue to address these uncertainties and ensure that the regulatory framework supports both public accountability and private sector participation in Kenya's development agenda. The outcome will shape the future landscape of public investment and its role in driving sustainable economic growth.