LRF Publications Extractive sector in Kenya: Will we hack it? By Paul Kauku The discovery of oil in Turkana County, Northern Kenya and ongoing exploration and production activities in other parts of the country have been viewed with excitement and hope on one side, and anxiety on the other. To some, the Country has already won a golden ticket to economic and social prosperity considering some of the largest economies in the world like Saudi Arabia earns about 50% of Gross Domestic Product (GDP) and about 70% of export earnings from the extractive industry . In hindsight, petroleum and mineral resources could contribute more than 5% to the Kenya’s GDP in the medium term and surpass traditional exports such as coffee as the key foreign exchange earner. In fact, preliminary estimates from various experts indicate that Kenya holds approximately 64.2 billion USD worth of rare earth . To others, there are valid concerns that failure to adequately manage the non- renewable natural resource may prevent Kenyans from enjoying the potential benefits of oil revenues including significantly expanding the economy to middle – income status as envisioned by Vision 2030 economic blue print and boosting social economic status of the local communities. Forgive my pessimism, but judging by increasing levels of corruption scandals, my confidence on proper management of the extractive industry is rather low. Kenya can avoid the theory of resource curse . This theory speaks to resource abundant economies that tend to grow less rapidly and are more prone to conflict in resource- scarce economies. It has been argued that, resources abundant economies tend to suffer from Dutch disease; insufficient economic diversification; rent seeking and conflicts; corruption and undermined political institutions as well as loose economic policies. Ring a bell? To contextualize the possibility of resource curse its necessary to compare Kenya with another country that has effectively and successfully managed natural resources. Botswana becomes a viable comparative. Bostwana, is one of the World’s largest producers of diamonds. It is one of the few that has managed to turn its resources into a blessing rather than a curse. Botswana went from being one of the 25 poorest countries in the World to becoming an upper –middle-income economy in 1998 reaching a per capita Gross Domestic Product (GDP) of 9200 USD in 2004 (Transparency International) and in 2017 Focus Economics placed Botswana’s GDP per capita at 8051 USD. How did Botswana escape the pitfalls of the resource curse? Over and above sound economic strategies, Botswana pursued good governance policies. Coming back home, signs of conflicts manifested in March 2017 when President Kenyatta toured the arid County of Turkana. Turkana Governor Josphat Nanok sparked an angry reaction from the President after he criticized the government plans to amend the Petroleum and Exploration Bill to reduce local communities’ 10% oil share benefits earlier proposed to 5%. Two months later, the County government of Turkana and the National government struck a deal at State House in Nairobi, clearing the way for Implementation of the Early Oil Pilot Scheme. Alarmingly, the community share which had been the bone of contention was retained at 5%. Other than people feeling shortchanged in revenue sharing model, Turkana County government yielded and accepted an arrangement to have her share of oil revenue capped should it exceed her annual budget . The same was revised on 19th May 2018 and capping on revenue was removed. The deal and the subsequent revision places Turkana community members at the short end of the stick. The arrangement is contaminated with hallmarks of capitalistic imperialism and is akin to a case of the elite speaking with their stomachs. It further offends the spirit of the Constitution of Kenya 2010, which placed natural resources governance and management in the hands of Kenyans (managed for them by the State). The political class may argue that, the 75% revenue share to the National Government and 20% revenue share to the County Government, will form part of the national revenue and eventually translate to development. Such an arrangement does not exude any form of confidence, given the Kenya we are in today. When announcing the deal between the National and County governments, the President expressed confidence that; oil production would proceed without hindrance and transportation of crude oil to Mombasa would be rolled out in earnest. In support of the President, Governor Nanok confirmed the leadership and people of Turkana were in full support of exploration and production of oil. He also added that the Council of Governors was satisfied with the manner in which the issue was resolved. Turkana community expressed dissatisfaction by the manner in which the deal was struck minus their input. The government demonstrated total disregard for the mwananchi and by all accounts defiled the spirit and letter of the Constitution under Article 1, which places the sovereign power to people of Kenya. To add insult to injury, the government had a few months prior to the deal signed a production agreement with Tullow Oil and an early Oil Pilot Scheme Agreement with Tullow Oil, Africa Oil, and Maersk Oil and Gas for exportation of Crude oil . To date, the community has never interacted with these agreements and Tullow Oil gives limited information. The deals are the genesis of conflicts. At one point, Tullow Oil was unable to export 40,000 barrels of oil, as they could not access Ngamia 3 and 8 Oil fields due to insecurity. Further, one of the Companies contracted to upgrade the Kitale – Lodwar Road, which leads to the Oil fields suspended work after attack on three of its employees . Turkana people who communally own the land now find themselves having to compete with private investors. The land surface from Lodwar to Lokichar has largely been marked for exploration. Oil installations have displaced pastoralists’ community from their grazing land and migratory routes. During exploration, 13 acres of land were fenced off for each of the oil field resulting to livelihoods difficulties and anxiety . Consequently, there have been conflicts among members of the community fighting for grazing land and water. Majority of adult males in Turkana own guns largely used for cattle rustling. There are concerns over the fact that the oil discoveries near Pokot – Turkana border may fuel violence between the Turkana and Pokot communities after mineral explorations established that there are large deposits of oil in the region. The pokot have laid claim on the discovered oil fields. There is also a general concern by the community over environmental degradation, which in future may precipitate conflicts. Even though the mining industry is still at its nascent stages, there are already signs of negative impact on the environment. National Environmental Management Agency (NEMA) has initiated cultural talks to protect sacred shrines of the Turkana people after destruction of a few to create room for exploration. It has been documented; oil extractions can have adverse effects on the environment particularly in relation to possible oil spills, which could release dangerous carcinogenic hydrocarbons into soil that subsequently could reduce plant growth adversely affecting the eco-system There is minimal government intervention on conflict mitigation arising from presence of extractive industries. In 2017, Legal Resources Foundation Trust (LRF) a not for profit civil society organization piloted a project in Turkana East and South Sub Counties focusing on raising awareness on community land laws, extractive industry, and environmental rights. The project has so supported founding of an Environmental and Land Court (ELC) Court Users Committee to facilitate deliberation of pertinent issues relating to land and extractive industry, and established an Alternative Dispute Resolution Mechanism (ADR) model to enable community members resolve conflicts amicably. To realize the full potential of Oil industry, both tiers of government need to involve the community more in development of legislations and policies. Establish public participation structures that are compatible with Turkana community aspirations. The national and county government as well as oil companies owe Kenyans constitutional obligation to share information on Turkana oil deals. March 20, 2019/0 Comments/by admin https://www.lrf-kenya.or.ke/wp-content/uploads/2019/03/7_9_3_1793_Human-rights-and-the-extractive-industry-cover.png 882 1329 admin https://www.lrf-kenya.or.ke/wp-content/uploads/2019/09/LRF-LOGO.png admin2019-03-20 10:34:262020-05-16 16:09:22Extractive sector in Kenya: Will we hack it?