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East Africa gets legal support on resources

By STEVE MBOGO Special Correspondent

Posted Saturday, February 8 2014 at 18:45

Kenya, Tanzania and Rwanda have started receiving support in how to negotiate and structure natural resource contracts from the African Legal Support Facility (ALSF).

Proper production sharing agreements with resource extractors are the first step towards avoiding conflict linked to resource extraction, based on lessons from other countries, said Stephen Karangizi, director and chief executive officer of the ALSF.

ALSF is an initiative of the African Development Bank (AfDB) to help African countries with international best practice legal standards required in the negotiation and drafting of resource exploration and extraction agreements.

“We are having a continuous dialogue with all the EAC countries to support them in negotiations of natural resource development. In the case of Tanzania, Rwanda and Kenya, the ALSF board has already approved projects to support in negotiations as well as capacity building,” said Mr Karangizi.

Tanzania has discovered gas, Rwanda is exploring for commercial gas while Kenya has confirmed commercial quantities of crude oil. Mwendia Nyaga, the chief executive at Oil & Energy Services Ltd, said countries that have done well have gone ahead to to take charge of management of their resources.

“These countries ensure that they develop the right policies and make sure they are followed,” he said. Such policies include licensing policy and strategy of knowing when to license, how to license and how to bring in local companies as players in the sector.

Other considerations, he said should include environmental management policies; local content policies determining how local goods, services and manpower are integrated into the new industry; and revenue management policies covering issues of revenue collection, management and distribution.

Gabriel Negatu, the regional director of AfDB’s East Africa Regional Centre said a new wave of resource extraction and increasing investment in power generation require that countries have the required skills to negotiate partnerships with the private sector.

The idea is to replicate four best practices used by countries that have managed resources well.

“A country needs to have a strong legal framework governing the natural resources so as to enhance transparency in terms of what is accorded to the investing companies when the final extraction agreements are concluded,” said Mr Karangizi.

“It is important that countries have sufficient capacity to manage negotiations with the investing companies both in terms of technical and legal aspects. In the short term, before the country has developed its own capacity, it can rely on international experts. However ,in the long term, the country needs to develop its own capacity as managing the implementation of the agreements is complex,” he said.

Agreements concluded should also be flexible enough to take into account possible economic changes such as increase or decrease in the demand for the commodity being extracted.

The other important aspect is provision of as much information as possible to both the state and non-state actors to avoid the myths about natural resources that trigger conflict.

“In many cases there is an exaggerated expectation that the resources are a panacea for all the country’s development challenges, whereas they should be viewed as part of the contribution to development,” said Mr Karangizi.

He said managing expectations within the government and the public and helping them to understand that the time between the discovery of the natural resources and receipt of revenues by the state is very long, usually at least 10 years, is important.

“The main lessons to take from countries that have failed to benefit fully from their natural resources are that certain best practices are the best guarantee against such failures,” he added.

 

EM

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