Transparency in the extractives industry involves the open and accountable management of oil, gas and mineral resources. It also aims at promoting public awareness on how countries manage their natural resources so as to ensure that the wealth from the exploited resources benefit all the citizens.
Transparency ensures good governance, accountability and sustainable economic development in a country’s extractives sector. These 3 key principles may be defined as follows:
Good governance – during decision making, it is not always about making the correct decision but proper governance entails the best possible process for making the decision.
Accountability – it entails ensuring that the officials in public and private organisations are answerable for the actions and in the instance they do not meet the required standard they are held answerable for their actions
Sustainable development -this is development that meets the needs of the present generation without compromising the ability of the future generation to meet their own needs.
Proper implementation of the above principles offers immense benefits to all the stake holders in the extractives sector as it increases investor confidence, confidence in the efficiency of extractive public institutions and political stability in the country containing the mineral deposits.
Transparency is not only for the benefit of foreign investors and the state owned entities exploiting the mineral resources but it is also important for the ordinary citizens of the country. Through transparency, there are increased levels of accountability in the flow of revenue from the point of extraction to the government then to the public.
Transparency also increases public awareness. Through increased awareness the citizens are in a better position to know and participate in how the management of its oil, gas and mineral resources.
Article 59 (4) and Chapter 15 of the Constitution of Kenya gives Parliament the power to enact legislation establishing commissions. In line with this article Parliament passed the Commission on Administrative Justice Act No. 23 of 2011 that established the Commission on Administrative Justice which is headed by the Ombudsman. The Commission ensures transparency and accountability in the public sector by investigating incidents of maladministration and gross misconduct of public officials. The Commission has the powers of a court and it may issue summons, question or order any person to disclose any information within his knowledge so as to conduct investigations.
Parliament itself also plays a direct oversight role through the Environment and Natural Resources Committee which plays an oversight role into all matters relating to environment management and conservation, water resource management, mining and natural resources.
Through the implementation of the Commission on Administrative Justice Act No. 23 of 2011 and the Environment and Natural Resources Committee it is evident that the government of Kenya has taken steps with a view of implementing transparency in the extractives sector.
The Legal and Regulatory framework on transparency in extractives is in the table below:
The Constitution of Kenya
The Constitution through its provisions plays a vital role in transparency. Article 10 (2) gives the national principles of governance which are good governance, integrity, transparency, accountability and sustainable development. They are binding to all state organs, state officers, public officers and should guide all persons in public policy and decision making.
Article 35 enhances transparency by giving every Kenyan the right to access information held by the state. The government also has an obligation to publish and publicise all important information affecting the state.
Article 60 (1) gives the principles of land use and requires land to be held used and managed in an equitable, efficient, productive and sustainable manner. All minerals and mineral oils are categorised as land in article 62 (1) (f) and so they must be used in line with the land use principles
The Mining Act No. 12 of 2016
The Mining Act makes it mandatory for the Ministry of Mining to make information for example mining agreements accessible, through channels such as its website. This obligation is under section 29, which requires that geoscience information be made accessible to the general public.
Section 119 (4) makes information accessible to the public by requiring the Cabinet Secretary to publish annual records, reports, mineral agreements and relevant information on the ministry website. He/she is also tasked with making regulations that provide for accountable and transparent mechanisms of reporting mining and mining related activities.
The Access to Information Act No 31 of 2016
This act gives effect to Article 35 of the Constitution of Kenya which gives every citizen the right to access of information. It also confers on the Commission on Administrative Justice the oversight and enforcement functions. With the right to access of information given effect by this Act, Transparency is now not only entrenched in the legal framework but also backed up by enforcement mechanisms.
Commission on Administrative Justice Act no 23 of 2011
The act together with article 59(4) and chapter 15 of the Constitution establishes the Commission on Administrative Justice. The commission enhances transparency as it plays a key role in the oversight of public bodies and public officers with an aim of enhancing accountability in the public sector. The commission has the powers of a court and may summon, question or order any person to disclose information so as to conduct investigations.
Companies Act No 17 of 2015
A company is a legal person and is distinct from its members. Generally the members are protected from the liabilities of the company but when the company is used to engage in fraud, defend crime or justify wrong doing the Company Act provides that the law will disregard the corporate entity and view the company as an association of persons. This ensures transparency by denying the members the opportunity to evade their obligations and engage in fraudulent practices like tax evasion.
The Model Product Sharing Contract
Access to information is enhanced by Clause 49 of the model product sharing contract which permits the Cabinet Secretary to use any of the information supplied for the purposes of preparing and publishing reports and returns as required by law and for the purpose of preparing and publishing reports and surveys of a general nature.
It also categorises the contract as a public document and gives the Government the right to publish it and keep it publicly available. The government may also publish information concerning the contract in accordance with internationally accepted standards and norms concerning transparency.
The following are some of the international best practices to transparencies in the extractives industry.
The Extractives Industry Transparency Initiative (EITI) - it is a global standard comprising of 51 countries that seeks to promote the open and accountable management of oil, gas and mineral resources by addressing key governance issues in the sector. It promotes transparency and accountability by using extractive information to trace the obtained revenue from the point of extraction, to the government then to the public. The countries that have implemented the EITI standard are guided by the EITI principles which require the wealth gained from a country’s natural resources to benefit all its citizens. Link
African Mining Vision - it was drafted by a taskforce convened by the United Nations Economic Commission for Africa. The vision aims at “Transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development”. Link
The Kimberly Process- it is a joint governments, industry and civil society initiative to stem the flow of conflict diamonds. Conflict diamonds are rough diamonds that are used by rebel movements to finance wars against legitimate governments. The Kimberly Process has 54 participants representing 81 countries. The member countries account for about 99.8% of all the rough diamonds produced globally. Link
Equator Principles June 2013 – These are principles adopted by Equator Principles Financial Institutions (EPFI) to ensure that the Projects they finance and advise on are developed in a manner that is socially responsible and reflects sound environmental management practices. It contains requirements on disclosure, reporting and transparency. Link
The United Nations Guiding Principles on Business and Human Rights – These principles are grounded in recognition of the fact that business enterprises as specialized organs of society performing specialized functions, are required to comply with all applicable laws and to respect human rights. When these rights and obligations are breached effective remedies have to be applied. Link
Organisation for Economic Cooperation and Development- It is a forum of countries committed to democracy and the market economy, providing a platform to compare policy experiences, seeking answers to common problems, identify good practices and coordinate domestic and international policies of its members. It is involved in the streamlining of the global extractives industry through stakeholder engagements. Link