Tatu City symbolises woes of foreign direct investment

Tatu City symbolises woes of foreign direct investment

It was primed as the “world-class, mixed-use new city, located within the greater Nairobi – East Africa’s new economic hub.”

But since its launch in 2010, the development of Tatu City has been nothing but endless court drama that has delayed it four years as the partners’ battle for control.

Beyond the glamour that marked the launch in 2010, Tatu City has come to symbolise the woes of foreign direct investment in Kenya.

It has been characterised by an elaborate extortion scheme, fraud and theft.

Those at the centre of the vicious battle in both Kenyan and Mauritius courts are New Zealander Stephen Armstrong Jennings, who is the founder and lead investor in Rendeavour, the US-based pan-African urban land developer focused on providing high quality infrastructure, planning and urban management; Robert James Reid a shareholder; former Central Bank of Kenya governor Nahashon Ngige Nyagah, industrialist Vimal Shah, former, Tatu City CEO Lucas Omariba, a Kiambu farmer Stephen Mwagiru, and Havi & Company Advocates.

With a portfolio of over 30,000 acres, Rendeavour’s shareholders and management are long-term investors in Africa, with decades of experience in the continent and other emerging markets. It has interests in Kenya, Ghana, Nigeria, the Democratic Republic of Congo and Zambia, among others.

Rendeavour is the majority owners of Kofinaf Company Ltd, which also owns about 7,500 acres of coffee farms in Kiambu County, with several land titles and other holdings such Eaagads and Garton Ltd and the 2,500 acre-Tatu City Limited.

To understand the on-going court battle, one has to go back to 2008. Then, three Kenyans approached Jennings with a proposal to partner in acquiring land in Ruiru, Kiambu County. They were Nyagah, Shah and Mwagiru.

The proposition was accepted by Jennings and in the same year, the process to acquire Tatu (2,500 acres) from its Belgian owners for $20 million (Sh2.12 billion at current rates).

The three Kenyans brokered the transaction and, according to documents in the possession of the Nairobi Law Monthly, pledged to support the project’s full development.

Though they were pledged to support the project, the full purchase price of $20 million was fully financed by Jennings and other international investors. The three Kenyans were just but the face of the project.

As part of the transaction, the partners in 2010 secured an option to acquire the 7,500-acre Kofinaf coffee farms (formerly Socfinaf) from the Belgians for $62.5 million. Again, Jennings, through offshore lenders, arranged for the loan and a $7.5 million (Sh791 million) equity investment to secure the option. The three Kenyans were only kept on board as a goodwill gesture as they did not contribute anything. Instead, and as the documents show, Nyagah, Shah and Mwagiru were paid a $500,000 finder’s fee for the transaction.

In the same year, 2010, the three Kenyans told their foreign partners of their vision for providing Nairobi and all of Africa with a world-class urban solution. As a further sign of goodwill from the foreign investors, they were appointed as board directors of Tatu City and the project was announced in October 2010.

But as soon as the launch announcement was made, things came to a head and the devious schemes to block the project and extort money started. The documents in our possession point to a scheme by the three to take over the Tatu City land for themselves.

According to the documents, Mwagiru is accused of registering falsified affidavits and caveats to stall Tatu’s development to prevent Kofinaf from selling land to meet its loan obligations. Between 2010 and 2013, the project stalled as the partners battled in court for control of the land for Tatu City development as well as Kofinaf.

The delaying tactics employed by the schemers included attempts to disqualify lawyers and disqualify judges, introducing new defendants who were asking to join the cases, applications to stay pending other cases and appeals of decisions, applications for temporary stays, repeat objections on the same unsuccessful grounds, and allegedly influencing court officials.

While the court cases were proceeding intermittently, courtesy of the delaying tactics by the Kenyan partners, one of them is alleged to have approached Rendeavour with a proposition that they were willing to withdraw the cases in return for an outrageously high payment. This was flatly rejected.

It was not until January 2013 that the court quashed the cases against Tatu City, and ruled as fraudulent the actions of Mwagiru, his mother Rosemary and a court clerk.

In the meantime, between 2013 and 2015, the Kenyan directors were reduced to minority shareholders. This was after Shah, Nyagah and Mwagiru refused requests to co-fund Tatu’s development. Instead, the interests they had in Tatu City were transferred to American and European investors who were willing to provide full financing for project’s development. As it stands, 77 per cent of the project is owned by an investment consortium whose majority shareholders are Jennings and American Frank Mosier – with a combined asset value of $360 million (Sh38.2 billion).

But even as the court cases in Kenya were dragging on, Shah, Nyagah and Mwagiru hatched another plot to register offshore investment vehicles in Mauritius where they started fighting each other.

“On May 8, 2015, Nahashon Nyagah lost two major court cases against Steve Mwagiru in Mauritius, leading to the dilution of Nahashon Nyagah’s shareholding to less than 1.78 per cent of Tatu City. His only apparent hope of recovering any value is through extortion in Kenya,” one of the documents states.

Even as he lost the case, Nyagah, as the chairman of the Tatu City board, is said to have been paid in excess of $800,000 (Sh84.8 million) over the period of the investment.

But the dream of a “world-class, mixed-use new city” is still far from being realised as some of the partners and Kenyan defendants have filed additional legal challenges to the project in Kenyan courts to block its development. Some of the cases have been filed as late as 2015.

“Vimal Shah and Nahashon Nyagah refuse to acknowledge and abide by majority board decisions, and held a ‘board meeting’ with no notice, and with only themselves present – a blatant violation of board covenants and illegal under Kenyan law. (They have made) libellous claims about shareholders ‘pilfering’ the proceeds of land sales, when no such thing has occurred, and they themselves approved the company business plan as board members. Nyagah has used his influence over officials to block work permits and call immigration checks on visiting employees,” another document reveals.

As Tatu City begins to take shape with the expression of interest from major international brands like Dormans of the US, the existential threat to foreign direct investors in Kenya has not disappeared as court corridors and boardroom battles have become the venue for claiming perceived or real interests.^

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