On Saturday, the Capital Gang discussed, among others, Dangote East African Refinery.
During the debate, two of the panellists wondered aloud why the Nigerian billionaire chose Lamu in Kenya for his $16 billion investment, given Kenya’s litigious history. They were surely up to something.
As of today, at least two petitions have been filed in Kenyan courts challenging the refinery’s construction; the first was by a group of 130 residents of Lamu, who claim the land taken up for construction is their ancestral heritage.
The second petition was filed by the Consumers Federation of Kenya (COFEK) that wants key details of the refinery made public – possibly for their use in further litigation. On the face of it, Kenya seems like a hard place to do business.
A place where, every now and then, for any reason, someone runs to court and the court gives them the order they want, which many times means delays for the project, and tests investors’ patience and resolve.
Yet, the reality is different, a polar opposite – especially in the long run. Take the historic 2017 decision of the Kenyan Supreme court that overturned the presidential election of that year and ordered a re-run against an incumbent president.
Given that elections in Kenya tend to be chaotic and disruptive, the ruling had an instant impact on the Nairobi Securities Exchange (NSE) with losses estimated at $1 billion within hours. Terrible happening, right? In the long run, however, the story is different.
Records now show that for some investors, that was the moment they decided that Kenya was the place to take their money for the simple reason that if a sitting president could lose a court case, which has happened less than five times in Africa, then anyone could win one.
For all the ‘inconveniences’ that come with a rule-based system, it still remains the most suitable for many people with billions of dollars to invest. After all, a system that simply requires everyone to play by known and well stipulated rules, with a judiciary ready to rule against anyone who does not – including the president – in favour of those who do, will always have more advantages, compared to one that swings back-and-forth depending on say the whims of a “big man.”
For many investors, it is a no-brainer that if the words of a “big-man” open and close doors and not impartial judges, that can mean they will lose the dispute if their opponent is closer to the big man, or willing to pay more.
Yet regardless of what one does, they can never be sure they are closer to the big man. So, it is not surprising that when the Kenyan judiciary ruled against their would-be big man, some investors looked no further.
Certain happenings suggest that Uganda has opted for the other side of the coin. For instance, on August 7 this year, the Daily Monitor reported a story where the Chief Justice was quoted as warning judges that “halting strategic oil projects is equivalent to treason”.
While the importance of the projects in the oil sector cannot be overstated for a poor country like Uganda, the best route will always be the one that follows the laws, and gives judges handling cases enough legroom to act independently.
Nigeria’s Niger Delta and the oil-exploration problems it faces today – massive oil spills, pollution, armed gangs, to mention a few – remind us of the dangers of rushing investments in a sector as vital as oil in total disregard of legal, environmental, and ethical standards.
Moreover, running away from the inconvenience of litigation by ordering judges not to interfere can have the effect of driving would-be litigants to international courts – given some of the companies are multinational – in a realm where we have zero leverage as a country.
Then there will always remain the elephant in the room: what happens to rushed projects when another government takes over?
Clearly, in deciding to handle the inconvenience of litigation related to investment, allowing the judiciary sufficient legroom to decide upon matters worth billions of dollars based on the law and precedent, the Kenyans have taken the route that brings returns, perhaps not in the short run, but certainly in the long term.
The writer works with Agora Center for Research