Progress Report- Community Development Obligations
Purpose of the progress report
The progress report is intended to provide an update on the research on community development obligations. The community development obligations team focused its research on three thematic areas. The areas were local content, revenue sharing, and access to water. The research questions fall within these thematic areas.
Overview of the dispute
The present dispute’s subject matter concerns an extractives company that has violated the IFC Performance Standards in its operations in Kerio Valley. Community members living in the affected area made a complaint to the Compliance Advisor Ombudsman in August 2019 regarding the violation of the performance standards in the exploration operations in Block 12A. The complaint was made against two parties operating in the identified area at the time: Delonex Kenya Limited and Africa Oil Corporation. Notably, Africa Oil ceased operations in Kerio Valley, but the investment made in Africa Oil as a group still subsists.
Recently the Ombudsman visited Kerio Valley to analyze the situation and come up with a solution. The assessment report revealed the lack of community engagement as a pillar in the complaint. The areas of interest to the community development obligations relate to our main thematic areas, local content, access to water, and revenue sharing.
Key findings
The key findings are informed by further research and the new information from the CAO Assessment Report. Additionally, the key findings guide our research by revealing gaps.
- i) Local Content
Local content falls within the national government mandate and is exercised under the Petroleum Act 2019. The Act also defines the role of contractors concerning local content obligations under Section 50.
The Local Content Bill is modeled against Nigerian legislation on local content. Nigeria provides a good case study for good practices due to its robust legislation on local content. This case study will be included in the report to provide a blueprint for local content in Kenya.
The Act captures local content obligations in respect of goods and services. As seen from the report, the main contention of the community is the absence of local content in the services sector of Delonex operations. The community asserts that skilled labor from the affected communities is not being used and that this contravenes the local content obligations. This concern raises a point of research on the stringent requirements for local labor qualification and its relation to local content obligations.
- ii) Revenue Sharing
The Petroleum Act of 2019 provides a formula for revenue sharing between all the stakeholders. Of the profit oil that the company gives to the state, the national government receives 75%, while the county government receives 29%, and the affected community receives 5%.
The affected community’s definition and scope are not explicitly outlined in the Act; however, the communities share is vested in a board of trustees. Further research is geared towards determining the process of selecting the trustees and the regulations on the use of these funds.
Another point of research raised focuses on the transition between revenue sharing formulas. The research will seek to establish if the revenue sharing formula prescribed under the previous Act supersedes the present formula enumerated above.
iii) Access to Water
Access to water falls within the Bill of Rights, which means that it is subject to progressive realization. The court affirmed this position in Petition 348 of 2015, where the right to water was declared an aspirational right. The import is that the enforcement of the right of access to water is subject to exceptions that the company may exploit.
The contents of access to water are found in the Water Act. However, the Environmental Management and Coordination Act provides broad obligations on the need for an environmental impact assessment under Part VI. This obligation includes the impact of a project on water sources. The EMCA provides us with more legal backing to enforce the right despite it being aspirational.
The Water Act 2016 repealed a previous Act that was in force at the time of exploration. The two Acts have been integrated to provide a smooth transition between legislations, and this was affirmed in Constitutional Petition 16 of 2019. The integration of the two Acts informs the discourse on applicable legislation.
Research Gaps
The research has gaps that will require engagement with the community members in Kerio Valley to fill. The gaps are listed as follows:
- The degree of local content by Delonex is based on the number of employees acquired from the local community. This inquiry also includes the level of staff the company is employing from the community.
- The effects of the water use on the livelihoods of the community members.
- The degree of community engagement during the EIA.
- The degree of public participation and the form it takes. Does the medium facilitate the community members’ needs or comfort, or are there barriers to community engagement such as language?
- Is the community aware of the board of trustees tasked with revenue sharing among the community members?
- Is the revenue being legitimately used to promote community development? Are there ongoing or complete projects that have been funded through the revenue acquired from the revenue sharing scheme?