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Blog Post

Delivering shared value in Kenya’s mining sector

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 Kenya is at a critical stage in its economic transformation agenda. According to the Ministry of Industry, Trade and Cooperatives, large investment projects planned for the East African region are set to create unique opportunities and open new markets in Kenya, Uganda and Ethiopia. Chief among these are the Lamu Port-Southern Sudan-Ethiopia Transport Corridor (LAPSSET), the SGR and the plans to widen the Nairobi-Mombasa Highway.

 

According to global consulting firm Frost & Sullivan, an estimated USD55.6 billion worth of investment into infrastructure development has been planned for Kenya. Industries expected to benefit from this infrastructure development include oil and gas, mining, agriculture and retail, accelerating Kenya’s economic development envisioned in the Vision 2030 goals. Central to ensuring that Kenya’s economic transformation and development is sustainable is the relationship between investors, both public and private, and the communities in which largest-scale infrastructure projects are being implemented.

 

The involvement of different stakeholders is however limited, since certain decisions in management of a project can only be made at an expertise level. However, decisions on community investment programmes can be made by involvement of a representation of various community groups. This is important so that the solutions for the community come from the community themselves; additionally, communities will more receptive if the solutions are not “imposed” on them. All too often, stakeholder relationship management (SRM) carried out by organisations is limited to dealing with issues as they arise, instead of taking a proactive approach in identifying potential issues or conflict before they occur.

 

Today, SRM is becoming more sophisticated, with many organisations investing time and resources to make it central to a project’s development. This requires recognition that human resources, the people of a project, underpin its success and that investing in stakeholder engagement early will help mitigate and manage issues later on. More organisations are building sustainable, long-lasting partnerships with their community stakeholders, allowing them to be involved and to understand a project’s impacts with the ultimate goal of ensuring that the community is a partner in helping shape the benefits such investment it brings to an area. Today, we see more organisations and governments embracing the concept of “shared value”. Harvard Business Review says that “Shared value is not social responsibility, philanthropy, or sustainability, but a new way for companies to achieve economic success.” Shared value is a dynamic force for good, creating value for both shareholders and society at large, hence creating a win-win scenario for all stakeholders involved in a project.

Shared value for any organisation should illustrate that as the company is growing, so is the community around it. It is still a fairly new concept in the extractives sector. However, in Kenya, through the Mining Act 2016 and application of best practice, this is slowly becoming ingrained in the sector.

 

Kenya’s largest mining company, Base Titanium, is internationally recognised as leading the way to ensuring that shared value for its host community is realised. By taking this approach, Base Titanium is demonstrating the potential for mining to contribute to the government’s Big Four Agenda. In 2017 the company’s Kwale Mine contributed KES 18.5 billion to Kenya’s exports, which represents 65 percent of Kenya’s total mineral output value. To illustrate this contribution to the Kenyan economy, exports to China in 2017 were KES14.9 billion, of which KES12 billion or 80.5 percent came from the Kwale Mine. Not only is the Kwale Mine a leading contributor to economic transformation, the company has so far invested over KES1.5 billion in a comprehensive suite of community programmes focused on livelihood development, improved health outcomes, education and community infrastructure. These programmes will all continue to be key economic assets long after mining is completed and the land rehabilitated.

 

Under its livelihood programmes, Base Titanium has partnered with Business for Development (B4D) to revive the cotton industry in Kwale County and the coastal region. The Kwale cotton programme links farmers with Australian apparel company Cotton On to directly purchases lint from the farmers at competitive prices. Farmers have been organised into a cooperative society called Pamba and Viazi Cooperative Society (PAVI), to help improve bargaining power and to implement various training programmes. In a further development, PAVI recently launched construction of a business park at a cost of KES 90 million that will include a ginnery and offices as well as other value addition initiatives allowing for the greatest capture of value to for farmers, including secondary income generation through production of feedstock and cottonseed oil.

 

The Ministry of Industry, Trade and Cooperatives has indicated its wish to replicate Base’s Kwale cotton programme nationally as a means of enhancing manufacturing under the Big Four Agenda. The company also supports over 1,600 students in high-schools, universities and colleges through its scholarship programme. The potential for these students to become transformers in ending poverty cycles in the community is limitless. Such community investment models provide a sustainable approach to shared value and stakeholder management, ensuring that large-scale projects, whether they be in the extractive industry or infrastructure, facilitate an empowered and engaged community, where the standards of living are uplifted even after the project is completed.

 

This is what shared value is all about: sustainably growing while transforming the lives of the impacted communities.

About the author: 

Martin Macharia is a Public Affairs Consultant at the strategic advisory firm, africapractice


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