Discussion Paper No. 242 of 2020 on Prerequisites for Enhancing Local Content in the Energy Sector in Kenya

Abstract

The energy sector is a crucial enabler to economic growth in many countries. Consequently, there are a number of private firms, governments and development partners who are heavily investing huge amounts of money on energy projects. Due to the nature of these projects, few foreign firms have the requisite resources and technical capacity to handle mega energy investments. In most cases, local firms lack capacity to undertake the projects. Additionally, as countries exploit resources they have, they are mindful of the gains the local communities would accrue from energy projects in terms of skills and technology transfer, employment and building capacity for local firms. This necessitates the development of local content policies and enactment of legislation requiring foreign firms to build capacity to locals. The local policies differ across countries that practice them depending on the level of development. Nonetheless, the prerequisite for effective local content policies include effective legal and institutional framework; local infrastructure; local capacity; investment climate; good governance and political will; and effective monitoring of the local content policies. Energy projects present numerous opportunities and challenges for local content. In addition, there are various emerging technologies that could be transferred to firms. Despite various legislations that necessitate achievement of local content in Kenya, such as enactment of the Energy Act 2019 and Petroleum Act 2019, it is important to have a policy that necessitates achievement of local content in all the energy sub-sectors.