Introduction.
The proposed Local content bill models Local content legislation from other jurisdictions. Generally, local content legislations aim at persuading investors in the extractives sector, in this case, oil, gas, and mining sectors to develop plans on how local communities will benefit through employment, value addition, technology, and knowledge transfer.
Objective of the bill and guiding principles
The bill aims to boost Kenya’s extractive industry by prioritizing local participation. It mandates the use of indigenous workforce, services, and supplies to enhance local ownership and as a result, create jobs for local citizens. The bill also addresses challenges such as capacity limitations and lack of a legal framework that regulates local content in Kenya. It aligns with national values and principles of governance set out under Article 10 of the Kenyan Constitution, principles of natural resource ownership stipulated in Article 62 and the principle of equity in the sharing of benefits accruing from natural resources set out in Article 69.
Capacity building
The Employment and Skill Development Plan outlined in sections 25 to 29 of the bill, is intended to mandate operators to strategize and implement plans for local capacity building in the extractive industry. Operators are required to utilize technical service contracts, joint ventures, and technology transfer strategies to enhance local skills and knowledge.
Ways of implementing this plan will include making efforts to train local persons lacking expertise, setting procedures for training execution, and developing programmes for industrial and technical education. Foreign personnel engagement shall be minimized, and first consideration given to employing locals having necessary expertise, with discriminatory practices prohibited. Succession plans for positions not held by locals shall be submitted, ensuring understudy by local persons and adherence to local labour laws. These provisions aim to foster local capacity development and reduce dependency on foreign expertise in the extractive sector.
The bill also mandates fair bidding processes, prioritizes local companies for licenses and contracts, and encourages joint ventures between local and foreign companies. Further preference shall be given to local goods and services, with set thresholds for local sourcing. As per the bill, a minimum local content input is required. Also provided are guidelines for local equity ownership and tax incentives to support training and capacity building. Additionally, a Local Content Training and Development Fund is established, funded by operators. These measures aim to maximize benefits for the local economy and workforce.
License and Permits
To obtain licenses and/or permits, operators shall submit detailed local content plans covering procurement, local employment, and workforce development. They must also comply with minimum local content requirements set by the responsible Cabinet Secretary, in consultation with the Local Content Development Committee intended to be established. The Committee shall have the mandate to review these plans within sixty days with public participation, communicating decisions promptly.
Compliance Mechanisms
Regulations will be formulated to ensure adherence to minimum standards, training requirements, and reporting protocols, with potential jurisdictional authority granted to county executive committee members. These provisions collectively aim to foster transparency, accountability, and adherence to local content regulations within the extractive sector.
Part VI of the bill encompasses miscellaneous provisions crucial for the effective implementation, monitoring, and enforcement of the Act governing local content in extractive industries. Operators are mandated to submit annual work plans detailing their activities, budgets, and procurement projects to the Committee. Monitoring and reporting mechanisms are established to track local content expenditure, with operators required to maintain records subject to audit. The Committee is tasked with monitoring compliance and submitting reports to the Cabinet Secretary, alongside recommending strategies for local content adoption. Public participation guidelines will be prescribed, with the Committee facilitating stakeholder engagement through various means.
Offences
The bill also specifies various offences and penalties for non-compliance. Individuals who submit false statements in documents related to the bill may face fines of up to two million shillings or imprisonment for up to three years, or both. Moreover, Kenyan citizens collaborating with foreign entities to misrepresent themselves as indigenous Kenyan companies for meeting local content requirements could be fined up to three million shillings or imprisoned for up to five years, or both. Similarly, those conniving with Kenyan citizens to deceive the committee commit an offence and may face similar penalties. Operators or connected entities failing to adhere to local content requirements, to submit necessary plans or reports, may be fined up to 5% of proceeds from the activity, not exceeding two million shillings, or face contract cancellation.
For offences not explicitly penalized, individuals may be fined up to eight hundred thousand shillings, imprisoned for up to twelve months, or both. If an offence is committed by a body corporate or association, individuals involved in management are deemed responsible unless proven otherwise, this being one shortcoming from the bill as it automatically lifts the cooperate veil, disregarding the fact that a body cooperate exists as a separate entity from its management. The Cabinet Secretary has the authority to revoke or suspend an operator’s licence if convicted of an offence under the Act.
Conclusion
Overall, the bill is a significant step forward for Kenya in addressing shortage of jobs for local communities and ensuring that communities benefit from natural resources within their setting as stipulated by the constitution. In summary, the bill seeks to promote local participation and benefit-sharing in the extractive industry, thereby contributing to economic development and empowerment at the local level.