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175THE LOCAL CONTENT BILL, 2018ARRANGEMENT OF CLAUSESClausePART I—PRELIMINARY1—Short t and purposes.5—Guiding principle.PART II—ROLE OF THE NATIONAL ANDCOUNTY GOVERNMENTS6—Obligations of the National and CountyGovernments.7—Oversight role of the Committee.8―Duties of the County Governments.PART III — ESTABLISHMENT OF THE LOCALCONTENT DEVELOPMENT COMMITTEE9—Establishment of the Local Content DevelopmentCommittee.10—Functions of the Committee.11— Assessment of local capabilities.12—Membership of the Committee.13—Term of office.14—Qualifications for appointment.15—Disqualification from membership.16—Vacation of office of member.17—Conduct of the affairs of the Committee.18—Sub-committees of the Committee.

134134The Local Content Bill, 201819—Secretariat.20—Functions of the Secretariat.PART IV—LOCAL CONTENT PLANSLocal Content Plan21—Minimum local content.22—Local content plan.23—Review of local content plan.24—Local content certification.Employment and Skill Development Plan25—Capacity building.26—Employment and skills development plan.27—Education and training for nationals.28—Consideration of employment of local persons.29—Succession plan.Transfer of Technology and Research Plan30—Strategies for transfer of technology.31—Fiscal support for the transfer of technology.32—Transfer of technology plan.33—Facilitation of transfer of technology by an operator.34—Submission of technology transfer reports.Research and Development Plan35—Research and development plan.36—Implementation of strategies to promote knowledgetransfer and research.37—Funding of research and development.Financial Services Plan38—Submission of a financial services plan.Local Content Performance Reporting39—Local content performance report.40—Assessment of performance report.

The Local Content Bill, 2018PART V—STRATEGIES FOR LOCAL CONTENTDEVELOPMENT41—Procurement.42—Preference of local companies.43—Preference of local goods and services.44—Contracting services from local companies.45—Thresholds for Kenyan equity stake in operator.46—Financial incentives.47—Fund for Training and Development.PART VI—MISCELLANEOUS PROVISIONS48—Annual work programmes.49—Monitoring local content of expenditure incurred.50—Impact assessment.51—Reporting by a connected entity.52—Support measures.53—Public participation.54—Offences.55—Offence by a body corporate.56—Revocation of licence.57—Regulations.PART VII—TRANSITIONAL PROVISIONS58—Existing contracts and agreements.SCHEDULE —PROVISIONS RELATING TOTHECONDUCTOFMEETINGSOFTHECOMMITTEE135

136136The Local Content Bill, 2018THE LOCAL CONTENT BILL, 2018A Bill forAN ACT of Parliament to provide for a framework tofacilitate the local ownership, control and financingof activities connected with the exploitation of gas,oil and other petroleum resources; to provide aframework to increase the local value capturealong the value chain in the exploration of gas, oiland other petroleum resources; and for connectedpurposesENACTED by the Parliament of Kenya, as follows —PART I—PRELIMINARY1. This Act may be cited as the Local Content Act,2018.Short title.2. In this Act—“Cabinet Secretary” means the Cabinet Secretaryresponsible for matters related to the extractive industry;“Committee” means Local Content DevelopmentCommittee;“company” means a firm or entity whose businessenterprise is incorporated or otherwise organised under theLaws of Kenya and whose principal place of business is inKenya and which is effectively owned and controlled bynationals of Kenya;“connected entity” means a person, firm or entitycontracted by an operator to perform a specified componentof the operator’s obligations under a licence issuedpursuant to this Act;“extractive industry” means the oil, gas and miningsectors in Kenya;“foreigner” means a person who is not a citizen ofKenya, and includes a body corporate which was notincorporated in Kenya;“local content” means the added value brought to theKenyan economy from extractive industry throughsystematic development of national capacity andcapabilities and investment in developing and procuringlocally available work force, services and supplies, for thesharing of accruing benefits;Interpretation.

137The Local Content Bill, 2018“local goods” means materials or equipment mined,produced or manufactured in Kenya and for this purpose, agood shall be considered to be manufactured, processed orassembled if it differs substantially in its basiccharacteristic, purpose or utility or in the case of amanufactured good, if the cost of local materials, labourand services used in the manufacture of such goodsconstitutes at least fifty percent of the cost of the finishedproduct;“local person” means a person, firm or entityperforming works, services or supplying goods andmaterials to an operator, whether as a subcontractor orotherwise, whose business enterprise is incorporated underthe Laws of Kenya and whose principal place of business isin Kenya and which is effectively owned and controlled bya Kenyan national;“operator” means a person, firm or entity licensed bythe Government to undertake exploration, development andextraction activity with respect to natural resource in theextractive industry; and“value chain” means sequential stages in the extractiveindustry life cycle including exploration and development,production, treatment, transportation, refining, or otherbeneficiation, and distribution.3. This Act shall apply to all commercial activitiesrelated to the exploration, extraction, development andexploitation of oil, gas and other petroleum resources in theextractive industry in Kenya.4. The objects and purposes of this Act are to—(a) promote the maximization of value-addition andthe creation of employment opportunities in theextractive industry value chain through the use oflocal expertise, goods, services, businesses andfinancing and their retention in the country;(b) provide a framework for the—(i)establishment of a monitoring, evaluation andreporting system in the implementation of thisAct;(ii) development of indigenous skills across theextractive industry value chain; andApplication.Objects andpurposes.

138138The Local Content Bill, 2018(iii) application of the mechanism of local contentby an operator under this Act;(c) enhance the participation of local persons inextractive industry value chain;(d) facilitate the development of a competitive,capable and sustainable labour force within theextractive industry;(e) enhance local ownership and use of local assetsand services in the extractive industry; and(f) maximize value addition through local contentdevelopment and local participation in extractiveindustry operations.5. All persons shall, in the performance of theirfunctions under this Act, be guided by the followingprinciples—Guidingprinciples.(a) the national values and principles of governanceset out under Article 10 of the Constitution;(b) the principles of ownership of natural resources setout under Article 62 of the Constitution; and(c) the principle of equity in the sharing of benefitsaccruing from natural resource exploitation set outunder Article 69 of the Constitution.PART II—ROLE OF THE NATIONAL ANDCOUNTY GOVERNMENTS6. (1) The National and County Governments shall,to the extent of their constitutional mandate, put in placemeasures to ensure the maximum development andadoption of local content by an operator under this Act.Obligations of theNational andCountyGovernments.(2) The National Government shall, in performing itsfunctions under subsection (2), collaborate with CountyGovernments.7. In ensuring that the National Government fulfilsits obligations under section (6), the Committee shall—(a) identify sectors in which value-additionopportunities exist along the extractive value chainindustry with respect to various goods and servicesand focus on the local content, participation andsupply capability development in those sectors;Functions of theNationalGovernment androle of the CabinetSecretary

The Local Content Bill, 2018139(b) facilitate the realisation of local content through—(i)managing the pace and scheduling ofextractive industry programmes in order toenable locals to take advantage ofopportunities along the extractive valuechain;(ii) facilitating local capability developmentthrough in-country programmes in order toenable full participation by locals in theextractive industry value chain;(iii) the implementation of strategies that ensurethat preference is given to locally owned,controlled and financed enterprises and tothose that demonstrate commitment andcapacity for maximizing local value-addition,participation and capability development; and(iv) the development and implementation ofstrategies for the development of local skills,business know-how, technology, financing,capital market development, and wealthcapture and distribution;(c) ensure delivery of maximum local value-additionby —(i) measuring and reporting on the performanceof operators in the extractive industry; and(ii) periodically comparing the local content andparticipation performance amongst operators,between projects and operations and withother countries and identifying opportunitiesfor improvement and best practices; and(d) pursue supportive policy objectives across allpolicy frameworks with the view to giving effectto the objectives of this Act.8. (1) Each county government shall, for theperformance of its functions under section 6 of this Act—(a) assist local contractors and companies within therespective counties to develop their capabilitiesand capacities to further the attainment of the goalof developing local content in the extractiveindustry within the respective county;Duties of theCountyGovernments

140140The Local Content Bill, 2018(b) implement the cross-cutting policies formulated bythe National Government with respect to theimplementation of local content;(c) implement strategies that enable local participationin the various activities along the extractive valuechain in the respective county;(d) monitor and put in place measures to facilitate theimplementation of local content performance byall operators in the respective county in accordancewith the provisions of this Act;(e) conduct regular audits for the purposes ofmonitoring the compliance with the provisions ofthis Act in the respective county;(f) set targets, in collaboration with the Committee,for the achievement of local content andparticipation in relation to specific projects,operations and operators and support these targetswith appropriate contract terms; and(g) perform such other function necessary for theimplementation of the objectives of this Act.PART III—ESTABLISHMENT OF THE LOCALCONTENT DEVELOPMENT COMMITTEE9. There is establishedDevelopment Committee.theLocalContent10. (1) The functions of the Committee shall be to—(a) oversee, co-ordinate and manage the developmentof local content in the country;(b) make recommendations and advise the CabinetSecretary on the formulation of policy andstrategies for the development and implementationof local content;(c) make recommendations to the Cabinet Secretaryon the minimum standard requirements for localcontent and the development of local content plansunder this Act;(d) appraise, evaluate and approve local content plansand reports submitted to the Committee pursuantto section 22;Establishment ofthe Local ContentDevelopmentCommittee.Functions of theCommittee.

The Local Content Bill, 2018141(e) oversee, in consultation with the countygovernments, the implementation of local contentpolicies and strategies by operators;(f) collaborate with county governments in theimplementation of strategies to improve thecapacity of local persons, businesses and thecapital market to fully leverage the objectives ofthis Act; and(g) carry out such other functions that may benecessary for the achievement of the objects andpurposes of this Act or that may be conferred byany other law.(2) The Committee shall, in implementing this Act,—(a) ensure measurable and continuous growth in thedevelopment and adoption of local content withrespect to all activities in the extractive industry;and(b) consult with, and collaborate with the countygovernments.11. The Committee shall—(a) within a period of six months from the date of itsconstitution, develop, and keep under regularreview, a comprehensive register of all equipmentand service categories required to effectivelysupply the needs of the extractive industry;(b) assess the capacity of the local industry to supplythe goods and services identified under paragraph(a); and(c) adopt policies and measures aimed atprogressively enhancing the capabilities of localenterprises to compete effectively on quality,price, quantity and reliability in the supply ofgoods and services required in the extractiveindustry.12. (1) The Committee shall consist of—(a) a chairperson appointed by the Cabinet Secretaryin accordance with subsection (2);(b) the Principal Secretary responsible for mattersrelating to petroleum and natural gas or arepresentative designated in writing;Assessment oflocal capabilities.Membership ofthe Committee.

142142The Local Content Bill, 2018(c) the Principal Secretary responsible for mattersrelating to finance or a representative designated inwriting;(d) the Principal Secretary responsible for mattersrelating to industry and enterprise development ora representative designated in writing;(e) two persons nominated by the Council ofGovernors;(f) two persons nominated by players in the extractiveindustry in such manner as the Cabinet Secretaryshall determine and appointed by the CabinetSecretary; and(g) the Director who shall be the secretary to theCommittee.(2) The persons nominated under subsection (1) (a)and (f) shall be appointed by the Cabinet Secretary bynotice in the Gazette.(3) There shall be paid to the members of theCommittee such allowances as the Cabinet Secretary may,in consultation with the Salaries and RemunerationCommission, determine.13. (1) The persons nominated under section 12 (1) (a)and (f) shall be appointed for a term of four yearsrenewable for one further term.Term of office.(2) No more than two thirds of the Committee shallbe of the same gender.14. A person is qualified for appointment as—(a) the chairperson of the Committee if that person —(i)holds a degree from a university recognisedin Kenya;(ii) has knowledge and at least ten yearsexperience in matters relating to theextractive industry; and(iii) meets the requirements of Chapter Six of theConstitution; or(b) a member of the Committee under section 12 (1)(f) if that person—Qualifications forappointment.

The Local Content Bill, 2018143(i)holds a degree from a university recognisedin Kenya;(ii) has knowledge and at least five yearsexperience in matters relating to theextractive industry; and(iii) meets the requirements of Chapter Six of theConstitution.15. A person is not qualified for appointment as amember of the Committee under section 12 (1) (a) and (f) ifthat person—Disqualificationfrom membership.(a) has violated Chapter Six of the Constitution;(b) is adjudged bankrupt; or(c) has been convicted of an offence and sentenced toimprisonment for a term of more than six months.16. (1) The office of a member of the Committeeappointed under section 12 (1) (f) shall become vacant ifthe member—(a) is adjudged bankrupt;(b) is convicted of a criminal offence and sentenced toa term of imprisonment of at least six months;(c) is convicted of an offence involving fraud ordishonesty;(d) is absent, without reasonable cause, from threeconsecutive meetings of the Committee;(e) resigns in writing addressed to the CabinetSecretary;(f) is removed from office by the Cabinet Secretaryfor —(i) being unable to perform the functions of his orher office by reason of mental or physicalinfirmity; or(ii) failing to declare his or her interest in anymatter being considered or to be considered bythe Committee; or(g) dies.Vacation of officeof member.17. (1) The Committee shall conduct its affairs inaccordance with the provisions of the Schedule.Conduct of theaffairs of theCommittee.

144144The Local Content Bill, 2018(2) Except as otherwise provided in the Schedule, theCommittee may regulate its own procedure.18. (1) The Committee may establish such subcommittees as it may consider necessary for theperformance of its functions and the exercise of its powersunder this Act.Sub-committeesof the Committee.(2) The Committee may co-opt any person to sit onany sub-committee established under subsection (1), whoseknowledge and skills are found necessary for theperformance of the functions of the Committee but suchperson shall have no right to vote at the meeting.19. (1) The Cabinet Secretary shall designate anappropriate administrative unit within the Ministryresponsible for matters relating to the petroleum industry toserve as the Secretariat of the Committee.(2) The Secretariat shall consist of—(a) the Director who shall be competitively recruitedby the Public Service Commission and appointedby the Cabinet Secretary; and(b) such other public officers as the Cabinet Secretaryshall, in consultation with the Committee,designate for the proper performance of thefunctions of the secretariat under this Act.(2) The Director and persons designated undersubsection (2) (b) shall possess such knowledge andexperience in matters relating to the petroleum industry asthe Cabinet Secretary shall, in consultation with theCommittee, determine.20. The functions of the Secretariat shall be to —(a) provide technical and administrative services tothe Committee;(b) implement the decisions, strategies, programmesand policies of the Committee;(c) make recommendations to the Committee on theformulation and implementation of programmesfor the achievement of the functions of theCommittee;(d) on behalf of the Committee, establish and maintainrelationships with international, national and localSecretariat.Functions of theSecretariat.

145The Local Content Bill, 2018institutions involved in the extractive industry andother related activities;(e) collaborate with State agencies, financialinstitutions and other stakeholders in theimplementation of policies, strategies andprogrammes developed pursuant to this Act;(f) train, disseminate information and providelinkages and networks with local and internationalinstitutions which engage in capacity building onlocal content development and application;(g) conduct studies, research and investigations inorder to enhance the development of local contentin the extractive industry in Kenya;(h) maintain a local content data base setting outinformation on—(i)projects, operations and programmes onextractive activities with respect to eachcounty, including the goods and servicesrequired with respect to the activities and thetimelines for their delivery;(ii) suppliers of goods and services relevant to theextractive industry in Kenya;(iii) human resource development programmesand initiatives of the operators and theirconnected entities, including work permitsawarded and their related commitments;(iv) business developmentinitiatives; andprogrammesand(v) the progress of activities by operators, Stateowned agencies and connected entities in theadoption of local content;(i) make arrangements for periodical evaluation of thepolicies and programmes in relation to the objectsand functions of the Committee; and(j) perform such other functions as may be assignedto it by the Committee.

146146The Local Content Bill, 2018PART IV—LOCAL CONTENT PLANSLocal Content Plan21. (1) The Cabinet Secretary shall, in consultationwith the Committee and by notice in the Gazette, set theminimum local content to be applied by an operatorengaging in any extractive activity undertaken under thisAct.Minimum localcontent.(2) An operator shall, in carrying out extractiveactivities under this Act, comply with the minimum localcontent requirements prescribed under subsection (1).22. (1) A pe

The Local Content Bill, 2018 134134 19—Secretariat. 20—Functions of the Secretariat. PART IV—LOCAL CONTENT PLANS Local Content Plan 21—Minimum local content. 22—Local content plan. 23—Review of local content plan. 24—Local content certification. Employment and Skill Development Plan 25—Capacity building.

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