Kenya's extractive sector is bracing for potential upheaval with the Local Content Bill, 2023 proposed by Senator Wamatinga Wahome. While the drafters intended for the bill to encourage local participation and value creation, however, a closer look reveals potential pitfalls that could harm the very industries it seeks to uplift, particularly the mining and petroleum sectors.
The bill's stringent local content quotas pose a significant challenge for the mining sector. The requirement for a minimum of 30 percent local participation in all activities, while ambitious, could be unrealistic given the current skills gap in specialised mining roles. Forcing companies to hastily replace experienced personnel with less-qualified local hires could compromise safety standards and operational efficiency, jeopardising the entire project.
Additionally, the capital-intensive nature of mining, coupled with its reliance on complex global supply chains, makes a sudden, substantial local content quota a risky proposition that could deter investors and disrupt project timelines.
A more gradual approach, allowing for capacity building and skills development within the local workforce, would be a more sustainable path towards achieving higher local content.
The petroleum sector faces similar concerns. The bill's ambiguity regarding the definition of "Cabinet Secretary" could lead to conflicts and delays in decision-making, especially in instances where ministerial portfolios are divided between petroleum and mining. A clear delineation of responsibilities and a robust mechanism for inter-ministerial coordination are essential to avoid bureaucratic bottlenecks in project implementation.
The requirement for operators to maintain bank accounts with indigenous Kenyan banks, while aimed at strengthening the local financial sector, could limit access to international financing and specialised services crucial for large-scale projects.
The bill's provisions on employment and skills development also warrant careful consideration.
The Bill presents a mixed bag for Kenya's extractive sector. While its goals are laudable, in its current form, the bill risks stifling investment and ultimately undermining sector growth.
The writer is the Executive Director of the Extractive Insight Centre and can be reached on [email protected]
