Law on oil must drive pros­per­ity

In many coun­tries, ex­ploita­tion of nat­u­ral re­sources is in­vari­ably linked to graft and poverty

The Star (Kenya) - - Front Page - ALEX AWITI

Kenya will soon join the ranks of oil ex­port­ing coun­tries. Pres­i­dent Uhuru Keny­atta an­nounced that Kenya would pump and ex­port an es­ti­mated 2,000 bar­rels of oil per day be­fore the next gen­eral elec­tion. At the cur­rent oil prices, these petroleum ex­ports will gen­er­ate enough rev­enue to pay about 203 MPs their salaries and al­lowances for one year.

But is Kenya pre­pared to nav­i­gate the slip­pery slope of the hy­dro­car­bons bo­nanza? Can oil rev­enues drive eq­ui­table or shared pros­per­ity? Our record and ex­pe­ri­ence with mas­sive cash re­ceipts like the Eu­robond is not in­spir­ing.

Africa’s ex­pe­ri­ence with hy­dro­car­bons and min­eral ore has not been rosy. In a ma­jor­ity of Africa’s re­source-rich coun­tries, ex­ploita­tion of nat­u­ral re­sources is in­vari­ably linked to cor­rup­tion, eco­nomic stag­na­tion, con­flict, so­cial in­equal­ity and wide­spread poverty. This ap­par­ent para­dox is re­ferred to as the Re­source Curse. Paul Col­lier, Ox­ford Univer­sity econ­o­mist, has ar­gued that poor man­age­ment of large in­flows of nat­u­ral re­source rev­enues makes other ex­port ac­tiv­i­ties un­com­pet­i­tive and sti­fles eco­nomic di­ver­si­fi­ca­tion, lead­ing to lower eco­nomic growth.

For a long tine Nige­ria was the poster boy of the Re­source Curse. Armed rebels, op­er­at­ing un­der the name of the Move­ment for the Eman­ci­pa­tion of the Niger Delta, have in­ten­si­fied at­tacks on oil plat­forms and pump­ing sta­tions. Ac­cord­ing to leaked in­ter­nal fi­nan­cial data ac­cessed by the Guardian, Royal Dutch Shell paid Nige­rian se­cu­rity forces hun­dreds of mil­lions of dol­lars a year to guard their in­stal­la­tions and staff in the Niger Delta.

A raft of le­gal in­ter­ven­tions, in­clud­ing a sov­er­eign wealth fund, ben­e­fit shar­ing as well as de­tailed reg­u­la­tions that spec­ify pro­duc­tion agree­ments are in var­i­ous stages of draft­ing, pub­lic con­sul­ta­tion and de­bate. All of these are in­tended to en­sure that Kenya averts a Re­source Curse and re­ceipts from nat­u­ral re­sources con­trib­ute to shared eco­nomic pros­per­ity.

The lat­est in this plethora of laws and reg­u­la­tions is the Lo­cal Con­tent Bill pub­lished by the Se­nate. The in­tent of the Bill is to cre­ate a frame­work to sup­port “in­di­geni­sa­tion” of fi­nan­cial, tech­ni­cal ca­pac­ity and lo­cal value cap­ture across all ac­tiv­i­ties in the ex­trac­tive sec­tor, es­pe­cially oil and gas.

The supreme pur­pose of lo­cal con­tent leg­is­la­tion is to move com­mu­ni­ties be­yond ben­e­fit shar­ing to eq­ui­table eco­nomic par­tic­i­pa­tion. This is es­pe­cially crit­i­cal for com­mu­ni­ties in the Rift Val­ley and coastal re­gion who have been marginalised for over six decades. Hence, the lo­cal con­tent leg­is­la­tion must give pri­macy to the county govern­ments. Real and durable pros­per­ity on a scale that di­min­ishes the risk of a Re­source Curse can only come through ro­bust eco­nomic par­tic­i­pa­tion by lo­cal com­mu­ni­ties in whose lo­cal­ity the nat­u­ral re­sources are found.

The Bill should es­tab­lish de­volved lo­cal con­tent de­vel­op­ment com­mit­tees, which must be em­bed­ded in plan­ning units of re­source-rich coun­ties. These com­mit­tees in con­sul­ta­tion with lo­cal stake­hold­ers de­velop lo­cal con­tent plans. Such plans must ad­dress spe­cific in­vest­ment, de­vel­op­ment and hu­man ca­pac­ity needs.

Bust most of all govern­ments, both county and na­tional, must make fun­da­men­tal in­vest­ments in hu­man cap­i­tal and phys­i­cal in­fra­struc­ture to make lo­cal con­tent as­pi­ra­tions fea­si­ble.

A RAFT OF LE­GAL IN­TER­VEN­TIONS AND REG­U­LA­TIONS ARE IN­TENDED TO EN­SURE THAT KENYA AVERTS A RE­SOURCE CURSE

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