By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), Winner of Kenya’s ADR Practitioner of the Year 2021, ADR Publisher of the Year 2021 and CIArb (Kenya) Lifetime Achievement Award 2021*

The Natural Resources (Benefit Sharing) Bill, 2018 seeks to establish a system of benefit sharing in resource exploitation between resource exploiters, the national government, county governments and local communities; and for connected purposes. The proposed legislation essentially seeks to provide a legislative framework for the establishment and enforcement of a system of benefit sharing in natural resource exploitation between natural resource exploiters, the national government, county governments and local communities and designates the Commission for Revenue Allocation to oversee the same.

Notably, the legislation shall apply to the following natural resources— sunlight; water resources; forests, biodiversity and genetic resources; wildlife resources; industrial fishing; and wind. The legislation, if enacted, will also amend the Mining Act 2016 by amending section 83 thereof in order to review the royalties payable. While the pending legislation will have a wide application and touching on the various types of natural resources, it is worth pointing out that the suggested amendment on the mining Act 2016 will have a huge bearing on the proceeds of mining activities in the country, if passed. The same seeks to ensure that all the interested stakeholders will have a share of the accruing benefits. The Bill has been pending for over five years due to the contentious issue of benefit sharing between national and county governments, amongst other issues.

The Benefit Sharing Bill addresses some important aspects encapsulated in the Africa Mining Vision 2009. This includes the fact that state’s ability to optimise the leasing (licensing) of its natural resource assets is concentrated at the outset (conclusion of the exploitation contract) as it is difficult to fundamentally renegotiate contracts at a later stage without sending negative signals to investors on the certainty of contracts, with resulting increased negative investment risk perceptions. The Mining Vision thus recommends identifying all the critical resource linkages at the outset (in the resource exploitation contract/lease/license), even if the local economy is not yet in a position to take advantage of such opportunities. These are some of the issues that the country’s legislative and institutional framework on extractives is trying to capture through enactment of laws and regulations. However, despite such efforts, implementation of these laws and regulations is doubtful. For instance, while there are regulations seeking to empower the local people on the extractives by equipping them with skills and expertise for technology transfer, there have been damning reports that the government agencies responsible for overseeing this are not carrying out their mandate.

Kenya’s Petroleum Ministry is on the spot for failing to utilize millions of shillings set aside for training Kenyans on petroleum operations despite the country facing a severe skills shortage. Empirical studies by other scholars have concluded that good institutional governance – specifically, a strong public voice with accountability, strong political stability, good regulations, and powerful anticorruption policies tend to conduce a positive relationship between natural resource richness and economic development. This is even clearer in the case of Nigeria where it has been reported that, despite the enactment of various laws, the culture of impunity and corruption has continued to occupy the country’s oil industry and poverty reduction remains elusive. However, this does not mean that Nigeria is not an implementing country of EITI. In 2019, Nigeria was rated as having made satisfactory progress overall with implementing the EITI Standard. Notably, the EITI Board points out that even if a country is found making satisfactory or meaningful progress, it does not indicate whether there is corruption in the country or not. It simply means that the country has put into practice significant aspects of all EITI Requirements and thus has sufficient mechanisms of public disclosure of natural resources. In other words, EITI membership and implementation alone is not enough.

In essence, the issues affecting the extractives sector in Kenya are not limited to those related to modes of benefit sharing. There has been a general lack of openness, transparency and accountability as far as the mining activities are concerned. Such situations may have informed the provisions in the Petroleum Act 2019 which provides under section 49 (5) that any contract is a public document and the Government shall have the right to publish and keep it publicly available. Despite this forward looking and commendable provision on accountability and transparency, we are yet to see the publication of such contracts touching on oil and gas agreements in the country. It is estimated that so far, out of the 44 Production Sharing Contracts signed by the government of Kenya, only 10 have been publicised.

In addition, as far as accessibility of information is concerned, it has been observed that the government of Kenya maintains an open data portal and has to some extent availed information on it on some of the on-going projects. However, key information regarding fiscal terms, negotiations and payments is missing on the sites. While there are many legal and regulatory framework covering contracts, exploration and production, it has rightly been pointed out that the legal framework on revenue collection, revenue allocation and social and economic spending is skeletal at best or is completely non-existent. In addition, the inclusion and involvement of civil societies, non-governmental organisations and other stakeholders in the transparency and accountability framework is also missing as part of independent oversight across the value chain.

Transparency through public disclosure of the Production Sharing Agreements and other contracts that the government has signed with mining, oil and gas companies builds citizen confidence in the institutions overseeing the governance of the sector and assists in managing expectations. In addition, mining, oil and gas resources are owned by the citizens and are merely managed in trust by the government. Citizens, therefore, have a right to information regarding how their resources are managed. Transparency initiatives in the extractive industries have also made it possible for governments and citizens to engage in the governance of the sector where some governments such as Liberia, Sao Tome, Nigeria, Mongolia, and Ghana have used the EITI to either engage citizens in policy dialogue about resource utilization or governance issues of the extractive industries.

*This article is an extract from the Article: Securing Our Destiny through Effective Management of the Environment, (2020) Journal of Conflict Management and Sustainable Development Volume 4(3), p. 1.  by Dr. Kariuki Muigua, PhD, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Publisher of the Year 2021 and ADR Lifetime Achievement Award 2021 (CIArb Kenya). Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized among the top 5 leading lawyers and dispute resolution experts in Kenya by the Chambers Global Guide 2022.

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