In this alert, we examine the impact of the Mining (Community Development Agreement) Regulations, 2017 (the CDA Regulations) on existing and future mining activities in Kenya.
(a) Requirement to enter into Community Development Agreements (CDAs)
The CDA Regulations require holders of mining licences (granted under the new Mining Act), mining leases and special mining leases (granted before the coming into force of the new Mining Act) to enter into CDAs with one or more communities located around their exploration and mining operations areas. Entering into such agreements is meant to contribute to the economic, social and cultural well-being of the affected communities and to ensure that the benefits that accrue to holders of mining licences and leases are also enjoyed by the communities. A “community” is defined under the Mining Act as: (a) a group of people living around an exploration and mining operations area; or (b) a group of people who may be displaced from land intended for exploration and mining operations.
Holders of mining leases or special mining leases under the repealed Mining Act, who already have community agreements in place are required to ensure that such agreements comply with the CDA Regulations by 4 February 2019. This requirement will not only be costly for the mining leaseholders but may also be disruptive to the already existing agreements and arrangements with the communities.
(b) Identification of a community
A mining licence holder is required to identify one or more communities with which it proposes to enter into a CDA following an environmental social impact assessment carried out in accordance with the Environmental Management and Coordination Act. Currently, there are no guidelines for the conduct of social impact assessments.
Depending on the number of communities and holders of mineral rights involved, the following may be parties to an agreement:
The mining licence holder is then required to notify the community (in writing) within 30 days of grant of a licence of its intention to enter into an agreement with the community. Since the new Mining Act requires holders of mining licences to commence operations within 60 days of the grant of a licence, it is unlikely that a CDA will already be in place within this period considering the timelines under the CDA Regulations.
A community may, on its own initiative, notify a licence holder that it should be party to a CDA agreement. If the licence holder does not agree with the community, the community may submit a petition to the Cabinet Secretary (CS) for Mining who has 90 days to deliver a decision after consultation with the relevant County Government and the National Environmental Management Authority on the inclusion or not of the community in the agreement. Any party that is aggrieved by the CS’s decision may appeal to the Environment and Land Court (ELC) within 30 days of notification of the decision. There is a possibility that multiple communities may claim entitlement to be identified as parties to an agreement. There are no clear guidelines on how the CS would handle such claims.
(c) Overlap with the Community Land Act
If the mining operations are taking place on community land governed by the Community Land Act, the licence holder may need to enter into a separate benefit sharing agreement or cater for the benefit sharing requirements of the Community Land Act in the CDA. “Community land” includes land declared as such under Article 63(2) of the Constitution and land converted into community land under any law. A “community” is defined as a “consciously distinct and organised group of users of community land who are citizens of Kenya and share any of the following attributes—(i) common ancestry (ii) similar culture or unique mode of livelihood, socio-economic or other similar common interest (iii) geographical space (iv) ecological space or (v) ethnicity.”
(d) Drafting of a CDA
A CDA shall be prepared by a licence holder together with the representatives of the community. A CDA should be prepared in both English and Kiswahili and in the local language where possible. It should also have schedules and charts to reflect information such as timelines and activities covered in the CDA.
Generally, the projects to be executed under a CDA are required to complement national or county government development projects, plans and services already being provided or to be provided.
The process for entering a CDA is summarised below:
The CDA Regulations define consultation as the process of discussion or dialogue involving the community and other interested parties at the village level.
The community and the licence or lease holder are required to agree on the manner of conducting consultations after which they shall prepare a schedule of consultations on the draft CDA. The agreed schedule should be published in a manner agreeable to both the community and the licence holder.
Where the community determines that it lacks the capacity to negotiate a CDA, the licence holder is required to assist the community to build that capacity by, for example, providing funds to the community to hire experts or consultants. It may not be financially sustainable to require a licence holder to pay for community advisers. However, any monies spent by the licence holder on paying an expert or consultant is to be treated as a deduction that the licence holder may be entitled to under the Income Tax Act. Treating such money as a deduction provides the licence holder with some financial relief.
A CDA Committee (the Committee) is tasked with conducting the negotiations on the CDA on behalf of and for the benefit of the community. A Committee shall have 13 members:
The Chairperson and Secretary shall be elected from the members of the Committee. A minimum of two thirds of the members of the Committee (or at least 9 members) is required to conduct its business.
In case negotiations fail, the Committee may petition the CS who shall determine the matter in contention within 90 days. The CS may not be well-informed of the localised affairs and social dynamics of communities in an area which could help resolve negotiation issues, which may make this resolution process inefficient. Any party aggrieved by the CS’s decision may appeal to the ELC within 30 days of the CS’s decision.
In addition to conducting negotiations, the Committee plays the following roles:
(e) Contents of a CDA
The CDA may provide for any of the following matters:
The following matters shall not be included in a CDA:
These provisions outlining what is prohibited will help manage expectations, especially concerning direct monetary benefits, among community members.
(f) Obligations after signing of CDA
The CS is required to publish any CDA entered into between the community and a licence holder on the Ministry of Mining website.
A licence holder is required to spend a minimum of at least one per cent (1%) of the gross revenue from the sale of minerals in every calendar year to finance the projects under the CDA. By setting a standard minimum expenditure percentage, the CDA Regulations have not taken into consideration the fact that every mining project is different and every community has different needs. Such spend will need to be factored into the cost of the project.
A licence holder may make payments or contributions to the community in kind as part of its obligations under a CDA. Where this is the case, the holder shall state the nature and value of such contributions or payments and provide supporting notes to explain how the value has been determined.
A licence holder is prohibited from making any direct payment to the Committee or any member of the community for any expenditures or expenses required under the CDA.
(g) Duration of agreement
A CDA shall come into force after signature by both the community and the licence holder. The CDA shall be in force throughout the productive life of the mine but may be amended or modified by the parties from time to time, and shall be reviewed at least every five years from the signature date.
(h) Reporting requirements
A licence holder is required to submit an annual Community Development Annual Report to the CS and the County Government, before the end of February every year, setting out the following:
The annual report, including the expenditure on projects and all attachments to the report, shall be published on the Ministry of Mining and County Government websites.
(i) Other issues
We note that the CDA Regulations make no recognition of a resettlement process that may need to occur once a mining license has been issued. It is, therefore, not clear how consultations and negotiations will be affected by the resettlement process that takes place immediately after the grant of a mining licence.
Our next email will examine the impact of Award of Mineral Rights by Tender Regulations. We hope you’ll find these useful and look forward to your feedback.
If you have any questions regarding this legal alert or require more information on the impact of these new laws, please contact Dominic Rebelo.
The content of this alert is intended to be of general use only and should not be relied upon without seeking specific legal advice on any matter.