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Content Bill gives Kenyans their fair share of oil wealth

COMMENTARY
By Gideon Moi | May 15th 2017

Kenya's oil production and exportation prospects have stirred sentiments of excitement and tension in equal measure. Both reactions are understandable.

The 750 million barrels of viable oil reserves beneath the ground have the potential to set off an unprecedented economic transformation, explaining the excitement.

On the flipside, oil reserves can easily become a curse rather than a blessing, as the experience in parts of West Africa, North Africa and Middle East lucidly illustrates.

The downsides

The impact of the so-called resource curse on many countries around the world has been well documented.

In many countries, abundance of natural resources has generally been associated with increased isolation of communities, deepening inequality, environmental degradation and armed conflict.

According to a report by the United Nations Development Programme (UNDP), poverty is higher and falls more slowly in resource-dependent economies than in non-resource-dependent ones.

Between 1980 and 2011, resource-dependent countries consistently underperformed non-resource-dependent countries in the Human Development Index, the United Nations Development Programme report further indicates.

These illustrations underscore the importance of inclusive polices in the extractive industry, especially in developing countries such as Kenya.

Consequently, a mineral producer that wants to obtain and maintain a social license to operate in a community must clearly demonstrate how it is adding value to the locals.

The Senate Committee on Energy, which I chair, has responded to this critical issue by drafting the Local Content Bill, 2016. The Bill will impact the whole extractive sector and not just oil and gas, though the latter will enjoy the initial benefits.

Beneficiaries

The Bill requires that a minimum percentage of value of goods and services supplied to players in the extractive industry be from Kenyan sources.

Creating these backward linkages will ensure that the extractive industry does not operate as an enclave, benefiting a few deep-pocketed investors, but benefits local industries as well. This will open up opportunities across a broad spectrum of different sectors, including financial services, transport and logistics, and security, among others.

The Bill also requires that miners give first consideration to locals who have requisite expertise or qualification when hiring. This will facilitate the skills and technology transfer that this country urgently needs to fast-track industrialisation.

Interventions comparable to what the Bill proposes have been undertaken with great success in Norway, Trinidad and Tobago, Kazakhstan, Brazil, Indonesia and Nigeria. Kenya is therefore following on the foot trails of global best practice.

Advancing interests

It is important to clarify that this Bill is not aimed at adding layers of complexity to an already heavily regulated extractive industry.

Rather, it is aimed at advancing Kenyans' interests in line with the spirit and letter of our Constitution, in particular Article 69 (1), which stipulates that Kenyans should benefit from the country's natural resources in an equitable fashion.

All over the world, and especially in Africa, miners primarily employ quick fixes such as grants to marshal positive publicity and sanitise injustices towards local communities.

Although grants make for good press, they are unsustainable and seldom drive lasting transformation. On the contrary, grants erode the capacity of local communities to deal with their own problems.

The Bill will counter this grant culture by unlocking economic opportunities for communities and empowering them to tackle their own challenges.

Shared gains

After the Bill is passed, miners and local communities will no longer be suspicious neighbours, but strong allies with a shared vision of economic prosperity. There is no overstating how critical this is to overall peace and stability in resource rich areas.

We have to be realistic about the situation on the ground in resource-rich areas such as Turkana. Many people in the area are already armed with AK-47s and other lethal weapons primarily intended for protection from cattle rustlers.

 These weapons can easily be used for other more sinister purposes if an inclusive approach to the oil wealth is not taken.

 The Local Content Bill 2016 is the game changer that will forestall these dangers and ensure greater local participation in the country's nascent oil and gas sector and the extractive sector in general.

I am encouraged by the warm reception that the Bill has elicited from key stakeholders and the public at large, and have every confidence that it will be passed into law when the time comes.

  Hon Moi is the Senator for Baringo County and the Chairman of the Senate Committee on Energy

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