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Opinion & Analysis

Let’s manage extractive industry prudently

On September 15, I attended a global meeting in Berlin called to explore legal remedies for resource equity. The conference was held against the background that the coming years are likely to witness increased disputes worldwide over the control and extraction of natural resources.

To prepare for this possible scenario, participants from close to 40 countries examined the existing legal, political and economic frameworks at the national, regional and international levels to understand how to deal with the causes and effects of conflicts arising from natural resources.

Several strategies were explored including how to keep resources under the ground and avoid their extraction altogether. A few of us from Africa argued that this approach would be a strong sale and may not altogether be the first option. Instead, we supported the discussions around enhancing transparency in the resource sector.

The extractive sector worldwide is associated with corruption. A former chairperson of the Economic and Financial Crimes Commission of Nigeria, Mr Nuhu Ribadu, in a presentation before the International Association of Prosecutors, Africa Region held early this year argued that.... “the connection between corruption and operations of the corporate world is an intimate one.

The extractive industry, like other industries, is riddled with the virus of corruption. But unlike other industries, corruption in the extractive industry has direct implications on our lives – environmental degradation.”

The sector requires a lot of money to run and also generates a lot of revenues for the economies of the countries where minerals are discovered. This makes it prone to corruption as a result of the high rents, concentrated revenue flows and technical complexity of the sector.

It is important as a country that we focus on transparency efforts.

Globally, there exists the Extractive Industry Transparency Initiative (EITI), which is a global coalition of governments, companies and civil society working together to improve openness and accountable management of revenues from natural resources.
The rationale of the initiative is simple: to ensure that there is complete disclosure of the revenues that are generated by the sector and their uses. It does this by publishing an annual list of the taxes paid by companies to the governments.

These figures are then compared with what the governments have disclosed to have received. Through such disclosures citizens can know how much the extractive sector is generating for the government in terms of revenues. Such disclosure should help Kenyans hold their government accountable.

It is, however, not enough to have transparency on the revenue side. This should be followed with discourse on expenditure so that citizens can follow and debate where the money generated went, in which sectors were funds invested and who benefited.

This is because it is not enough to know how much money was generated but also to ensure that the money is used for public and not private purposes. Further to that, public purposes are the priority for the country.

The process of joining the EITI process is detailed and includes assessments to determine whether the country is eligible. Kenya should aspire to join the initiative so that we can be part of global efforts to improve the governance of the oil and mineral sector.

We will need to improve on the levels of access to information, promote greater public disclosure, and build capacity of citizens to engage with the information from the sector and to hold the government and oil companies accountable. In the meantime, we also need to ensure that as we debate and enact laws for the sector, we include the principles of EITI into both our legal frameworks and operations in the sector.

As part of transparency and accountability, this calls for the involvement of oil companies in the country in the disclosure process and the prudent management of natural resources.

As a country we should prioritise strengthening of our institutions at all levels to help govern the extractive sector and ensure that everyone benefits.

Dr Odote lectures at the University of Nairobi.

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