While Kenya is blessed with some natural resources, the country has always faced challenges in ensuring that benefits derived from these resources are shared in an equitable manner. Often, the host communities have complained that they are getting the shorter end of the stick.

The Natural Resources (Benefit Sharing) Bill 2022 (Bill) seeks to cure this challenge by establishing a system for sharing the benefits derived from the exploitation of natural resources among various stakeholders, including resource exploiters, the national government, county governments, and local communities.

The natural resources to which the Bill applies are sunlight, surface and underground water, forests, biodiversity and genetic resources, wildlife resources, industrial fishing, wind, geothermal resources, minerals, and petroleum.

The Bill proposes the establishment of the Benefit Sharing Authority (BSA) with various responsibilities including, coordinating the preparation of benefit sharing agreements, reviewing royalties payable by affected entities, identifying counties for agreements, overseeing fund administration, conducting research, and advising on policy and legislation related to benefit sharing.

The Bill specifies that the Kenya Revenue Authority shall be responsible for collecting royalties and fees from affected entities.

Should the Bill be passed into law, the revenue collected shall be shared in the ratio of 60 percent to 40 percent respectively between the National Government and the relevant County Government from which the natural resource is exploited. The Bill goes further to provide that at least 60 percent of the revenue allocated to a County Government shall be utilized to implement local community projects.

The Bill requires exploiters to enter into a benefit sharing agreement with the relevant County Government before the exploitation of a natural resource in the affected county. The agreement must be approved by the respective county assembly prior to its execution. The county benefit sharing committees and local community benefit sharing forums will be engaged in the negotiation of benefit sharing agreements. Ongoing projects will be given a grace period of 2 years from the Bill’s passing to comply with the Bill by entering into benefit sharing agreements with the appropriate County Governments.

In addition, the introduction of a formal mechanism of negotiation recognized by the local communities, and approval of benefit sharing agreements by county assemblies will lend legitimacy and support to investors, paving the way for successful projects and uninterrupted economic activities. As a result, unfortunate scenarios caused by wrangles between the indigenous communities and investors leading to delays through sabotage and endless litigation as witnessed in some projects, might be a thing of the past. Previously projects such as Tullow Oil and Lake Turkana Wind Power faced some resistance from the host communities due to lack of proper engagement on the benefit sharing.

Undoubtedly, the biggest winners are the local communities which will now be increasingly involved in the exploitation of natural resources within their locality and will ensure that a benefit accrues to them. The Bill envisions both direct and indirect participation of the local community through the local community benefit sharing forums and election of representatives to the county benefit sharing committees respectively. This will ensure that their views form an integral part of the decisions undertaken in the local governments in determination of payable royalties.

The Bill also proposes amendments to the Mining Act, the Wildlife Conservation and Management Act, the Petroleum as well as the Energy Act to align the collection and dealings with revenue derived from natural resources under these laws.

The Bill has been approved by the Senate and is currently with the National Assembly for consideration. We are monitoring the legislative process in respect of the Bill and will shortly publish a further article with an update on its status as well as a deep dive into its various proposals.

The article was published in the Business Daily on 29 March and can be accessed here.