The Local Content Bill, 2023
Status Timeline
Proposed
Active now
Public Review
Pending
Debate
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Executive
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Final
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Establishment of the Local Content Development Committee
Establishes the Local Content Development Committee under Section 9 to coordinate the development of local content, evaluate and approve local content plans, and assess local industry capabilities to supply goods and services.
Mandatory Local Content and Subsidiary Plans
Requires operators, before bidding or applying for a licence, to prepare and submit a long-term local content plan (Section 22). This must incorporate subsidiary plans for:
- Employment and skills development
- Research and development
- Technology transfer
- Financial services
- Succession planning for positions held by non-citizens
Thirty Percent Local Quota and Bidding Preferences
Mandates that local content activities include local participation at a quota of not less than 30% (Section 7). Operators must maintain a bidding process providing fair opportunity to local companies, giving preference to local persons where the price differential does not exceed 10% (Section 41).
Indigenous Banking and Financial Requirements
Requires operators and connected entities to open and maintain bank accounts with indigenous Kenyan banks (defined as having 100% or majority Kenyan shareholding) and transact business through banks in Kenya (Section 38).
Fines of Up to KSh 3 Million for Violations
Introduces strict penalties under Section 54:
- Knowingly making false statements in plans or reports is subject to a fine of up to KSh 2 million, imprisonment for up to 3 years, or both.
- Actively fronting or conniving to pass off a foreign entity as an indigenous Kenyan company carries a fine of up to KSh 3 million, up to 5 years imprisonment, or both.
- General non-compliance with local content requirements faces a fine of 5% of the proceeds of the activity (capped at KSh 2 million) or contract cancellation.
Bill No.
Senate Bills No. 50 of 2023
Gazette No.
Supplement No. 224
Sponsor
Wamatinga Wahome
Background
The Local Content Bill, 2023 addresses the lack of capacity, technology, and public participation within local communities in Kenya's extractive sectors. Grounded in Articles 66(2) and 69(1) of the Constitution, the Bill seeks to establish a structured legal framework to maximize local value addition, employment, ownership, and capability along the oil, gas, and petroleum value chain.
Key Provisions
- Local Content Development Committee: Establishes the Committee under Section 9, consisting of representatives from petroleum, finance, and industry ministries, the Council of Governors, and extractive industry players. The Committee is tasked with auditing operator compliance and maintaining a database of industry suppliers and projects.
- County Government Duties: Mandates under Section 8 that county governments assist local contractors in developing capacity, implement national policies, and conduct regular compliance audits.
- Local Content Training and Development Fund: Establishes a fund under Section 47 financed by an annual operator training levy based on a percentage of net revenues.
New Obligations
- Local Content Plans: Operators must submit a long-term local content plan alongside their license application, followed by annual plans once approved (Section 22).
- Employment and Succession: Operators must give first consideration to qualified local persons in hiring (Section 28) and must submit a succession plan within six months of starting operations to transition foreign-held roles to local understudies (Section 29).
- Local Banking: Operators and connected subcontractors must maintain a bank account and transact business through indigenous Kenyan banks (Section 38).
- Local R&D Funding: Operators are required to set aside an annual percentage of gross revenue for research and development in Kenya, with 50% allocated to Kenyan universities and 50% to the operator's local facilities (Section 37).
- Tender Advertising: All tenders in the extractive industry must be advertised, evaluated, and awarded in Kenya (Section 48).
Penalties
- False Statements: Submitting false documents or plans is punishable by a fine of up to KSh 2 million, imprisonment for up to 3 years, or both (Section 54(1)).
- Fronting: Any Kenyan citizen or entity acting as a front to deceive the Committee on indigenous ownership status faces a fine of up to KSh 3 million, up to 5 years imprisonment, or both (Section 54(2) and (3)).
- Non-Compliance with Plans: Carrying out extractive activities without meeting local content requirements, failing to submit plans, or failing to submit annual reports carries a fine of 5% of the proceeds obtained from the extractive activity (not exceeding KSh 2 million) or the cancellation of the contract (Section 54(4)).
- Licence Revocation: The Cabinet Secretary may revoke or suspend the license of any operator convicted of an offence under the Act (Section 56).
Transitional Provisions
- Existing Agreements: Under Section 58, all oil and gas arrangements, agreements, contracts, or memoranda of understanding existing before the commencement of the Act shall continue in force as if entered into pursuant to the Act. Any agreements entered into after the commencement must fully conform to the Act's provisions.
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