Chinese, Qataris Portland deal flops after loss of $47.8m land

Part of Athi River land owned by East African Portland Cement which the Kenyan government failed to seize, derailing plans to build affordable homes in a property deal financed by Chinese and Qatari contractors. PHOTO | KANYIRI WAHITO | NMG

By BUSINESS DAILY

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The Kenyan government has lost the fight to seize 4,272 acres from East Africa Portland Cement Company (EAPCC) for free, derailing plans to

build affordable homes in a multibillion-shilling property deal financed by Chinese and Qataris.

A Kenyan High Court stopped the takeover of the land in Athi River valued at about KSh6.4 billion ($47.8 million) because the country’s government failed to follow rules that guide compulsory acquisition, including consulting stakeholders like National Social Security Fund (NSSF), French firm Lafarge and the Nairobi bourse-listed cement manufacturer.

EAPCC Managing Director Oliver Kirubai told Kenyan parliament that the court stopped the state takeover, adding that the cement maker plans to develop a Green Smart City as it seeks to diversify its earnings via real estate.

A green city is an urban enclave that incorporates eco-friendly practices, green spaces and supporting technology to reduce air pollution and CO2 emissions, enhance air quality and protect natural resources.

The suit followed opposition from the country’s Central Organisation of Trade Unions (Cotu), which argued the NSSF as well as Portland Cement were not consulted and have no intention to cede the land for free.

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The NSSF has a 27 percent stake in EAPCC, with the country’s government ownership standing at 22.3 percent and Lafarge a 41.7 percent stake.

Kenya’s Ministry of Land and Physical Planning wanted to acquire the land for free because EAPCC failed to use it for agricultural in line with allocation terms inked in 1960.

The company was required to surrender the land immediately to clear the way for private investors including Chinese and Qataris, to build more than 3,000 affordable housing units under the Big 4 Agenda of former president Uhuru Kenyatta’s administration.

In 2019, Kenya secured commitments from foreign investors to build the houses.

But Cotu through lawyer Donald Kipkorir, challenged the compulsory acquisition saying it was violating the company’s investments and economic rights by taking away its asset.

Cotu argued that with the NSSF being one of the biggest shareholders at EAPCC, workers stood to lose their investment if the land were seized for the housing project.

The NSSF headquarters in Nairobi, Kenya. PHOTO ANTONY KAMAU | NMG

The court action followed a letter from the principal secretary in the ministry of land and physical planning on August 13, 2019 to EAPCC’s acting managing director, asking the cement maker to surrender the land.

The firm has been looking to dispose of some of its extensive land holdings in Athi River to fund a restructuring of its balance sheet, mainly to pay debt and bridge a working capital deficit.

Kirubai said Portland was planning further land sales to clear a KSh8 billion ($59.7 million) debt.

EAPCC to sell invaded land

EAPCC told Kenyan parliament that the company was seeking to retire KSh4.5 billion ($33.6 million) in government debt, KSh2 billion ($14.9 million) in union and employees’ dues, KSh1.3 billion ($9.7 million) tax arrears to the Kenya Revenue Authority (KRA), KSh1.2 billion ($8.96 million) for plant refurbishment and KSh450 million ($335835) cement levy that is due to the government.

The cement maker plans to dispose of 2,090 acres of land whose proceeds will also help retire a JICA loan of KSh1.195 billion ($8.92 million).

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The Portland Cement management told Kenyan MPs that it is normalising the sale of another 907 acres to squatters who invaded and subdivided the property.

The sale of the 907 acres will be used to bridge the working capital deficit.

Kirubai told the country’s national assembly committee on trade and industry that EAPCC last year cleared KSh6.8 billion ($50.7 million) debt by transferring 1,169 acres to the KCB Bank.

He said the company had sold 900 acres of land to Kenya Railways Corporation, 100 acres to Obelisk Health Care Limited and 16 acres to the Critical Infrastructure Police Unit under the National Intelligence Service (NIS).

Kirubai said the company holds 9,797 acres located in Mavoko in Machakos County as investment properties.

For mining of limestone, the company owns 1,844 acres at Kibini and Bissil in Kajiado County.

“To fully reposition the business back to profitability and make working capital available to drive operational excellence and cost leadership, the company intends to fund its strategic plan 2022-27 through balance sheet restructuring that is the disposal of fully mined idle land,” Kirubai told MPs.