The Uganda Cabinet has approved the covenants and conditions for mortgaging government land by investors, a move that could see government save billions of dollars in proper allocation of land to genuine investors.
Government will now require investors to preset documentary evidence of financial capacity to fully use land; the activity schedule highlighting key milestone for the first 18 months duly broken into deliverables for every six months and written commitment that milestones will be met and where the investor fails, land is withdrawn.
Investors will also be required to show a detailed business plan; proposed total amount of investment in US dollars; ability to raise funds to implement to implement the project; expected project impact on the economy and alignment of the proposal with the National Development Plan.
According to the decisions of the Cabinet sitting at State House Entebbe this past Monday, a prospective investor will also present evidence of the investor’s Track Record (experience in implementing related projects) and the anticipated impact of the project on the environment.
The development comes amid a public outcry over misuse of land given to investors.
The Government, keen to attract foreign investment, has allowed foreign companies to acquire large-scale land investments for a range of projects.
According to ‘A Scoping Study of Illicit Financial Flows Impacting Uganda’ by Global Financial Integrity, Multinational corporations, often in partnership with Government, are taking the land, akin to land grabbing, which frequently results in depriving local communities of critical resources, securing long leases to exploit the land for private profits, extracting natural mineral resources, or growing crops for food, fuel, or carbon credits.
The legal regime on land has subsequently established many different government institutions and agencies with various mandates over land, often with contradictory and/or conflicting, vague mandates and blurred lines of operation, thus opening room for speculation and investments on land that lead to both legal and illegal financial inflows and outflows.
For example, Africa Gold refinery (AGR) was granted a 10-year tax holiday and free land to run a gold refinery.
However, the company makes a total of about $300m per annum which is repatriated to foreign countries.
Government was recently forced to repossess the Nakawa-Naguru Housing Estate land, nearly a decade after the investor, Opec Prime Properties, failed to develop the planned satellite city.
LAND ALLOCATION PROCEDURE
Cabinet further decided that the application for land allocation shall be processed in not more than two months from the date of receipt of the application.
A decision will be communicated, giving a lease offer or reasons why the application was declined.
When an offer is made, it should be valid for one month within which written acceptance of the offer must be given to Government by the investor (Company).
The value of the land allocated to an investor shall be determined and shall be captured as the contribution of Government.
The lease agreement is then signed between the investor and government subject to approved terms and conditions.
The processing of the Leasehold Certificate of Title shall not take more than two weeks.
No investor shall be allowed to take possession of the land without a signed lease agreement and Leasehold Certificate of Title.
Cabinet also resolved that “Government shall have powers to allocate any land for which a lease agreement has not been signed even if a lease offer has been accepted by the investor. Land allocation shall be confirmed only and only if the lease offer leads to signing of the lease agreement.”
No investor shall be allowed to take possession of the land without a valid lease agreement.
Any allocation of land for which a lease agreement has not been signed by the investor within a stipulated period shall revert back to Government and will be available for allocation of other investors.
The lease agreement shall be signed within one month following its approval by Government.
The investor shall take possession of the land within a period of six (6) months from the date the lease Agreement is signed.
Cabinet said the investor shall forfeit the land if possession is not effected within the stipulated period (Possession means starting to prepare the land for the planned development in line with the approved business plan.)
Terms and Conditions for Mortgaging the Right to Use Government Land
- Should possess a valid Lease agreement on the Government Land.
- Should not change land use without consent from the Government.
- Change in land use shall be allowed by the Minister responsible for Lands with approval of Cabinet.
- Government should allow investors to mortgage their property including the lease agreement (Right to use land over the remaining period in the lease).
- For an investor to qualify to mortgage Government land should have invested/developed at least fifty percent (50%) of the declared investment capital and needs funds for completion or expansion or operationalization of the investment.
- The required fifty percent (50%) of the total value of the declared investment capital referred to herein above shall be determined by the Office of the Chief Government Valuer or any other independent accredited valuer whose report shall be examined and approved by the Chief Government Valuer.
- Financial Institutions shall formerly request for consent from Government with respect to mortgaging the right use of the land by the investors stating clearly that they understand the terms and conditions in the relevant legal framework.
- Land ownership shall remain with the Government.
- Where the investor fails to pay, the Financial Institutions shall be entitled to take over the lease under its terms and conditions.
- Government shall maintain a register of all approval to mortgage the lease in line with these terms and conditions.
- The Certificate of Mortgage addressed to a specific financial institution shall be issued within one (1) month after the leasing authority is satisfied that the investor has complied with the covenants and conditions.
- In the event of default by the investor and subsequent foreclosure, the Bank shall notify the leasing authority.
- The Leasing Authority and the Financial Institution shall concurrently source for a new investor on similar terms and conditions of the lease agreement however, the Bank’s choice will be given preference.
- In case both the Leasing Authority and financial institutions fail to identify a new investor for the same land use, the government may change the land use in accordance with the Physical Planning Act to attract a new investor.
- In case the Financial Institution fail to comply with the set Covenants and Conditions, Government shall re-enter the land.
- In regard to Foreign Investors
- A Land Use Rights Certificate (LURC) shall be issued by Minister of Lands, Housing and Urban Development to the investor in consultation with the Leasing Authority at the time of acceptance of the lease offer;
- (ii) In addition to the restrictions to change the land use, an investor shall not transfer, sublease or sub-divide the allocated land expect with consent from the Government in consultation with the Leasing Authority;
- Foreign Investors should only be allocated leasehold and not any other tenure of land holding;
- Foreign Investors shall only be allowed to own leasehold tenure;
- Foreign Investors should be allocated a first lease term of 49 years but renewable upon expiry;
- Foreign investors to be allowed to mortgage developments on land, they should have invested at least 60% of the investment capital value.
- In regard Local Investors
- A Land Use Rights certificates (LURC) shall be issues by Minister of Lands, Housing and Urban Development to the Investor in consultation with the Leasing Authority at the time of acceptance of the lease offer;
- In addition to the restrictions to change the land use, an investor shall not transfer, sublease or sub-divide the allocated land expect with consent from the Government in consultation with the Leasing Authority;
- Local Investors shall be allocated leases with no provision of conversion to freehold tenure, and
- A local investor to get a mortgage should have invested at least 30% of the investment capital value.
- Application to both Foreign and Local Investors
- Once a mortgage is processed and granted to an investor, the mortgaged land /or properties shall be published in the Uganda Gazette.