Nema hands investors reprieve with caps on audit charges

Investors have been handed a reprieve after environment watchdog started putting maximum caps on fees paid for environmental audits ahead of construction.

The National Environment Management Authority (Nema) will now cap the fees based on the risk levels of projects with those deemed to pose great damage to the environment paying a maximum of Sh40 million.

Property investors have since September 2013 paying environmental impact assessment (EIA) fees as a percentage of the value of projects to Nema, resulting in higher costs for big ticket projects.

The EIA fees were initially set at 0.1 per cent of the worth of the project with a cap of Sh1 million.

In 2013, Nema reviewed the EIA fees to a minimum of Sh10,000 or 0.1 per cent of project cost without an upper limit.

“We are introducing a risk-based approach to projects. Previously we were just focused on the project costs but in the new regime, a project can be expensive but if its risk to the environment is small, it will be charged less,” Nema director-general Geoffrey Wahungu told the Business Daily in an interview Tuesday.

READ: Big investors pay high Nema audit fees despite cap

Projects will be categorised into three based on their levels of risk — high, medium and low — to the environment.

Mr Wahungu said that the maximum caps for medium and low risk projects are being finalised and would be fixed at rates lower than the Sh40 million charged for high risk businesses.

Benefit developers

“High risk projects are those that displace people and have long term and significant effects on the environment like oil drilling and energy generation plants,” he said, adding that the Sh40 million cap has been gazetted.

The Sh40 million cap will benefit developers of big ticket projects valued at more than Sh40 billion, based on the 0.1 per cent charge, such as railway, road and pipeline works as well electricity generation.

Homes are likely to fall in the low risk category.

President Uhuru Kenyatta in October 2014 directed Nema to revert to the flat rate, saying that payment of the fees by property developers as a percentage of the value of projects is punitive and risks cooling investments.

The EIA, which is prepared by investors and reviewed by Nema, details project’s site location, its likely impacts on the environment and remedial measures, alongside the project’s decommissioning if it has a lifespan.

Nema will retain the minimum EIA fees at Sh10,000 or 0.1 per cent of projects valued at Sh10 million and above.

The removal of caps three years ago had been punitive to businesses undertaking large-scale projects such as those in the energy sector.

The 2013 review took place as Nema experienced financial shortfalls partly because of reduced revenues from issuance of licences. Nema requires projects such as mineral processing and oil drilling to be licensed before their implementation.