FAQs on the Local Content Bill 2016

The concept is defined as the development of local skills, technology transfer, the use of local manpower and manufacturing. It is building a workforce that is skilled and a competitive supplier base.

Section 2 of the Bill defines local content as "maximizing the level of usage of local goods and services, people, businesses and financing".

Benefit sharing is different from local content in that the former seeks to devolve revenue accrued from the exploitation of natural resources. Generally, it seeks the equitable sharing of benefits arising from the use of natural resources.

Local content on the other hand is the added value brought to the local or national economy from an extractive (oil, gas or mining) project through workforce development and supplier development and competiveness.

Local content regulations are normally drawn in order to achieve 3 specific objectives;

  • Control - placing an emphasis on local ownership of enterprises participating in the value chain;
  • Participation – advocating cooperation between foreign and local firms, also incorporating local skilled and unskilled workforce;
  • Value – maximizing the value of the resource to the country, rather than maximizing the overall value of the resource.

Local Content Policies can help domestic firms in developing countries integrate themselves into global economic networks. It has also been argued that Local Content Policies can contribute to the productivity and competitiveness of domestic firms, specifically SMEs, through knowledge and technology transfers that take place from foreign firms to domestic firms.
It has also been observed that most advanced economies utilized industrial policies similar to those of Local Content Policies to boost their domestic economy while in the early stages of their industrial revolution to promote growth and integrate their industries with the global economy.
The above is especially evident in the Chinese economy, and during the early stages of growth of the United States economy.

The Bill is meant to benefit anyone participating commercially in activities related to the exploration, extraction, development and exploitation of oil, gas and other mineral resources in the extractive industry in Kenya. Therefore, anyone seeking to get involved in the extractives industry, whether directly through exploration, extraction, development and exploitation of oil, gas and other mineral resources or by any other indirect means is to benefit from the Bill.

The Bill deals with commercial activities related to the exploration, extraction, development and exploitation of oil, gas and other mineral resources in the extractive industry in Kenya. Therefore, apart from the extractives sector, it deals with other activities, that are meant to provide or supplicate the extractives sector.

  1.  The Local Content Development Committee

The Committee is mandated to identify sectors in which value-addition opportunities exist along the extractive value chain industry, facilitate the realization of local content through, ensure delivery of maximum local value addition and pursue supportive policy objectives across all policy frameworks with the view of giving effect to the law.
Clause 8 of the bill sets forth its functions which include overseeing, coordinating and managing the development of local content in Kenya. Such a provision in itself is so broad that achieving it will be a challenge. The committee is also invested with the power to appraise, evaluate and approve local content plans as well as oversee in consultation with the county governments, the implementation of local content policies and strategies by operators.
The committee shall also be expected to routinely assess local capabilities and keep regular review of the capabilities

2. The County Government

The bill sets out the functions of the county government in clause 6 (4) which generally are to assist local contractors and companies within the respective counties to develop their capabilities and capacities to further the attainment of the goal of developing local content in the extractive industry within the respective county, implement the cross-cutting policies formulated by the National Government with respect to the implementation of local content and monitor and put in place measures to facilitate the implementation of local content performance by all operators in the respective county in accordance with the provisions of the bill among other provisions.

3. The Secretariat

It is an administrative unit within the Ministry responsible for matters relating to the extractives industry. It is established under clauses 17. It essentially deals with the technical aspect of administration of the extractives. It functions are stipulated under clause 18.

4.The Cabinet Secretary

The Cabinet Secretary has been granted a wide array of power which range from nominating members of the Secretariat, designate the minimum local content to be applied by any operator engaging in any extractives activity under the bill, designate any other plan he or she deems fit apart from the existing ones under clause 20, prescribe rules on local content certification and in so doing, as captured under clause 22 (1) prescribe a methodology for determining the percentage of local content in goods and services acquired or delivered in Kenya. The Cabinet Secretary is also invested with the jurisdiction of formulating a strategic plan on technology transfer which shall be included in contracts, agreements, concessions and licenses granted to an operator.

The bill, if assented into law, shall require an operator, before applying for a license, prepare and submit to the committee a long term local content plan. The plans should set out, as required in clause 20, information on;

  1. The procurement and utilization of locally procured goods and services available in the locality in which the extractive activity is to be undertaken, where such goods meet the standards in the extractive industry

2. The qualification requirements and employment of local persons to be engaged in the extractive or related activities and the standards for remuneration of such employees

3. Workforce development strategies in relation to locals, including training plans and projections to address any skill gaps that may have been identified in relation to the local labor force

4. Strategies for the support of local participation in activities of the operator and exploration and production work program.

5. And budget estimate with regard to the local content components of the project.

The content plan, as provided for under clause 20 (5), shall also include employment and development plan, research and development plan, financial services plan, succession for positions not held by Kenyans and such other plans that the Cabinet Secretary may prescribe.

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