Sub-National payments in Kenya’s oil industry

Discussion paper

Nakaale Lopodo 22, a resident of Lokichar in Turkana County Northern Kenya. Photo Credit/Jeremy Mutiso
Paper publication date: 
Friday, April 20, 2018

This paper aims to give an overview of revenue benefit sharing in the context of Kenya’s oil development in Turkana.  It outlines the importance of revenue sharing; what the different proposed formulas may mean with respect to the cash value of transfers to sub-national levels; assesses absorptive capacity of Turkana county as this has been put forward as justifying the proposed revenue sharing formula as contained in the current Bill and concludes with recommendations for both national and county governments. The paper also seeks to shift and broaden the discourse on revenue sharing from solely focusing on revenue formulas to encompass aspects related to governance and the administration of sub-national payments, once they have been made.

The discovery of extractive resources almost always brings with it expectations for windfall revenues and socio-economic transformation.  However, the potential to generate significant revenues from oil and gas resources also brings with it the prospect of conflict in relation to the sharing of revenues. Communities that live adjacent to extractive resources often bear a disproportionate burden of the costs related to resource extraction and, on this basis, argue that they should get a bigger disproportionate share of the revenues generated thereof. This ‘cost’ burden related to resource extraction includes involuntary displacement and resettlement, loss of land and grazing, loss of livelihoods and environmental degradation. This cost burden tends to be highly localised lending credence to calls for a higher share of sub-national revenue sharing.