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Land prices rise again as excavators roar in Konza – but will it last?

By Otiato Guguyu and Dominic Omondi | Updated Tue, December 20th 2016 at 00:00 GMT +3
The dredging of the soil and hum of activity is, after all, happening on an isolated 5,000-acre property off the Nairobi-Mombasa Highway.PHOTO: COURTESY

The sound of an excavator breaking through the black cotton soils of Konza plains in Makueni County might escape the attention of many.

The dredging of the soil and hum of activity is, after all, happening on an isolated 5,000-acre property off the Nairobi-Mombasa Highway.

But to the hundreds of people who have sunk millions into the plots around the expansive plains, these sounds offer hope that the $14.5 billion (Sh1.4 trillion) technopolis that exists on paper will soon become a reality.

These investors ravenously acquired land close to Konza Technology City (KTC), a Vision 2030 flagship project, as they waited for ‘Africa’s Silicon Savannah Valley’ to rise from what was infertile land inhabited by wildebeest and zebras.

By 2030, KTC is expected to create 100,000 jobs. However, since it was launched in January 2013, construction has been delayed, and many people’s hopes of recouping their investment shattered.

But now, construction has resumed on a fraction of the land set aside for the technology hub.

“Now that construction has started, prices will shoot up. I am now getting so many phone calls, not like before,” Erick Maina, a land dealer at Konza who also owns two acres in the area, told Business Beat.

Land speculators

In 2006, the Government announced it would set up a technopolis in the Konza plains fashioned after the US’ Silicon Valley. This news triggered a wave of excitement among land speculators.

In a physical development plan for Konza in 2013, the Centre for Urban and Regional Local Planning noted: “Land speculation is also rampant around the KTC based on anticipation for the new city to develop.”

This saw prices for land around the proposed city go through the roof. There were instant millionaires as the Government bought 5,000 acres from a group of 609 shareholders who occupied part of Malili Ranch where Konza Techno City was to be erected.

Each of these shareholders owned 7.8 acres. It is not really clear how much the Government paid them for their land. However, most of them are said to have received about Sh1.4 million, although others say they were given Sh1.1 million.

Back in 2006, 7.8 acres cost Sh200,000, or Sh25,641 an acre . A few years later, the Government bought the same size of land at Sh1.1 million, which translates to Sh150,000 an acre.

And when the Government set up a ring-fence around KTC, it created another group of multi-millionaires as those with property around the proposed city sold an acre at about 48 times above the average rate of Sh200,000.

By 2014, an acre adjacent to Konza City or in Malili township cost as much as Sh3 million. On the promise of the tech city, buyers kept trooping in, forking out millions of shillings for land that not long ago was dominated by scrubs and wild animals.

And then everything went quiet.

Lower prices

Except for a few sentries guarding against vandals and saboteurs, and a lone structure that housed a caretaker, years went by without anything happening at the site.

The hype dissipated, and land prices dipped to about Sh800,000 an acre.

“I thought [Konza] was something that was being built back in 2013, but this is when they are starting to build. If they had started construction at the time there was hype just after [former President Mwai] Kibaki launched it, the plots around the area would have risen in value about four times over,” Mr Maina said.

After the Konza site went quiet, uneasiness crept in. According to land dealers in the area, everything suddenly went bust and desolation slowly snuck back in.

“People were not buying completely. Some were saying that the city would never be built,” said Ann, a land dealer in Konza, adding that people approached her willing to sell their property at lower prices than they had paid for it, “but there was no one willing to buy the land.”

Property Reality Company General Manager Abraham Muriithi notes that people buy the potential in land, not the land in itself.

Now, however, another rush of disposing land has begun.

Konza Technopolis Development Authority (KoTDA) is mandated to realise the technopolis dream. However, its budget allocation dwindled immediately after Mr Kibaki broke ground on the 5,000-acre property.

The authority grappled with limited resources, few staff and a mammoth task, and dimming political goodwill after the exit from Government of the project’s biggest proponent, former ICT Permanent Secretary Bitange Ndemo.

Soon, the authority was struggling with implementation of the $14.5 billion technopolis, work was incomplete, and as the Auditor General noted, the few resources allocated to Konza were probably not being used prudently.

And then accusations of impropriety started flying around.

First were allegations that Malili Ranch Company directors had duped their members in the sale of the 5,000 acres. There were also corruption allegations levelled against seven high-profile individuals, including Dr Ndemo, Machakos Senator Johnstone Muthama and former Law Society of Kenya chairman Eric Mutua.

With all this going on, the project began losing its lustre before a single brick had been laid.

Auditor General Edward Ouko has also raised concerns that paint a rather bleak picture between what the authority says it has done and the reality on the ground.

Mr Ouko differed with KoTDA on whether a Sh58 million water project has been set up in the proposed city, saying the authority awarded the contract to an unnamed water company that has since left site without completing the job.

“A physical visit to the project revealed that the project was incomplete as gaping trenches of the pipeline and pipes were strewn all over the trenches, which had not been connected,” an audit report said.

Ouko added that two water tanks that had been included in the bill were incomplete, with weak handrails and walkways.

NO EXPLANATION

He also noted that two signboards paid for were not installed, a Sh700,000 contractor camera had not been set up, and the authority could not account for a Sh1.5 million cost on supervision of engineers attached to the project from headquarters.

Maintenance of the project engineer’s office was also not done, and neither was a chain link fence around the water tank and a double gate that was supposed to be put up with the fence.

“In the circumstances, it has not been possible to confirm the propriety of the expenditure totaling Sh2.9 million for the year ended June 2015,” the report said.

The Auditor General was also displeased that the authority left out the value of the 5,000 acres when estimating its assets. KoTDA put the value of plant property and equipment at Sh22 million as at June 2015.

“The balance excludes undetermined value of land LR No 9918/6 located within Makueni and Machakos counties, measuring 2023.6 hectares and whose title deed is in the name of the National Treasury.”

Ouko said no satisfactory explanation was given as to why the land had not been valued for inclusion in the financial statement.

Further, the planned city is still haunted by land compensation issues six years after the Government bought property from the community around it. Some people feel they were not adequately compensated, noting that while some were given Sh1.4 million, others received Sh1.1 million.

But KoTDA has dismissed these issues. In a report, the authority responded to the auditor’s allegations, insisting that the site is already connected to piped water from seven boreholes drilled on location. In addition, the authority said it is sourcing for bulk water supply from Nol-Turesh Water Supply Company.

“There was no issue in all those issues that were raised. Those were the initial stages when Konza did not have resources and used to outsource to different ministries, and sometimes information classification would take longer,” said KoTDA CEO John Tanui.

“We didn’t have resources. Actually, our staff is a year old or so.”

POLITICAL WRANGLES

He added that the project is on course: “It is very much alive and a lot of work has been done preparing for its take off.”

The 5,000-acre property has also drawn political wrangles over which county between Machakos and Makueni the technopolis lies.

Director of Survey Cesare Mbaria and Director of Physical Planning Augustine Masinde told the Senate lands committee chaired by Embu Senator Lenny Kivuti that Konza City is in Machakos County.

This, however, was in contradiction to submissions by the Independent Electoral and Boundaries Commission (IEBC) that showed it was in Makueni County.

Steering clear of these encumbrances, Mr Tanui repaints a picture of a grandiose, spectacular technopolis that should soon start rising from the grassland.

Behind the new enthusiasm is a complex financing model that has been touted to fix the problem of low budget allocations.

The Engineer, Procure, Construct and Finance (EPCF) model will see a contractor set out do a job and receive payment every financial year when the project gets budgetary allocations.

“We are in discussions with the Treasury over the EPCF financing. We have identified the best designs and contractor to implement it, and hopefully in a few months, subject to negotiations with the Treasury, we will be able to kickstart the project,” Tanui said.

KoTDA has also set up the necessary basic infrastructure for phase 1A of the project. It is also building the Konza Complex, which shall host, among others, the authority’s offices, Huduma Centres and a KCB branch.

Further, the Korean Institute of Advanced Science and Technology is in plans to help the country set up a Sh10 billion Kenya Advanced Institute of Science and Technology.

As for the intensive data that will be consumed by the techno city, KoTDA has completed designs for fibre connectivity on the main corridor from Nairobi to Mombasa, and before the end of the year, a contractor is expected to be on site.

“In the long term, all the major lines will be connected to Konza over eight independent fibre cables,” said Tanui, who added that there would be enough fibre connectivity in the city.

POLITICAL WRANGLES

Transport is also expected to be top notch, with Athi River-to-Machackos junction being expanded. The Government has also prioritised the Konza-Isinya Road, with plans for a railway station and line to the city in the offing.

There will be an airport just outside the technopolis, which, according to Tanui, will offer an alternative to the busy Jomo Kenyatta International Airport.

The Government has already commissioned the construction of power sub-stations in Machakos and Konza that should adequately supply electricity to the area.

It seems like things have finally started falling into place, with Tanui saying since last year when the authority advertised for expressions of interest, it has received more than 60 bids for phase one. Since inception, KoTDA has got more than 400 unsolicited expressions of interest.

“From April next year, we will see major construction plans. In June or July, we expect to see ground work begin,” the CEO added.

This sounds like great news for the hundreds of investors who feared they had burnt their fingers on yet another white elephant. However, it might just as easily trigger another boom and then a bust if the authority is unable to turn its plans into action. Only time will tell.

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