Heritage

What does local content bill hold for mining communities?

mine

Workers at a mining site in Kehancha, Migori County. FILE photo | nmg

The mining sector, especially the extractives industry, is likely to experience further regulatory changes if the Local Content Bill of 2016 is passed. This is a proposed Bill that will regulate local ownership, control and financing of gas, oil and natural resources.

There are many infrastructure projects currently ongoing in Kenya and one issue to consider is how the local community would stand to gain from these infrastructure projects.

It is clear that the State will gain from these projects in terms of increased revenue and tariffs, the nation as a whole would also gain through infrastructure development, however it is not very clear how the local community will gain.

In most mining projects there is a requirement that the investor shows how the local community will be impacted by the development for example through establishment of social facilities like schools and hospitals.

This Bill goes deeper than this requirement and is expected to create employment for a local community in a structured and systematic manner.

The Bill is very good for the locals as it enhances the rate of employment by providing that an investor shall indicate how the project shall create jobs for them. In any event, the investor cannot hire a foreigner unless he shows that he lacked local talent after having advertised the position in two dailies.

The local community will also stand to gain because the Bill provides that in undertaking the project, the investor shall prefer local goods and services over foreign ones.

This means that sourcing of raw materials and support services like transportation shall prioritise local supply over foreign supply. Businesses in the area of locality will therefore stand to benefit from this law.

The Bill in my view is very protectionist when it comes to matters to do with technology transfer and research. The investor must ensure that there is a level of technology transfer that will occur with the project and that is, transfer of technical knowhow to the local community.

The Industrial Property Act provides for the matters that can be included in a technology transfer agreement and what should be left out.

Technology transfer agreements in Kenya seem to be largely protectionist as they have very stringent provisions as against the one who owns the technology. For example, a technology transfer agreement cannot contain a clause stopping a licensee from engaging local expertise in order to fulfil the terms of the agreement.

READ: Local Content Bill key to oil wealth sharing

The Bill therefore encourages the hiring of locals and using local goods and services in the event of a mining and extractives project.

Some of the provisions of the Bill include that before any investor is granted a licence, he must produce a local content plan which shows how local goods and services will be procured, employment of locals, research and development plan, technology transfer mechanisms, and succession planning.

When it comes to research and development, the investor must highlight the 3-5 year plan and the same must also contain research proposals.

In my view, local communities stands to gain the most if this Bill is passed. Furthermore, it would enhance research and technology transfer in the sector which will further contribute to the pool of knowledge.

The Bill is, however, too protectionist in favour of the local communities. But this is not out of the ordinary as most countries that have a vibrant mining sector have a lot of protectionist laws to ensure that the local community and indeed the country gain from mining projects.