Kwale Sugar and Govt of Kenya tussle over land

by Wakili Liam

Land grabbers within the government of Kenya have set the state on a warpath with Kwale International Sugar Company Limited (Kiscol)

Kiscol is accusing the government for breach of statutory and contractual duties over its lease of 15,000 acres of land for cane farming. The sugar firm is seeking Sh32 billion.

Kiscol says it has set up its greenfield sugar manufacturing plant on the parcel within Kwale County and holds a sublease dated August 20, 2007, between itself and the government.

It accuses the government of failing to provide it with full, unhindered and peaceful possession of the leased area.

Kiscol, which is one of the companies within the larger Pabari Group of Companies, has sued the Treasury Cabinet Secretary and the Attorney General at the High Court in Mombasa.

The company says there are squatters who claim portions of the leased area.

According to Kiscol, the squatters occupied approximately 5,816 acres and are scattered in seven areas.

“The plaintiff’s efforts to access portions of the leased land occupied by the squatters were frustrated by a court order,” says Kiscol, adding that it managed to have the order set aside on March 13 2018 before a petition by the squatters was dismissed in January this year.

The sugar miller argues that it was an express and implied term of the sublease that it would have full and peaceful possession of the land.

Kiscol says that at the inception of the project and granting of the sublease, it had been made known to the government that the greenfield project was modelled and designed around availability of land and unhindered access to it.

It also argues that in breach of the legitimate expectation created by the defendants, it has not been able to access the entire leased area and has accessed approximately 50 per cent of the leased land.

“The plaintiff has so far invested USD 300 million in the project but the investment cannot yield the projected results because the project is not operating optimally, in fact, the plaintiff is now forced to go into a second restructuring exercise with syndicated lenders,” argues Kiscol.

Kiscol says that the reason for sub-optimal operation is the inaccessible land which has led to incomplete irrigation and power generation infrastructure, underutilized cane crushing equipment, reduced production, increased cost of operations and reduced income.

The sugar miller also says that as a result of the defendant’s acts and omissions, it could not implement its project as planned and consequently it was unable to meet its loan obligations as and when they fell due.

“To save the plaintiff from possible extinction, the plaintiff and its syndicated lenders carried out a forensic audit leading to a revised business plan in 2015,” says the company.

According to the company, the revised business plan was prepared on the key assumption that the defendants would avail the entire lease land to it.

Kiscol says that from its prior research, the average yield on irrigated cane is 110 tons of cane per day (TCD) while the average yield on rain-fed cane is 61 TCD.

This, Kiscol says informed its desire to model its project around irrigated cane within its nucleus, with minimal reliance on rain-fed agriculture.

“To be able to achieve those yields, the irrigation system must be installed and operated at optimum capacity. Such installation is only possible when the land is fully accessible,” argues Kiscol.

Other than the occupation of squatters, Kiscol says that the government in breach of its statutory duty hived off a portion of land and allocated it to Base Titanium Ltd without following the law.

It says that the hiving off the land should have led to compensation being paid to the government.

“If at all the defendants demanded and received compensation from Base Titanium Ltd, they breached their contractual and statutory duty by failing to remit part of the compensation to the plaintiff,” argues Kiscol.

The company is also seeking a declaration that the defendants’ actions as pleaded amount to a breach of statutory and contractual duties owed to it.

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