Mineral wealth should be a blessing not a curse. That, at least, is what Kenya, Uganda and Tanzania are hoping for from their recent discoveries of vast oil and natural gas reserves. Kenya’s economy has not historically been known as an exporter of oil or minerals. According to Government estimates, extractives currently contribute just 1 per cent to Kenya’s GDP, which amounts to less than 2 per cent of total export revenues.
It is now estimated, however, that the sector could provide 10 per cent of GDP as a result of the recently discovered oil. London-listed Tullow Oil and Africa Oil have led the way in drilling in northern Kenya, with Tullow estimating that Kenya has at least 600 million barrels of oil. Having discovered a large bounty of black gold on its soil, the trick will be to ensure East African governments reap the rewards from their resources. In Kenya’s case, the Jubilee government hopes oil production will start in 2018. Analysts and NGOs say legislation and transparency are needed to guarantee a fair slice of what could be a very large pie. But the Mining Bill, which proposes to overhaul the 74-year-old existing regulation, has yet to be signed off by President Uhuru Kenyatta, despite being backed by the National Assembly last October.
But it is extensive new reporting requirements in European and US law that are likely to do the most to shape Kenya’s fledging extractives sector. The European Union’s Accounting and Transparency directives agreed on in 2013 by government ministers require companies in the extractive and logging sectors to publish annual reports. These will disclose details of all tax, bonuses and other payments made to governments for every individual project or contract undertaken by a firm over a 100,000 euro (Sh10 million) threshold. Reporting rules The country-by-country reporting rules apply to all listed and large unlisted companies registered in the EU, without exemption. They must report their payments to governments worldwide annually, starting this January. The new regime was painstakingly agreed on over two years in the teeth of opposition from a handful of governments and a powerful industry.
