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Protect the long-term investors from harassment by local elites

Wednesday October 23 2019

DelMonte

An aerial view of pineapples growing at Del Monte Kenya Limited farm. FILE PHOTO | NATION MEDIA GROUP 

JAINDI KISERO
By JAINDI KISERO
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We really need to renew our faith in free enterprise. We are slowly evolving into a society that is hostile to free enterprise.

The other day, I came across an agreement between Kiambu Governor Ferdinand Waititu and the agribusiness multinational Del Monte, in which the company ceded to the county government some 690 acres that it had owned since 1949.

It was all part of the terms which the county government had introduced as conditions for approving extension of leases for part of the land the company has been operating in and which expired this year. The county said it needed the land for major property projects in Thika Town.

PROJECTS

We all know that Kiambu neither has the capital nor capacity to implement projects of the size and scope it claims to be contemplating.

Although the arrangement with Del Monte was framed as a mutually agreed deal, we all know that the multinational was arm-twisted into ceding the land, which will, eventually, end up in the hands of land-grabbing elites. It will not take long before a scandal explodes over the land.

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What is telling is that the deal between Kiambu and the multinational has now given neighbouring Murang’a County fresh impetus to also press Del Monte to cede to it 2,500 acres of its land.

Del Monte owns a total on 9,000 acres in both Kiambu and Murang’a, of which 1,500 is leased from private owners.

Since the battle with the county government in Murang’a is in the courts, I will restrict my comments to broader public policy questions which the trends we are witnessing in both counties raise.

First, we must all the time remember that respect for private property is the foundation of market-based economies.

CONFIDENCE

I read somewhere that one of the factors that allowed industrial conglomerates such as Arthur Guinness to emerge in the 18th century Europe was that they were granted leases of 9,999 land leases that gave generations of the business the confidence to invest in massive infrastructure, including ports and railway systems.

Long-term investors are only prepared to commit billions of dollars when they know that the land leases they have acquired will be renewed at a peppercorn rate when the expiry date calls.

The tribulations and pressures which Del Monte has been subjected to are bound to have implications on the country. As a long-term player, you don’t want to commit your resources in an enterprise only to be informed on expiry of land leases that no renewal will be forthcoming unless you cede some leases.

We really need to come up with a national policy with transparent ways of managing, but also protecting expiring long-term leases, especially when it comes to large consolidated pieces of land such as expansive private plantations and individually-owned ranches.

LARGE COMPANIES

Today, multinationals running large companies in the countryside are enduring pressure from multiple local leaders — governors, MCAs, senators, MPs — all claiming to have veto powers over decisions made by multinationals operating in their jurisdictions.

Indeed, the advent of the county system of government has brought with it a wave of illiberalism that is now considered a major source of uncertainty and a political risk factor for multinationals operating in the countryside.

We remember the drama in June, when Nandi Governor Stephen Sang lead a group to invade a tea firm belonging to a multinational company?

Investors have to operate in an environment where political power is so diffuse and where one cannot tell whether to seek protection from the national government or from the county government.

Because of their size, turnover, size of the workforce and contribution to taxes, exports and exchange, companies such as Del Monte belong to the category that businesses wonks call “systemic players”. These ought to be supported because their fortunes have an impact on the health of the broader macro-economy.

EXPANSION PROGRAMME

Del Monte processes more than 240,000 tonnes of pineapple annually, making it Kenya’s largest exporter of fruits and beverages. It has a total workforce of 7,000 and has lately been on an aggressive expansion programme.

We need to disabuse county government elites of the mindset that deceives them into believing that they have more rights and entitlement to the benefits of operations of large multinationals operating in their territories than the rest of Kenyans.

Systemic players should be insulated from manipulation, unnecessary pressure and having to cede to parochial demands by the elites.

Our hard-earned reputation as a safe investment location, where private property is protected and honest pursuit of wealth respected, is at risk.

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