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In VogueThe East African Oil and Gas Sector
Taming the Lion MarketsReflections from ALN on the Investment Climate in Africa
A Plug in the VentLand Ownership Challenges Hamper Natural Gas Development in Tanzania
Building BlocksPublic Private Partnerships and
Kenya’s Infrastructure Deficit
Diamonds UnearthedAn overview of mining in Botswana
Consumer Protection in KenyaAway with the fine print!
Forex AlertZambia’s Move in Monitoring
Balance of Payments
and so much more...
BOTSWANA | BURUNDI | ETHIOPIA | KENYA | MALAWI | MAURITIUS | MOZAMBIQUE | RWANDA | SUDAN | TANZANIA | UGANDA | ZAMBIA
VOLUME NO 11 | ISSUE 5 | OCTOBER 2013
Inside this Issue
36 | LEGAL NOTES | APRIL 2013
ALN
ALN is an independent alliance of leading law firms in Africa. It is the largest and only grouping of its kind in Africa, with close working relationships across its 12 members and an established network of Best Friends across the continent. ALN’s firms are committed to working together to provide extensive coverage and on-the-ground experience. Members share common values and are grouped under – EAC, SADC and COMESA – with a combined population of 325 million people.
ALN at a Glance
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
Our member firms are on the ground in Botswana, Burundi, Ethiopia, Kenya, Malawi, Mauritius, Mozambique, Rwanda, Sudan, Tanzania, Uganda and Zambia. ALN also works closely with its affiliates in UAE, Kenya and Mauritius and its affiliates in UAE, Kenya and Mauritius and its associates in South Africa.
LegalNotes 1
WelcomeFor those of you who are new to ALN as a whole, we are an
independent alliance of leading law firms in Africa. We are the
largest grouping of its kind in Africa, with a tightly integrated
set of top-rated member firms. ALN’s clients and network
of international ‘Best Friends’ law firms benefit from ALN’s
“one-stop-shop” capability knowing that the quality of lawyers
and quality of services throughout is going to be uniformly
first class. Please do visit us on www.africalegalnetwork.com
Actually, I’m new to ALN myself! So a word of introduction is
in order. I have been with ALN for 6 months now – operating
out of Nairobi – having had a career background as a CEO,
a PE investor and an investment banker. I hold a B.Sc. and PhD
in Computer Sciences from Imperial College, London, and an
INSEAD MBA. I like learning languages and have promised my
Kenyan friends that Swahili is next!
Legal Notes is ALN’s flagship publication. Each edition brings
you commentary and analysis from a selection of ALN’s pool
of renowned legal minds.
Like ALN itself, Legal Notes continuously strives for excellence.
To achieve excellence requires your feedback. So do let us know
what you think.
Sincerely,
Dr. Michael H. GeraALN Chief Executive Officer
mg@africalegalnetwork.com
The Beating Drums of Africa These are undeniably exciting times for Africa. Never before have the drums resonated with such vigour! Today, Africa is being viewed as the land of a thousand gems. The continent’s potential stretches from mineral to agricultural wealth and from rich natural resources to a youthful workforce.
The slumberous giant is rising and Africa’s economies are among the fastest growing in the world, averaging 7 per cent. The growth and returns are attributable to various factors, among them: the unearthing of mineral deposits in Botswana and Zambia and the discovery of oil deposits, natural gas and coal in Mozambique, Kenya, Uganda and Tanzania.
Yet, despite such vast riches, Africa remains home to some of the world’s poorest. It continues to struggle with imbalances of trade and is viewed by many as a risky place to do business. Africa must find ways to address the concerns that still bedevil the continent. At the heart of this, is the need for regulatory and structural and governance reforms.
In this edition of Legal Notes, we bring you legal highlights from various ALN countries, with a particular focus on natural resources. We evaluate emerging trends in the oil & gas sector in East Africa and discuss diamond regulation in Botswana, the investment opportunities presented by Kenya’s private public partnerships laws and the new forex regulations in Zambia.
We have also included a special report on the investment climate in Africa, as seen through the eyes of three senior ALN Partners. Our affiliates, AC&H and JMiles & Co., offer insights on UAE as a gateway to Africa and the role of bilateral investment treaties, respectively.
As always, we hope that you will find this edition insightful! Asante! Merci! Obrigada!
Anne KiunuheEditorPartner, Anjarwalla & Khannaak@africalegalnetwork.com
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
2 LegalNotes
This publication is designed to inform readers of legal issues in various African jurisdictions. The contents of this newsletter are intended to be of general use only and should not be relied upon without seekingspecific advice on any matter. If you would like to subscribe to Legal Notes or any other ALN publication, visit www.africalegalnetwork.com. For further information on Legal Notes, contact legalnotes@africalegalnetwork.com
Editorial Team: Anne Kiunuhe - ak@africalegalnetwork.com | Patricia Fokuo - pf@africalegalnetwork.com Elizabeth Karanja - ewk@jmilesarbitration.com | Wangui Kaniaru - wk@africalegalnetwork.com | Madiha Abdul-Majid - interneight@nbi.africalegalnetwork.com
Contents
In VogueThe East African Oil and Gas Sector ................................................................................................................................................................3
Taming the Lion MarketsReflections from ALN on the Investment Climate in Africa ............................................................................................................................5
A Plug in the VentLand Ownership Challenges Hamper Natural Gas Development in Tanzania ..............................................................................................8
Building BlocksPublic Private Partnerships and Kenya’s Infrastructure Deficit .......................................................................................................................10
Diamonds UnearthedAn Overview of Mining in Botswana ............................................................................................................................................................12
Consumer Protection in KenyaAway with the Fine Print! ...............................................................................................................................................................................14
Forex AlertZambia’s Move in Monitoring Balance of Payments.....................................................................................................................................16
Opportunities and ChallengesKenya’s Devolved System of Government ....................................................................................................................................................18
Foreign Investment Protection in Africa ................................................................................................................................................20
The UAEEmerging Gateway to Africa .........................................................................................................................................................................22
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
LegalNotes 3
IntroductionThe development of the East African oil and gas (O&G) sector offers a burgeoning market with significant opportunities for exploration, development and production (E&P) companies. The O&G sector in East Africa is in the early stages of development and as a relatively new market, East Africa is an attractive investment destination.
The question that arises is: how well prepared are Kenya, Mozambique, Tanzania and Uganda to compete for this neoteric E&P interest? Encouragingly, these countries are taking active steps to secure and protect foreign investment by rapidly effecting robust and comprehensive regulatory systems designed to increase transparency and certainty for investors and ensure their own people are beneficiaries of the natural resources.
The trend towards a definitive O&G playing field coupled with significant gas discoveries in Mozambique and Tanzania and oil finds in both Kenya and Uganda, is resulting in global interest refocusing on the East Africa region as an attractive, if speculative, O&G emerging market.
KenyaThe calm election of the new Kenyan Government in 2012 has reduced the perceived political risk of doing business in Kenya and demonstrated a strong rule of law with the President being elected on a pro-progress ticket. With its favourable regional geology, competition for petroleum blocks in Kenya has intensified. The Ministry of Energy and Petroleum has diligently released of a steady stream of blocks for E&P activities, and is considering a move to
Aleem TharaniSenior Associate Anjarwalla & Khannaat@africalegalnetwork.com
The East African Oil and Gas Sector
licencing rounds designed to underpin investor confidence through a more formulaic and transparent system of block allocation.
Kenya is early in the development spectrum with Tullow drilling wells onshore in Turkana (having obtained good results and declared commerciality with a circa 5200 barrels per day (bpd) flow rate) and Apache and Anadarko drilling wells offshore (with mixed results to date). Due to the increased interest in Kenya, the Kenyan Ministry has become more aggressive than in the past on compliance with PSC terms. The Kenya Ministry has recently only allowed relatively short extensions in combination with very heavy penalties – a clear and significant departure from its historic approach. PSC interest holders now approach the importance of compliance with their obligations with increasing caution, and repossessions on the grounds of failure to comply with work and expenditure commitments are expected imminently.
From the people’s perspective, one of the most exciting developments is the potential creation of a sovereign wealth fund. The Government of Kenya has brought in a number of advisors and is actively pursuing this as a possibility with a view to avoiding the oil curse.
MozambiqueAfter many years of civil war and political instability, Mozambique is returning to a state of normality and consequently its upstream O&G industry is of growing importance in the region. Mozambique’s upstream potential appears to lie in natural gas rather than oil.
Mozambique’s debut into the market includes such highlights as the discovery of more than
In Vogue
100 trillion cubic feet (mainly in the offshore Rovuma Basin) and the Cove Energy takeover by PTTEP (who outbid Shell) which has demonstrated the growing attention O&G companies are giving to Mozambique. Anadarko, ENI, Petronas, Statoil, Total and Maurel & Prom already hold significant interests in the country’s exploration permits.
The Government of Mozambique has made a concerted effort to attract investment. The critical factor in the future exploitation of the country’s gas, however, is the emergence of sound commercial criteria for the establishment of a south-east African gas-gathering network capable of serving developing markets in the region.
Endemic corruption and limited O&G infrastructure will pose the most significant challenges to operators in the short-to-medium term and international donors have repeatedly called on the Government to tackle corruption or risk a freeze on budgetary support and donor aid.
Challenges remain – Mozambique’s infrastructure is inadequate for the spike in investment in the extractives sector. The potential of recent discoveries and regional and international demand for gas have prompted foreign companies to take the lead on infrastructure development with support from the Government.
Tanzania Tanzania has no commercial oil discoveries and only two small producing gas fields (Songo Songo and Mnazi Bay) and a number of promising gas discoveries in the deep offshore blocks. The producing fields took decades to
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
Krista BatesConsultantAnjarwalla & Khannakb@africalegalnetwork.com
Philip KarugabaPartnerMMAKS Advocateskarugaba@mmaks.co.ug
4 LegalNotes
bring to commercial production due to the lack of a local market and the impracticability of export in view of the limited reserves.
In June 2013, a run of new discoveries took the total recoverable reserves of gas to 28 trillion cubic feet. Tanzania has licensed 16 international energy companies to search for O&G. BG Group, Statoil, Petrobras, Royal Dutch Shell and Exxon Mobil Corp are among companies already operating in Tanzania. The country plans to offer seven deep offshore blocks and one onshore block in October for O&G exploration.
The potential rewards for investors are not in doubt but, despite enjoying enviable political stability, Tanzania remains some way behind regionally as an overall investment environment due to corruption, a challenging tax authority, electricity shortage, poor infrastructure and a deficiency of homegrown specialists in key Government departments.
In a political move likely to significantly shake investor confidence, the Ministry of Energy and Minerals has recently indicated all existing O&G contracts will be reviewed – it is not entirely clear what this will mean for PSC holders. The overall uncertainty leaves Tanzania in a challenging position.
UgandaO&G exploration activities in Uganda have had an unprecedented 90 per cent drilling success rate, with 58 of the 64 exploration and appraisal wells drilled in the country to date encountering oil and/or gas. Wells drilled on a number of structures during 2002-2013 confirmed the presence of multiple exploitable accumulations of hydrocarbons proving up over 3.5 billion barrels of oil equivalent in place.
The moratorium that was placed on licensing oil and gas activities in Uganda will soon be lifted with the enactment of new laws to govern the sector and the establishment of the relevant institutions. International oil companies are already setting up in Uganda in anticipation of the new licensing rounds.
Parliament has recently promulgated further legislation to enable the effective and efficient management of the nascent O&G sector, one of which is the Petroleum (Exploration, Development and Production) Act, 2013 which was brought into force in April 2013.
The new laws are expected to help boost investor confidence in the sector. Investors should however expect to see tougher contractual terms than those that were negotiated under the old legal regime.
After a two year impasse between the Government and the O&G companies, the Government has decided to build a refinery to cater for the needs of Ugandans alongside a crude export pipeline to cater for the interest of the O&G companies. This will hopefully stimulate progress in the development of the O&G sector.
Trends in the Market With a changing landscape, the various Ministries across East Africa have become more robust with the terms required under new PSCs, with large increases in signing bonuses, minimum work obligations, minimum work programs and bank guarantees. The trend is shifting to a more
aggressive sharing of the profit oil with the relevant Government, who are now looking to see a significant balance sheet for E&P companies who wish to secure a PSC.
The Ministries must however be cognisant of the need to balance the interest of the people of East Africa to fully benefit from their own O&G resources with the level of risk which O&G companies are willing to accept. The successful development of the sector is reliant on a country making itself an attractive destination – O&G is by its nature a risky business. East Africa will need to rise to the challenge of attracting E&P activities through sensible PSC terms, and a strong legal, fiscal and regulatory framework.
Given and that a preponderance of PSCs are held by smaller players, noncompliance with work obligations is becoming increasingly likely. With an intensifying difficulty on the part of smaller E&P companies to secure funding coupled with looming work obligations, those holding blocks and requiring financing are becoming less demanding of their potential farm-in partners. Although Kenya (with the most developed capital market in East Africa) has developed a new stock exchange market (GEMS) targeted to provide funding for such companies, it is currently in its infancy. Consequently, there are increased for well funded players wanting to invest in the East African O&G sector via the farm-in route.
This signals new opportunities for those with the technical, operational and financial capacity interested in investing in the East African O&G market.
The Future of the O&G IndustryClearly these are very exciting times for East Africa. Unfortunately many of the East African countries in recent times have shaken investor confidence. Whether it be an adverse review of PSCs, the introduction of taxation on farm-ins, discourse on the pathway to commercialisation or other Government acts, it may restrict development of the sector.
The key to a stable, long term and successful O&G sector is the creation of an investor friendly, market competitive, certain and transparent investment environment with full collaboration with the O&G companies. Despite a few notable offshoots there is broadly speaking a steady march to adopting these founding principles which is indicative of the various East African Government’s approach to ensuring the attendant benefits of natural resources flow to its people. There is every indication, and one can be cautiously optimistic, that despite some challenges along the way the O&G sector will ultimately flourish in East Africa and steer the region to a better future. •
Interesting fact about Africa: Nineteen African countries are currently significant producers of oil and gas, but these sectors employ less than 1 per cent of the workforce.
Interesting fact about ALN: ALN has an oil & gas sector group that advises project sponsors, funders, private equity partners, government agencies, acquirers and targets on innovative project structures, tax considerations, local participation requirements, and other regulatory and commercial considerations in the oil and gas sector.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
LegalNotes 5
According to Phillip Karugaba, a Senior Partner
at MMAKS Advocates in Uganda, “the leading
sector attracting investment by far in Uganda
has been in the oil & gas sector and the support
services. The buy up of Heritage interests
by Tullow and the subsequent farm-in of Total
and CNOOC were certainly among the largest
transactions of late.” The significant growth is
attributable to various factors, primarily Africa’s
rich resources and extended periods of political
stability.
Strides in Law and GovernanceKarim Anjarwalla, the Managing Partner of
Kenya’s Anjarwalla & Khanna Advocates
attributes the growth in Kenya to improvements
in the political climate and governance
structures as evidenced by the recently
successfully held elections. According to Mr.
Anjarwalla, “The elections have undoubtedly
Mapping the Growth African countries have in recent years continued
to outdo others as the fastest growing
economies in the world. It is estimated that in
the last 10 years, growth in Africa has surpassed
that of East Asia. Research conducted by
Renaissance Capital indicates that 11 African
countries grew at an annual rate of 7 per cent
or more between 2000 and 2009. IMF data
shows that 6 out of the 10 fastest-growing
economies in the world between 2001 and
2010 were in Africa. These statistics tell a story
(despite investors derive different conclusions
from them) but it is irrefutable that Africa will
in the years ahead continue to attract a lot of
interest.
It is thus not surprising that international
investors continue to beat on Africa’s doors. Ten
years ago if you were invited to a conference on
Africa in London or other global venues,
chances are the topic would have been political
or social such as peace-keeping or the refugee
crisis. Today, many of the conferences and
events relate to the investment opportunities in
the continent.
New Trade DynamicsAlthough the EU as a bloc remains one of
Africa’s biggest trading partners, the EU’s and
Anne Kiunuhe PartnerAnjarwalla & Khannaak@africalegalnetwork.com
Reflections from ALN on the Investment Climate in AfricaTaming the Lion Markets
Elizabeth Karanja AssociateJMiles & Co.ewk@jmilesarbitration.com
The renewed interest in Africa has been described as the modern scramble for Africa. Questions abound about investing in Africa and in many ways,
it remains an adventurous journey. There are no easy road maps or instruction manuals. We were privileged to speak to three Senior Partners from
key emerging markets in Africa – Mr. Karim Anjarwalla, the Managing Partner of Anjarwalla & Khanna, Advocates, Kenya, Mr. Phillip Karugaba, a
Senior Partner at MMAKS Advocates, Uganda and Mr. Julien Kavaruganda, the Managing Partner of K-Solutions & Partners, Rwanda. They have been
advising investors and businesses in Africa for over a decade and are familiar with the do’s and don’ts about the continent. They share with us their
candid views on investing in the continent.
America’s share of trade with Africa has
continued to shrink over the years. Trade
between Africa and other countries, particularly
the BRICS countries is on the rise. China leads
the BRICS pack. Chinese investment into Africa
multiplied 10 times between 2005 and 2011,
with major investment in oil and gas,
commodities and infrastructure development.
Between 2006 and 2012, China invested over
USD 67 billion in projects in Africa. Brazil is
investing heavily in the mining sectors in
Mozambique and Angola. The Indian-based
companies that have recently set up in Africa
include Bharti Airtel, Tech Mahindra and Tata.
Intra-African trade boosted by trading blocs
such as the EAC, SADC and COMESA is also on
the rise, with South Africa and Nigeria being the
most active exporters of growth capital. Growth
in neighboring countries has increased the
importance of gateway countries such as
Mauritius (as a financial gateway), Kenya and
Nigeria (both as geographic gateways).
The Budding Sectors Sectors that have continued to attract significant
investment include natural resources and
extractive industries such as oil, gas and mining,
infrastructure, fast moving consumer goods,
telecoms, construction, real estate and financial
services.
Karim Anjarwalla“He is a very fine lawyer and very pleasant to deal with.” IFLR 1000, 2013
ksa@africalegalnetwork.com
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
6 LegalNotes
had a positive impact on investment in Kenya
because they were peaceful, they were held
under the new constitution and they affirmed
the growing strength of Kenya’s democratic
and governance institutions.” Other
contributors to the growth in Kenya include
improvements in infrastructure, such as the
expanded road network, telecommunication,
improvement in rail and the expansion of the
capacity of the port of Mombasa.
Julien Kavaruganda, the Managing Partner of
Rwanda’s K-Solutions & Partners, identifies
law and regulatory reform in Africa as a key
driver of the increased interest in Africa.
“Incorporating a company in Rwanda can
now be done all in a space of 6 hours”, he
points out.
According to a recent report published by the
IFC and World Bank, out of the 50 economies
making the most improvement in business
regulation for domestic firms since 2005, 17 of
these are in Sub-Saharan Africa. Rwanda has
implemented 26 regulatory reforms since 2005
while Burundi has implemented at least 4
reforms in the last one year. Mauritius which is
ranked 19 in the World Bank Doing Business
Report improved access to credit information
and made property transfers faster by
implementing electronic systems. Uganda and
Zambia are both noted to have strengthened
their insolvency processes.
There is Room for ImprovementDespite the significant headways made by
African countries in improving the investment
climate, a lot still remains to be done.
Mr. Anjarwalla points out that there is still a
significant infrastructure deficit, especially in
relation to power. The increase in urbanisation,
with 40 per cent of African estimated to live
in cities by 2030, is causing a strain on the
already over-stretched infrastructure.
Other areas requiring reform include investor
relations, bureaucracy, unemployment and
dispute settlement mechanisms.
In Uganda, the Constitution is currently being
tested on several issues such as the appointment
to Cabinet of a serving military officer,
re-appointment of a Chief Justice and other
issues. “Constitutionalism must prevail” quips
Mr. Karugaba.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
Phillip Karugaba “bright and very commercial - definitely a heavyweight lawyer in the Ugandan market.” Chambers Global, 2013
karugaba@mmaks.co.ug
LegalNotes 7
the necessary steps to make the most of this
growing interest. The question is how do they
do this?
Mr. Kavaruganda’s view is that the answer lies
in the transfer of knowledge. “Request a
transfer of knowledge otherwise we won’t be
able to create what they are selling to us: we
can buy their products now, but with their
commitment to help us to develop our
knowledge we can be in a position to develop
our industry and compete with them in the
coming years.”
A major mind shift towards foreign investment
is required and Africa needs to view and treat
foreign investors as collaborators in national
development, recognising their commercial
interests and accommodating this alongside
national priorities. “For African governments
this is not the time to bask in the sun but to roll
Unemployment and poverty is still a major
challenge. “There has been insufficient focus
on poverty alleviation which has resulted in
high unemployment and concerns in relation to
insecurity”, says Mr. Anjarwalla.
There have been strides in improving dispute
resolution mechanisms: 44 out of 54 African
jurisdictions are signatories to the ICSID
Convention on investment arbitration; African
governments are increasingly prepared to
accept arbitration as a preferred dispute
resolution mechanism; and jurisdictions such as
Mauritius, Kenya, Rwanda and Nigeria have set
up international arbitration centres in a bid to
increase foreign investor confidence. However,
there is still a real need to improve the capacity
and quality of the judiciary, which will give more
certainty in the enforcement of contracts and
resolving of investment disputes.
Whereas many Governments in Africa are to be
lauded for the significant legal reforms
witnessed over the last few years, African
Governments must ensure that the reforms do
not achieve the counteractive effect of making
it a more difficult place to do business. Mr.
Anjarwalla, for instance, points out that Kenya,
which ushered in a new form of governance in
2013 comprising of a National Government and
47 County Governments, needs to take care
that the new devolved government structure
does not lead to turf wars in relation to
resource-based investments such as oil and gas
and mining between national government and
county governments.
How do we Move Ahead?With the world’s focus having shifted towards
Africa, African governments and the African
people will need to carefully and actively take
up our sleeves and get working on the
hard and soft issues to create a condusive
environment for business” advises
Mr. Karugaba, adding that infrastructure,
roads, power, telecoms and rail all need much
more investment than is available. Softer issues
like legislation, fighting corruption, and ease of
doing business must all be addressed and
quickly. His advice to the African people is that
they need to put in massive effort to acquire the
requisite skills so as to equip their people to
provide services in the growing industries and
investment opportunities.
Mr. Anjarwalla emphasizes the need for Africa
to invest in itself. “Hold your leaders accountable
and remember that foreign investment will
only help a nation’s development if a country
and its citizens invest in themselves and create
a viable domestic economy based on each
country’s comparative advantages.”•
Julien Kavaruganda “is strong in banking, financing and contract negotiations.”
Chambers Global, 2013
julien@ksolutions-law.com
Interesting fact about Africa: There is only one place on Earth where 4 countries meet –
the “Four Corners of Africa” includes Botswana, Zambia, Zimbabwe, and Namibia.
Interesting fact about ALN: ALN is the only network in Africa that brings together leading
law firms in Africa to work together to provide extensive coverage and on-the-ground
experience.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
8 LegalNotes
IntroductionThe legal framework for petroleum and gas
exploration and development in Tanzania is
governed by the Petroleum (Exploration and
Production) Act, 1980 (the PEPA) and midstream
and downstream petroleum activities are
governed by the Petroleum Act, 2008 (the PA)
and the regulations promulgated thereunder.
The Tanzania Petroleum Development
Corporation (the TPDC) Is the body responsible
for entering into production sharing agreements
(PSA) / development agreements with foreign
exploration and development companies.
The PEPA applies to any naturally occurring
hydrocarbon, whether in gaseous, liquid or
solid state or mixtures. The PA, on the other
hand, only seems to apply to petroleum, which
has been defined to mean petroleum crude and
any liquid or gas made from petroleum crude,
coal, schist, shale, tree, peat or any produce of
petroleum crude. The PA does not take into
account natural gas. Currently, there is no
legislation in force which specifically relates to
natural gas.
Although there is a draft Natural Gas Policy
which was issued in 2012, it is not in force.
Furthermore, the Gas Supply Bill, 2009 as
subsequently amended to the Natural Gas Act,
2012 has not passed the mandatory readings
required by parliament or been given presidential
assent. There is, therefore, a gaping legislative
lacuna for companies undertaking work in the
natural gas sector, especially in the midstream
and downstream sector.
Amish ShahLegal ConsultantAdept Chambers amish.shah@adeptchambers.com
A Plug in the VentLand Ownership Challenges Hamper Natural Gas Development in Tanzania
One of the challenges faced by foreign
exploration companies is the uncertainty
surrounding the ownership of land for
midstream and downstream infrastructure.
Land Ownership for Investment Purposes All land in Tanzania is State land, vested in the
President of the United Republic of Tanzania as
trustee for the nation. Statutory leases of up to
ninety-nine (99) years may, however, be
obtained and are known as granted rights of
occupancy. These leasehold interests represent
title and may be sold and encumbered. Land
may only be held under these statutory leases
by a citizen of Tanzania or a company which has
a majority Tanzanian shareholding. Foreign
nationals and foreign companies cannot own
land in Tanzania. A Tanzanian company wholly
owned by foreigners or majority owned by
foreigners can hold land if it holds a Certificate
of Incentives issued by the Tanzania Investment
Centre (the TIC).
When a foreigner wishes to own land for
investment purposes, the land is required to be
identified, Gazetted and allocated to the TIC
which thereafter creates derivative rights in
favour of the investor, subject to the investor
obtaining a Certificate of Incentives. The
Tanzania Investment Act, 1997 (the TIA) sets
out minimum capital requirements that must be
meet in order to qualify for registration under
the TIA. If a project is wholly owned by a
foreign investor or if a joint venture, the
minimum investment capital must not be less
than the Tanzania Shillings equivalent of USD
300,000. If the company is locally owned, the
minimum investment capital is not less than the
Tanzania Shillings equivalent of USD 100,000.
Broadly, the TIA applies to businesses which
meet the investment requirements, as discussed
above, other than to a business enterprise
which is authorised to conduct exploration or
production operations or to construct or
operate a pipeline under the PEPA. However,
there are provisions in the TIA which still apply
to licence holders under the PEPA - these relate
to guarantees of transfer of capital, profits and
dividends and guarantees against expropriation.
The Investment Regulations promulgated under
the TIA require the TIC to automatically issue a
Certificate of Incentives to any investor holding
1952 – Tanzania started petroleum exploration
1974 – First petroleum discovery was made at Songo Songo Island
5 – Number of onshore and shallow water discoveries of natural gas fields made to date
2 – Number of gas fields producing natural gas. These are in Songo Songo and Mnazi Bay
29 – Number of exploration licences granted to the TPDC
One of the challenges faced by
foreign exploration companies is
the uncertainty surrounding the
ownership of land for midstream
and downstream infrastructure.
Interesting fact about Tanzania: Tanzania is home to the coconut crab,
the world’s largest (and one of the most delicious) crabs in the world.
Interesting fact about ADEPT Chambers: Adept acted for Cumberland
and Jeppe Star on the sale of Jeppe Star to a consortium of HSBC Investment
Bank and Satya Capital, marking the largest private equity deal of 2010.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
LegalNotes 9
a licence under the PEPA. In practice, however, oil and gas exploration
and production companies are not automatically issued with a Certificate
of Incentives and therefore cannot rely on the provisions of the land
laws which allows a foreign company to hold land under a derivative
title. Government authorities argue that because exploration/
development activities are governed by the relevant PSA/development
agreement and since PSA’s/development agreements are issued pursuant
to the PEPA, the provisions of the TIA are not applicable.
Developments in the Natural Gas Sector With the recent gas discoveries made in Tanzania the estimated
recoverable gas reserves have increased to 30 and 40 trillion cubic feet.
Certain foreign companies are planning to develop liquefied natural gas
terminal(s), but as discussed above, such ambitions would face
challenges in obtaining land under a derivative title from the TIC. These
companies would instead have to hold some form of long term lease
from the TPDC, which would hold the land as envisaged under the
Natural Gas Policy, 2012. The concern with this arrangement is that
With the recent gas discoveries made in Tanzania the
estimated recoverable gas reserves have increased to
30 and 40 trillion cubic feet.
There is currently no legislation in force which specifically
relates to natural gas.
should the TPDC lose its title over the land for whatever reason, then the
infrastructure on the land could be affected. This creates an operational
risk for an natural gas investor.
From a project financing perspective, the uncertainty raises issues for
lenders as they would often require a strong guaranteed title to act as
security for financing. Where an investor only holds a long term lease
(say from the TPDC), the lenders would only be able to create a security
with the consent of the title holder.
ConclusionIt is clear that there is a legislative lacuna that needs to be quickly
addressed in order to guarantee the future of natural gas development in
Tanzania. There are discussions in Government for the need to amend the
land laws to guarantee land ownership for natural gas development
investors or to make special concessions under existing laws. Investors will
have to wait and see if changes will be implemented in the near future,
as momentum by foreign exploration/development companies mounts. •
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
10 LegalNotes
The government has been encouraging
participation of private parties in developing
public infrastructure through Public Private
Partnerships (PPPs) in a bid to bridge the
yawning infrastructure deficit. These efforts
have initially been centered on creating a
favorable environment to encourage the uptake
of PPPs through creation of a legal framework,
engaging investors and government entities.
As Engineer Stanley Kamau, head of the PPP
Unit at the Kenya National Treasury states,
“[we] as a government, are trying to create an
enabling environment and a mechanism for
supporting PPPs.”
The PPP Act The Public Private Partnerships, Act 2013 (the
Act) was assented to on 14 January 2013 and
came to effect on 22 February 2013. The Act
repealed the PPP regulations under the Public
Procurement and Disposal Act, No. 3 of 2005
(PPDA) and PPP arrangements under the
Privatisation Act, 2005.
The Act defines a PPP as an arrangement
between a state department, agency, state
corporation or county government (Contracting
Authority) and a private party, where the
private party performs a public function or
provides a service on behalf of the Contracting
Authority; receives a benefit for it either in the
form of compensation from a public fund and/
Rosa Nduati-MuteroPartnerAnjarwalla & Khanna rn@nbi.africalegalnetwork.com
Building Blocks
Edwin BaruLawyerAnjarwalla & Khannaebm@africalegalnetwork.com
IntroductionKenya, under its developmental blueprint “Vision 2030”, aims at achieving middle-income country status with a high quality of life for all its
citizens by the year 2030. Although the economy has shown steady growth averaging 4.82 per cent between 2004 to 2013, the country needs
to achieve and maintain an annual growth rate of 20 per cent for the next 20 years to achieve middle-income country status.
or charges to consumers; and is generally liable
for risks arising from performance of the
function in accordance with the project
agreement.
The Act applies to projects for the financing,
construction, operation, equipping or
maintenance of infrastructure or development
of a facility or the provision of public services
undertaken as PPPs. A plain reading of the Act
suggests that contractual arrangements
between the government and a private party
for the exploitation of a natural resource, such
as building a dam or a mining concession would
fall under the definition of a PPP.
Projects Under the ActBefore undertaking any project, a Contracting
Authority must first assess the advantages of
using a PPP over developing the facility or
providing the service itself based on three
indicators:
Although the economy has shown
steady growth averaging 4.82 per
cent between 2004 to 2013, the
country needs to achieve and
maintain an annual growth rate of 20
per cent for the next 20 years to
achieve middle-income country status.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
Public Private Partnerships and Kenya’s Infrastructure Deficit
LegalNotes 11
Inadequate funding: A recurring challenge is
lack of adequate funds, compounded by the
absence of a long-term lending market. It has
been reported that Kenya will only undertake 6
PPP projects out of the 160 important projects
in the first 5 years due to inadequate finances.
There is a lack of local players in the long-term
lending market which is currently dominated
by Development Finance Institutions (DFIs).
Overlap with other laws: A glaring challenge is
that the Act fails to clarify whether projects that
qualify as PPPs are also subject to the PPDA.
This poses a serious setback in implementing a
PPP as the PPDA contains its own processes
required to be followed.
ConclusionThe Act has introduced a firm legal base upon
which PPP projects can be undertaken in Kenya
and with the devolved system of government,
we are likely to see increasing interest in
infrastructure projects undertaken as PPPs in
the future. The success of the Act will however
rest in the ability of the Regulations to either
give confidence or discourage investors
interested in undertaking PPP projects in the
Country. •
(i) value for money,
(ii) affordability for the Contracting Authority
and
(iii) the end users and appropriate transfer
of risks to the private party.
Projects can either be solicited bids or
privately-initiated proposals.
Solicited bids
For a solicited bid, a Contracting Authority
conceptualizes the projects it wishes to
undertake and submits a list of these projects
for approval by the PPP Unit, PPP Committee
and the Cabinet.
Once the project is on the National Priority List,
the relevant Contracting Authority conducts a
sector diagnostic study and submits a project
proposal for approval to the PPP Unit. If
approved, a competitive bidding process begins
with private parties applying for prequalification
followed by technical and financial bids by the
prequalified parties.
The successful party then establishes a project
company in which the Contracting Authority
may be a minority shareholder.
Privately initiated bid
A private party may field a PPP project to a
Contracting Authority without going through
competitive bidding where:
i) There is an urgent need for continuity;
ii) Costs relating to intellectual property in
relation to the project design are
substantial;
iii) There exists only one person capable of
undertaking the project; or
iv) There exists any of the circumstance as
the Cabinet Secretary may prescribe.
The Contracting Authority then submits the
proposal to the PPP Unit for approval which if
approved, negotiations can commence with the
private party.
Project AgreementsAll project agreements are subject to the laws
of Kenya and must fall within the 13
arrangements provided in the Second Schedule
of the Act or any other arrangement approved
by the Cabinet Secretary. These 13 arrangements
include;
i) Management contract;
ii) Lease;
iii) Concession;
iv) Build-own-operate-transfer scheme;
Rehabilitate-operate-and-transfer; or
v) Land swap.
Draft PPP Regulations 2013 (the Regulations)The National Treasury recently circulated draft
Regulations for public comment. Although the
Regulations were mostly well received, the
business community has voiced concern that
the Regulations are heavily skewed in favour
of the Government.
The Regulations are expected to provide for
thresholds for the application of the Act and for
projects which can be undertaken by County
Governments without necessarily getting
approval from cabinet. This is welcome as most
of the small-to-medium-sized PPP projects will
be undertaken at the County level.
Challenges in Implementing the ActManaging expectations: PPPs involve heavy
planning and logistics which may take at least
3 years before implementation commences.
Most people are unaware of the time required
for matters such as the mobilisation of capital
and multiple approvals like environment impact
assessments. It is, therefore, important that
the expectations of the public and policy
makers are managed.
Generating synergy: A single PPP project
requires the involvement and collaboration of
many government agencies and departments.
Consultations between the various departments
(including between National and County
governments) are therefore central to a PPP
project.
A single PPP project requires the
involvement and collaboration of
many government agencies and
departments.
The Act fails to clarify whether
projects that qualify as PPPs are also
subject to the PPDA.
Interesting fact about Kenya:
Kenya was Africa’s first geothermal power
producer and is the world leader in the
number of solar power systems installed
per capita.
Interesting fact about
Anjarwalla & Khanna:
First Sub-Saharan African law firm
to achieve financial close on a large
power project. A&K was the lead legal
adviser for the project sponsors on the
development of an 83 MW HFO power
generation facility.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
12 LegalNotes
IntroductionThe mining industry in Botswana has dominated
the national economy since the early 1990s.
Botswana is most famous for its diamond
industry, which was for many years dominated
by South African giant, De Beers, in partnership
with the Botswana Government. De Beers
began exploring for diamond in Botswana in
1955, a time when the country’s economy
survived on agriculture. And, hence, Botswana’s
rise to be a leading global exporter of diamonds
began.
Mineral LegislationAs the mineral sector grew, the Government
recognised the need to update existing mineral
regulation pragmatically. The Mines and
Minerals Act of 1977 has been amended to
incorporate changes designed to facilitate the
issuing of exploration and mining licences and
to make Government participation in new
developments more attractive to investors. The
current Mines and Minerals Act (the Act) was
enacted in July 1999.
Botswana’s general mining policy aims at
maximising the national economic benefit from
development of mineral resources. This is to be
achieved through:
(a) Encouraging prospecting and new mine
development
(b) Negotiating mining agreements which
maximise the net national economic
benefits resulting from mine operations
(c) Generating linkages with the rest of the
economy and increasing local value added
services
Diamonds UnearthedAn Overview of Mining in Botswana
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
(d) Creating employment and training
opportunities for Botswana
(e) Vesting all mineral rights in the Republic.
Acquiring Mineral RightsApplications for mineral rights are made to the
Minister of Minerals, Energy and Water
Resources through the Geological Survey
Department (exploration) or the Department of
Mines (mining). There are three types of mineral
rights in Botswana:
(a) a prospecting licence, which is restricted
to a maximum area of 1000km2. It is valid
for 3 years and may be renewed for
further two periods of 2 years each. The
licence holder is among others, requires to
submit activity reports to the Minister and
once a mineral discovery is made, this is
required to be notified to the Minister. The
licensee may apply for a mining licence
upon discovery.
(b) a retention licence, which is granted to the
licensee over a prospecting area for
periods not exceeding 3 years. Licensees
must provide the Director of Geological
Survey and the Director of Mines with
quarterly activity reports and annual
financial reports. They must also
immediately provide the Minister
(via the Director of Mines) results of
studies, surveys and tests, including
analytical metallurgical, mineralogical
and geophysical work.
(c) a mining licence, which is only issued to
a prospecting licensee over the ore
deposit in question. The application
must be made by a company resident
in Botswana which intends to carry on the
sole business of mining under the mining
licence applied for. The licence is valid up
to 25 years and may be renewed for
another period not exceeding 25 years.
Rizwan DesaiSenior PartnerCollins Newman & Co.rizwan.desai@collinsnewman.bw
Krupali RaiParalegalCollins Newman & Co.krupali.rai@collinsnewman.bw
LegalNotes 13
Interesting fact about Botswana:
Botswana’s currency is called the Pula
(which means “rain” in Setswana, the
local language).
Interesting fact about Collins Newman:
Collins Newman has a well-developed
and dedicated mining practice covering
all aspects of mining and resources law,
and has been involved in the largest
infrastructure projects in Botswana.
Interestingly, diamond mining uses water,
rather than chemicals, for extraction.
The rights may be granted to an individual or
company as provided for in the Act.
The key feature of the revised licensing regime
is that the whole process from prospecting to
mining would be automatic and predictable,
removing some of the uncertainty and stages of
negotiation which previously existed. The main
innovation was the introduction of the retention
licence, designed to accommodate explorers
who on making a discovery, find that it cannot
immediately be mined economically. Previously,
prospective mining investors would have lost
their entitlement if they were not able to bring
a resource into production.
The Government’s StakeThe Government of Botswana insists on
effective participation in the mineral sector
through equity participation and board
representation.
Generally, for large projects, Government
participation falls within the range of 15 per
cent to 25 per cent issued free of cost. With
regard to new mines, while the Government
retains the right to acquire a minority interest,
this will now generally be up to a maximum of
15 per cent and will be on commercial terms
with the Government paying its pro-rata share
of costs incurred.
Minimum controls are exercised on business
operations and the management is left entirely
to the private sector partner.
Taxation of mining companies outside the
diamond industry has also been revised with a
variable rate income tax replacing project-
specific rates.
Royalty rates are calculated as a percentage of
the gross market value of the mineral and are
currently 10 per cent for precious stones
(including diamonds), 5 per cent for radioactive
minerals, precious metals, semi-precious stones
and coal and 3 per cent for all other minerals,
including building and industrial mineral
products.
Environmental ObligationsBotswana has a National Conservation Strategy
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
Coordinating Agency which promotes the use
of an environmental impact assessment.
Sectorally, the regulations under the Act contain
detailed requirements for environment control.
The holder of a mineral concession is obligated
to conduct his operations in such a manner as
to preserve as much as possible the natural
environment; minimise and control waste or
undue loss of or damage to natural and
biological resources; and to prevent, and where
unavoidable, promptly treat pollution and
contamination of the environment.
ConclusionThe Government of Botswana has undertaken a
deliberate commitment to derive maximum
benefit from the entire diamond value chain in
the country which has led, inter alia, to the
relocation of the De Beers marketing and selling
arm, Diamond Trading Company, from Europe
to Botswana which will initiate the much
needed critical mass for secondary diamond
trading in Botswana.
The current legislative, political and business
environment, in addition to the Government’s
stewardship of Botswana’s mineral resources
has led to the recognition of Botswana,
by the Fraser Institute, as one of the top 5
countries in the world for mining investment
in 2012.
With the progressive developments made
by the Government, it is expected that
Botswana’s position as a diamond producer
can only go up. •
Krupali RaiParalegalCollins Newman & Co.krupali.rai@collinsnewman.bw
14 LegalNotes
IntroductionIn the last 3 years, Kenya has witnessed
significant changes in the area of consumer
protection. Many of the legal rights of
consumers are now enshrined in written law and
consumer lobby groups are slowly beginning to
gather momentum. The Constitution of Kenya
provides that consumers have the right to
goods and services of reasonable quality.
In addition, consumers have the right to
information necessary for them to gain benefit
from goods and services, protection of their
health, safety and economic interests and
compensation for loss or injury arising from
defects in goods or services.
The Constitution required Parliament to enact
legislation to provide for consumer protection
and for fair, honest and decent advertising.
Pursuant to this, the Consumer Protection
Act, 2012 (the CPA) was enacted and became
operational on 14th March, 2013.
Historical Background Prior to the enactment of the CPA, consumer
protection was fragmented among various
laws, including the Standards Act, the Trade
Descriptions Act, the Sale of Goods Act, the
Hire Purchase Act, the Competition Act, 2010
Away with the Fine Print!
Nafysa AdamPrincipal AssociateAnjarwalla & Khanna naa@africalegalnetwork.com
Consumer Protection in Kenya
and English common law. The lack of a single
encompassing legislation was a challenge to
enforcement.
There was no statutory designated body dealing
with consumer affairs, and the Consumer
Federation of Kenya (COFEK) was registered
by a cross-section of interested parties in 2010.
COFEK provides legal advice and institutes
legal proceedings in matters touching on
consumer protection. For instance, in 2012,
COFEK instituted proceedings against the
Communication Commission of Kenya to stop
them from effecting their notice to switch off
analogue signal transmission in a bid to have the
public switch to digital signal. COFEK claimed
that the CCK had failed to offer sufficient public
information on digital migration so as to allow
consumers the freedom of choice guaranteed
by the Constitution.
The Competition Act, 2010 and Consumer ProtectionThe Competition Act has a number of provisions
geared towards consumer protection. For
example, the Competition Act makes it
an offence to make false and misleading
representations to consumers or engage in
conduct that is unconscionable in relation to
the supply of goods or services. False or
misleading representations include false
representations that the services or goods are
of a particular standard, quality, value or grade.
In determining whether or not a person has acted
unconscionably, the Competition Authority may
consider various factors, including the relative
strengths of the bargaining positions.
Further, the Competition Act grants power to
the Competition Authority to require suppliers
to recall their goods if they do not comply with
prescribed safety standards.
Under the Competition Act, a person who
contravenes any of the provisions in relation
to consumer welfare commits an offence and
is liable to conviction to imprisonment for a
term not exceeding 5 years and/or to a fine
not exceeding KES 10 million (approximately
USD 120,000).
The Constitution of Kenya provides
that consumers have the right to
goods and services of reasonable
quality.
The CPA automatically incorporates
into consumer agreements certain
implied conditions and warranties
applying to sale of goods such
as fitness for purpose and
merchanteable quality.
Interesting fact about Kenya:
Jomo Kenyatta International Airport is the biggest
airport in East Africa.
Interesting fact about Anjarwalla & Khanna:
With 54 lawyers, A&K is the biggest law firm in
East Africa.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
LegalNotes 15
New FrameworkThe CPA establishes a platform for consumer
protection. The CPA automatically incorporates
into consumer agreements certain implied
conditions and warranties applying to sale
of goods such as fitness for purpose and
merchanteable quality.
Who is a Consumer?The CPA defines “consumer” widely to include
not only the person who buys the goods or
services, but also a person who uses the goods
or services irrespective of whether they were a
party to the purchase transaction.
The Kenya Consumers Protection Advisory
Committee (the Committee)
The CPA establishes the Committee whose
functions include providing advice to
consumers on their rights and responsibilities
under appropriate laws, making available
to consumers general information affecting
their interests, ensuring relevant action on all
aspects of consumer protection and advising
the Cabinet Secretary on matters related to
consumer protection.
The Committee is made up of the principal
secretary for trade and industry, the Attorney-
General and persons nominated by the cabinet
secretary which include among others, four
persons nominated by accredited consumer
organizations, professional bodies including the
Law Society of Kenya and government agencies
including the Kenya Bureau of Standards.
The CPA and the Banking IndustryThe CPA has significantly changed the game
in the banking industry. There are protections
offered in relation to credit agreements (a
consumer agreement under which a lender
extends credit or lends money to a borrower),
including the following:
(a) If a lender under a credit agreement invites
a borrower to defer making payment,
the lender must disclose whether or not
interest would accrue on the unpaid
amount failing which lender is deemed
to have waived the interest.
(b) A lender is not entitled to impose on
a borrower default charges other than
reasonable charges in respect of legal
costs incurred by the lender in
attempting to collect payment and
realizing security interest or costs
incurred by the lender in respect of bounced
cheques.
(c) A borrower is entitled to pay the full
outstanding balance under a credit
agreement at any time without any
prepayment charge or penalty.
Other ProtectionsOther protections under the CPA include:
(a) Where a consumer, under a future
performance agreement, has paid at least
two-thirds of his payment obligations,
the supplier may only re-possess the goods
or services upon default in payment by
the consumer by leave from the High
Court.
(b) If a consumer agreement includes an
estimate, the supplier shall not charge the
consumer an amount that exceeds the
estimate by more than 10 per cent.
(c) A repairer of motor vehicles and other
goods shall not charge a consumer for
any works or repairs until the repairer first
gives the consumer an estimate unless the
consumer declines the estimate or gives
the repairer a maximum amount that he
will pay for the works.
ConclusionGiven the haphazard way that consumer
protection has been dealt with in the past, the
CPA, in many ways, is a welcomed change. It
brings with it a piece of legislation that can
be relied on by consumers, in its entirety, in
relation to consumer protection. Suppliers,
on the other hand, need to be aware of its
far-reaching implications. Only time will tell
how effective the CPA will be in meeting its
objectives. •
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
16 LegalNotes
IntroductionThe Government of Zambia will now be able to
monitor borrowings from non-resident lenders
and remittances out of Zambia. This is after the
recent introduction of the Bank of Zambia
(Monitoring of Balance of Payments)
Regulations, Statutory Instrument 55 of 2013
(the Regulations), which came into operation
on 1 July 2013. The Regulations repealed the
Bank of Zambia (Monitoring of Balance of
Payments) Regulations Statutory Instrument
32 of 2013 (SI 32).
The enactment of the Regulations does not
appear to introduce any foreign exchange
restrictions, but have still created new concerns
for foreign lenders and investors in relation to
foreign exchange payments to and from
Zambia.
Impact of the Regulations on Foreign LendersUnder the Regulations, the Bank of Zambia
(BoZ) monitors borrowings from non-resident
lenders and the receipt of the principal and
interest on loans to non-residents. BoZ also
monitors any amounts remitted out of Zambia
whether gratuitous or not, loans granted to
non residents and any payments of interest or
principal or an instalment on loans from foreign
lenders.
The Regulations affect all capital-intensive
projects in Zambia which are largely financed
through foreign exchange loans from
financial institutions outside Zambia.
Mutule MusebaAssociateMusa Dudhia & Co.mmuseba@musadudhia.co.zm
Forex AlertZambia’s Move in Monitoring Balance of Payments
Registration of LoansThe Regulations require any person
who obtains a foreign exchange loan from a
non-resident lender or who provides a loan to a
non-resident borrower to register the loan with
the BoZ through a commercial bank licensed
in Zambia (Commercial Bank). However, this
requirement to register the loan does not apply
to loans for a period of less than 30 days.
The Regulations further provide that, should a
subsidiary of a foreign company obtain a
foreign exchange loan from a parent company,
shareholder, partner or affiliated entity,
the local borrower shall provide the Commercial
Bank with a signed facility, loan or similar
agreement and in each case disclose the rate of
interest, duration and the repayment schedule
of the loan.
Whilst the Regulations do not require written
loan agreements to be submitted where the
parties are not related, it is expected that BoZ
will request copies of such loan agreements
when registering the loans.
Where the transaction involves goods or services
which results in an external debt then the
borrower will have to provide evidence of the
importation and physical delivery into Zambia
of the goods or services which resulted in the
loan amount.
Under the Regulations, a Commercial Bank is
only permitted to make inward or outward debt
service remittances on loans that are registered.
In the case of outward remittances, proof that
applicable taxes have been paid is required.
The Regulations
require any person
who obtains a
foreign exchange
loan from a non-
resident lender or
who provides a loan
to a non resident
borrower to register
the loan with the
BoZ through a
commercial bank
licensed in Zambia
Interesting fact about Zambia: Because Zambia is a land-locked country,
you need to travel 600 miles before seeing an ocean.
Interesting fact about Musa Dudhia: While you are driving through
Zambia, you can see the Kafue Dam, a USD 1.5 billion project Musa Dudhia
acted as local counsel on by advising the International Finance Corporation
and the Government of Zambia.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
LegalNotes 17
Persons that contracted loans with foreign
lenders before the Regulations became
operational on 1 July 2013 are required to
provide the information required for the
registration of a debt on or before 31 July 2013.
It would appear that the failure to register
any foreign exchange loan will proscribe a
Commercial Bank from facilitating inward and
outward debt service remittances in respect
to the loans contracted before the operation
of the Regulations.
Foreign lenders may, therefore, have to take
measures to ensure that borrowers based in
Zambia have complied with the requirements
under the Regulations in order to avoid the risk
of Commercial Banks in Zambia being
proscribed from facilitating loan repayments on
grounds of lack of registration.
Loan Identification NumberThe Regulations further require that the loan
agreements, which are registered, be assigned a
unique identification number by the BoZ and
will be maintained in an electronic depository at
the BoZ. To obtain this identification number,
the resident borrower will need to provide
evidence of receipt of the loan amount in a
bank account in a Commercial Bank and the
bank account has to be in the name, or for the
benefit, of the borrower.
Commercial Banks shall be proscribed from
registering loans without the unique
identification number. Foreign lenders must
therefore take measures to ensure that
borrowers based in Zambia have complied
with the regulatory requirements under the
Regulations.
Impact on Foreign InvestorsThe Regulations have introduced a requirement
for foreign investors to open and maintain a
foreign currency account with a Commercial
Bank. Under the Zambia Development Agency
Act, 2006 (the ZDA Act) a foreign investor is
defined as a person who makes direct
investment in the country and who in the case
of a natural person is not a citizen or permanent
resident of Zambia and, in the case of a
company, is incorporated outside Zambia
.
The ZDA Act provides that for a foreign investor
to be entitled to incentives as specified by or
under the Income Tax Act or Customs and
Excise Act, it is required to hold an investment
certificate and be investing not less than
USD 500,000 or the equivalent in convertible
currency, in a priority sector or product.
The Regulations require foreign investors
holding investment certificates under the ZDA
Act to deposit the pledged cash component of
the investment pledged under the investment
certificate into the account required to be
maintained within the period stated in the
investment certificate and to acquit the
deposited amount to the BoZ.
In addition, the Regulations require that
where a foreign investor has pledged capital
equipment under the investment certificate,
the pledged capital equipment must be
acquitted to the BoZ by producing
documentation indicating the monetary
equivalent of the capital equipment. The
Regulations also require an acquittal of the
monetary equivalent of any non-cash
component to the BoZ.
The ZDA Act provides that the ZDA may
suspend or revoke a licence, permit or certificate
of registration where it finds that a foreign
investor has failed to implement the pledged
investment. It, therefore, appears that the
failure to deposit or acquit the pledged
investment would result in the suspension or
revocation of the investment certificate of
the foreign investor.
Criminal SanctionsIn addition to the implications discussed above,
the Regulations make provision for criminal
sanctions. A person who contravenes any
provision of the Regulations commits an offence
and is liable, upon conviction, to a fine not
exceeding approximately USD 3,300 and/or
to imprisonment for a period not exceeding
10 years.
ConclusionThe Regulations have elicited anxious reactions
from both local and foreign investors. It will be
interesting to see how the Zambian Government
goes about enforcing the Regulations. •
A person who contravenes any
provision of the Regulations
commits an offence and is liable,
upon conviction, to a fine not
exceeding approximately USD 3,300
and/or to imprisonment for a
period not exceeding 10 years.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
18 LegalNotes
IntroductionThe Kenya Constitution, which was promulgated
in August 2010, heralds significant changes,
among them being the introduction of the
devolved system of government. This
transitioned Kenya from the old national system
of government, which was characterized by
the centralization of political and economic
power, to a federal system of government,
where resources and power would be equitably
distributed in the country.
Implementation of the devolved system
commenced after the March 2013 elections.
There are 47 counties, each with its own
executive and legislative arm. The devolved
system envisages that the national and county
governments are distinct systems of
government.
Devolution is seen as providing an opportunity
for a break from the corruption and inequitable
distribution of resources that had hitherto
existed. Kenyans have high expectations:
upgraded infrastructure, jobs, better services
and a share of the proverbial national cake,
to name but a few. Unfortunately, the majority
of Kenyans do not fully understand the fairly
complex new system. Ensuring equity in
resources distribution and managing
expectations will be a big challenge –
decentralization is no silver-bullet.
Key Devolution InstitutionsUnder the devolved system, there is a bicameral
Parliament comprised of the National Assembly
and the Senate. The National Assembly is
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
Paul WanjohiLawyerAnjarwalla & Khannapwk@africalegalnetwork.com
Opportunities and ChallengesKenya’s Devolved System of Government
Aisha AbdallahPartnerAnjarwalla & Khannaaa@africalegalnetwork.com
mandated to legislate on national laws while
the Senate is restricted to legislation on matters
affecting the counties. Both chambers are
required to cooperate on a number of
overlapping areas.
At the national level, the President’s powers
have been significantly checked. For example,
the President can only appoint and dismiss
Cabinet Secretaries with the approval of
Parliament, a power which was hitherto left to
his unfettered discretion. The Cabinet
Secretaries are largely career professionals, a
departure from the former system where
ministers were politicians.
At the county level, the County Assembly
enacts legislation to enable the county
governments to execute their assigned
functions. It also approves local development
projects, investment decisions and borrowing
by the county governments. The County
Executive Committee exercises executive
authority at a local level and implements county
legislation. It is made up of the Governor,
Deputy Governor and the County Executive
Committee members.
The Opportunities and Challenges of Kenya’s Devolved Government StructureThe devolved system has brought with it a
mixed bag of fortunes. There are great
opportunities in terms of decentralisation of
resources and development. On the other hand,
devolution also portends various challenges.
Below is a sample of the major opportunities
and challenges.
Revenue and FinanceThe Constitution guarantees that a minimum of
15 per cent of the total national revenue must
be allocated to the county government. For the
financial year 2013/2014, the approved
budgetary allocation to counties stands at
approximately 32 per cent. This allocation has
already faced criticism, and governors and
county officials have been clamouring for
increased allocation. A cross-section of
politicians have agitated for a referendum to
pass a constitutional amendment increasing the
minimum allocation from 15 to 40 per cent. On
the other hand, some have argued that the
county governments should first demonstrate
prudent use of the 32 per cent before requesting
further allocation.
Under the Constitution, counties have the
power to raise their own revenues through
property and entertainment taxes, fees and
charges charged on local services, sale of bonds
and other financial instruments, borrowings
and grants from donors. The obvious challenge
will be to balance the fees and taxes charged
by the county governments with those charged
by the national government, as ultimately, any
revenue policies will affect the population. For
example, Nairobi County has enacted a County
Finance law that is set to increase charges in
nearly all service areas by margins of up to 100
per cent. This, if not managed properly, will be
counter-productive as it may increase the cost
of doing business, the cost of living and deter
would-be-investors.
A major challenge that will be faced by county
governments is management of inherited debts
LegalNotes 19
Interesting fact about Kenya: Kenya is named after Mt. Kenya – the largest mountain in Kenya.
Interesting fact about Anjarwalla & Khanna: A&K’s top legal minds have been honoured in 2013: it has been named Top Land Law Firm of the
Year by Finance Monthly Law Awards; Banking and Finance Lawyer of the Year Award; by Lawyer Monthly Legal Awards and shortlisted as Law
Firm of the Year Award for Africa Oil and Gas Awards.
LegalNotes 19
from their predecessors. Some counties such as
Nairobi County and Mombasa County have
inherited huge amounts of debts from the
defunct city councils and managing such debts
will be in direct competition with other financial
obligations of the county governments such as
developmental projects and service provision.
Natural ResourcesCurrently, the national government has the
sole discretion to grant mining licences or
enter into production sharing contracts.
With the recent discovery of oil and natural gas
and good prospects for mining and other
extractive industries, county officials are calling
for more participation in the granting of
exploration and mining licences and entry into
production sharing contracts. Turkana, which
lies in Northern Kenya, has recently seen major
discoveries of commercially viable oil reserves
and Kwale in Kenya’s Coastal region has seen
the discovery of commercially viable titanium
and rare metals deposits. Areas like the Mui
basin are being prospected for coal.
There is a strong argument that there should be
equitable and transparent sharing of revenues
derived from the natural resources between
national and county governments. A system
needs to be quickly developed as between the
two levels of government so as not to dampen
investment and development of Kenya’s
resource wealth.
Devolution of Functions and Powers The functions of both the national and the
county government have been set out in the
Constitution. The national government is in
charge of overall policy formulation. In addition,
certain key functions of national interest such as
national security are the preserve of the national
government. The county government is
primarily mandated with service delivery at the
county level. While legislating for their
respective functions, each level of government
will be expected to respect the division of
functions. Cracks are already starting to emerge
in the division of powers and responsibility,
as has been witnessed after the natural resource
discoveries. In addition, although county
governments are responsible for infrastructural
development within the counties, the national
government is also responsible for development
projects at the national level. A clear
management system through which functions
will be more clearly set out and any disputes on
overlap in functions smoothly resolved, needs
to be put in place.
Counties are responsible for providing a
significant amount of the services to the people.
It is expected that County governments will
undertake a lot of capital infrastructure projects
at the county level mostly through public
private partnerships (PPPs). This would create
opportunities for the private sector to work
jointly with the county governments. This is
however an area that needs to be well defined
and the necessary regulatory and structural
frameworks put in place to facilitate such PPPs.
ConclusionDevolution is intended to promote democracy,
accountability, self-governance, public
participation, accessibility of services and
equitable sharing of resources.
However, it is a fairly complex and expensive
process that will take many years to fully
implement. There are a lot of opportunities for
individuals, professionals and businesses arising
out of devolution and if well handled, Kenyans
and investors in the country can enjoy the
benefits that devolution promises. •
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
20 LegalNotes
IntroductionAfrican states rely heavily on Foreign Direct
Investment (FDI) as part of their development
strategy. Where states are concerned some of
the risks are: failure by the state to safeguard
foreign investor’s rights; expropriation of
property; political instability and ineffective or
corrupt judicial systems to enforce their rights.
In recent years, African states have taken
several initiatives to increase the protection of
and legal security offered to its foreign investors
and this has had a correlating effect of
increasing FDI into Africa. These measures
include Bilateral Investment Treaties (BITs).
What are BITsAs the name suggests, a BIT is an international
agreement between two states where each
state agrees to give certain protections and
Nikhil DesaiAssociateJMiles & Co. ngd@jmilesarbitration.com
Foreign Investment Protection in Africa
According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2013, foreign direct investment (FDI) in Africa grew to USD 50 billion in 2012, a rise of 5 per cent from the previous year.
benefits to investments made by citizens and
companies of the other state and which
provides for international dispute resolution
mechanisms to settle claims by the investor
against the host state should they arise. To a
qualifying investor, a BIT will provide protections
beyond any protections contained in contractual
agreements the investor may have entered into
with the host state. Rights under a BIT exist as
a matter of international treaty law and do not
depend on the investor being in a contractual
relationship with the host state.
BITs and Africa The first BIT was entered into in 1959 between
Germany and Pakistan in the wake of the Cold-
War and nationalizations which exposed the
lack of effective protection for foreign investors.
By the end of 2012, there were over 2,500 BITs
concluded globally. To-date more than 487 BITs
have been entered into by African states of
which approximately 70 per cent have been
signed with non-African counterparties and
around 30 per cent have been signed between
two African states.
Protections provided under a BITThe protections provided under a
BIT vary depending on the negotiations and
agreement between signatory states. However,
generally a BIT will provide that each of the
states guarantee the other state’s investors
certain substantive protections, such as:
(a) Protection from expropriation – This
protection is considered to be the most
fundamental and traditional investment
protection and present in almost all BITs
(b) National Treatment – each state agrees not
to treat investment by foreign investors less
favorably than investments of its own
nationals
(c) Fair and Equitable Treatment – requires that
states maintain stable and predictable
environments consistent with reasonable
investor expectations
(d) Most-Favoured-Nation (MFN) Treatment –
a host state agrees not treat the relevant
investment less favorably than the
investment of an investor from any other
state
Interesting fact about international arbitration:
South Sudan, created in July 2011, joined ICSID in April 2012 and almost immediately had
an ICSID case instituted against it in August 2012!
Interesting fact about JMiles & Co.:
JMiles & Co. has represented clients in cases before tribunals of the ICC in London and Paris,
tribunals of LMAA, LCIA, FOSFA and ad hoc tribunals in Stockholm, Zurich and Geneva.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
LegalNotes 21
ConclusionPotential investors wishing to benefit from the
protections offered by BITs will want to structure
their transaction(s) with the particular BITs in
mind, not least to ensure that they and their
investment qualify as “investors” and
“investment” under the BIT(s).
Investors should ensure that a particular BIT is
still in force as some states do not renew their
BITs after the 10 years expiry period. A recent
example is South Africa which has terminated
its BIT with Belgo-Luxembourg Economic Union
and has announced its intention not to renew
12 other BITs it previously entered into with
other European Union (EU) member states. The
reason for this is that the South African
Government feels that first-generation BITs did
not contain the necessary safeguards to
preserve flexibility in a number of critical policy
areas.
With a steady flow of investment coming into
Africa especially from the exploration and
exploitation of mineral resources, it is expected
that the availability of BITs will be an important
part of the risk management process for foreign
investors in Africa. •
The recent “Arab Spring” has given rise to a steady flow of potential BIT claims in Africa.
neither signed nor ratified the ICSID Convention).
By ratifying the ICSID Convention, ICSID member
states agree to treat an ICSID award as equivalent
to a final judgement of a court in their state.
Therefore, ICSID awards are directly enforceable in
ICSID member states and do not have to be
enforced under domestic procedures. Furthermore,
the fact that ICSID was formed and remains part
of the World Bank, acts as a deterrent to states
from failing to honor an ICSID award due to the
risk of losing World Bank funding and generally
looking like an unfriendly investment state.
Due to the confidential nature of certain
international arbitration institutions it is not
possible to state the exact number of BIT claims
involving an African party. However, an indication
of the use of BITs to bring claims against African
states can be gleaned from the fact that around
22 per cent of all claims registered at ICSID were
against an African state. The recent “Arab
Spring” has given rise to a steady flow of
potential BIT claims in Africa. Four requests for
arbitration against Egypt were registered at
ICSID in the nine-month period from March
2011 to December 2011. The cases have been
brought (or are about to be brought) under the
Egypt-UAE, Egypt-UK, Egypt-Kuwait and Egypt-
USA BITs, and in relation to investments in
property development, textile manufacturing
and the Egyptian energy industry.
(e) Repatriation of investment and earning –
each state permits the unrestricted transfer
of investments and returns made by
national of the other state
(f) Dispute Resolution –any breach of the BIT
will entitle the investor to commence
arbitration proceedings against the relevant
state. Some BITs provide for ad hoc
arbitration while others provide for
institutional arbitration (such as the
International Chamber of Commerce (ICC)
and the Permanent Court of Arbitration).
The most common forum for investment
arbitration is before the International
Centre for Settlement of Investment
Disputes (ICSID).
ICSID ArbitrationICSID was established under the 1965
Washington Convention on the Settlement of
Investment Disputes between states and
Nationals of other states (ICSID Convention).
ICSID is an impartial international forum
providing facilities for arbitration of international
investment disputes. The autonomous nature of
ICSID means that no national court has the
right to set aside an ICSID award on merits,
making it preferable for investment disputes
with state parties.
There are currently 158 signatories (147 ratified)
to the ICSID Convention globally of which 44 of
the 54 African states have signed and ratified
the ICSID Convention (4 African states have
signed but not ratified and 6 African states have
44 of the 54 African states have signed and ratified the ICSID Convention.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
22 LegalNotes
Interesting fact about UAE:
The UAE has the first indoor ski village and resort in the Middle East.
Interesting fact about AC&H:
Anjarwalla Collins & Haidermota – a legal consultancy firm providing
corporate/commercial legal services – is the first African firm to be
licensed in Dubai.
Over the past decade, Dubai’s non-oil
trade with Africa increased by 700
per cent from USD 2.9 billion in 2002
to USD 23.2 billion by 2011.
His Excellency Sultan Bin Saeed Al Mansoori,
Minister of Economy in the UAE advised that
“…UAE investment in Africa is expected to
increase significantly in the coming years, with
the UAE increasing its economic diversification
efforts.” Over the past decade, Dubai’s non-
oil trade with Africa increased by 700 per cent
from USD 2.9 billion in 2002 to USD 23.2 billion
by 2011.
There is no income or capital gains tax payable
in Dubai and this fact creates a further incentive
to house businesses in the Emirates. In addition,
the UAE enjoys an extensive double tax treaty
network with over 50 countries (including a
number of African countries).
Company Establishment in the UAEThere are different types of corporate bodies
which can be established in the UAE. The
two most common forms which non-Emirati
businesses utilise are free zone companies
;and onshore companies.
Free Zone Companies A free zone company allows 100 per cent
of the shares to be owned by non-Emirati
persons. A free zone company will generally
not be licensed to operate within the UAE.
The UAE have in total more than 30 free zones.
Each free zone is industry specific and has its
own set of laws and operating procedures.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
The UAE: Emerging Gateway to Africa
Holly VoceAssociateAnjarwalla Collins & Haidermotah.voce@ach-legal.com
Dubai with its strategic location, world class infrastructure, modern business climate and status as an international business hub is an excellent
gateway into and out of the African continent. Investors are increasingly using Dubai as a base from which to pursue opportunities across
Africa and five key sectors have been identified which present significant opportunities for investment, namely: general trade, logistics, tourism,
agribusiness and finance.
For example, there are free zones for IT, media,
higher education, logistics, trading and general
mercantile activity, among others. Free zone
companies are entitled to visas for staff that
will be based in the UAE. There are generous
tax holidays provided by each free zone and
as there are no exchange controls in the UAE,
repatriation of income is freely permitted.
Limited Liability CompaniesA limited liability company (LLC) (onshore
company) is usually established for purposes
of trading within the local UAE market,
although an LLC can still trade internationally.
An LLC benefits from easier establishment
procedures in other Gulf Cooperation Council
(GCC) countries as compared to a free zone
company. Under UAE law, LLCs must have
a minimum of 2 shareholders of whom one
must be a UAE national who shall hold 51
per cent of the registered shares of the LLC.
The remaining 49 per cent may be distributed
among the remaining shareholders at their
discretion. It should be noted that the profit/
loss distribution need not reflect that of the
individual shareholdings in the LLC. It is possible
to arrange the affairs of an LLC such that the
foreign party enjoys total day to day control and
management of the LLC.
The main advantages to foreign investors
establishing a free zone company or an onshore
company are as follows:
(a) no personal income or capital gain taxes in
the UAE;
(b) no corporate taxation;
(c) 100 per cent repatriation of capital and profits;
(d) no currency restrictions;
(e) excellent support services; and
(f) easy access to both sea and airports.
The Dubai Airport Free Zone The Dubai Airport Free Zone (the DAFZ) was
established in 1996 and has become one of
the UAE’s fastest growing free zones. DAFZ is
currently home to 1,600 companies covering a
number of key industry sectors including aviation,
freight and logistics, IT and telecommunications,
pharmaceuticals, engineering, food and beverage,
jewellery and cosmetics.
DAFZ has become the premium free zone due
to its unique advantages such as having:
(a) a strategic location in the heart of Dubai and
neighbouring Dubai International Airport;
(b) state of the art infrastructure and facilities;
(c) a one stop shop for all administrative
services; and
(d) easy access to the facilities at Dubai
International Airport with its connectivity
to 220 destinations worldwide through
130 airlines.
LegalNotes 23
ConclusionThere is considerable investor interest in Africa,
especially in the oil and gas sector, agriculture,
infrastructure development and mining.
With the progressive double tax arrangements
that the UAE has entered into with various
African countries, the favourable tax regime,
good infrastructure and progressive service
industry, the UAE is well poised as a gateway
into investment in Africa. •
DAFZ provides international investors with
attractive business incentives including 100
per cent foreign ownership, a corporate
tax holiday for 15 years (renewable for an
additional 15 years), no personal income tax,
freedom to repatriate both capital and profits,
full exemption of import duties and no currency
restrictions.
DAFZ offers 3 types of companies which can be
established, each offering different options to
suit an investors specific business requirements.
These are:
(a) a limited liability Free Zone Establishment
(FZE) formed with one shareholder,
either individual or non-individual with a
minimum share capital requirement of AED
1,000,000 (USD 273,225);
(b) a limited liability Free Zone Company
(FZCO) formed with a minimum of 2
and a maximum of 5 shareholders,
either individual or non-individual (or a
combination of both) with a minimum
share capital requirement of AED 500,000
(USD 136,612); and
(c) a Branch Office being a branch of an
existing company which does not have a
share capital requirement.
Investors establishing a company in the DAFZ
can choose from 3 types of licences:
(a) a Trade Licence for import, export,
distribution and storage of specific
products;
(b) a Service Licence for activities as approved
by DAFZ after consultation with a DAFZ
sales executive; and
(c) an Industrial Licence for light manufacturing,
processing, assembling and packaging.
Additional investor set up support provided
by DAFZ includes processing visas, residence
permits, health cards and medical reports
for company staff.
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
DAFZ offers 3 types of companies
which can be established, each
offering different options to suit
an investors specific business
requirements.
24 LegalNotes
Financial Services: A financing by OPIC in the sum of USD 82 million to Wananchi Group (Holdings) Limited and its related companies incorporated in Kenya, Uganda, Tanzania, Mauritius and United Arab Emirates for a project involving development of television programming, development and operation of satellite management and delivery of business devices, providing broad band internet, data and telephonic services
Infrastructure & Telecoms: Providing and coordinating corporate and investment advice in the sum of USD 100 million in 15 countries in Africa to Tech Mahindra, a leading communications service provider, which has been contracted by Bharti Airtel to provide to business process outsourcing and telecommunications services in respect of its operations in various African countries
Mining & Minerals: Acting for a Canadian Mining Company on USD 450 million in Zambia on the disposal of interests in a copper mine and defending the company in litigation with a local partner
Oil & Gas: Acting for PTT Exploration and Production Public Company Limited (PTTEP), Thailand’s national and publicly listed petroleum exploration and production company, and also one of the largest producers of oil and gas in Asia in the proposed acquisition of Cove Energy plc – a company listed on the Alternative Investment Market of the London Stock Exchange which indirectly owns participating interests in various oil and gas exploration blocks in Kenya, Mozambique and Tanzania, including advising PTTEP on petroleum exploration laws and competition laws
Energy: Acting for Triumph Power Generating Company in connection with its development of an USD150 million, 83 MW thermal power plant in Kenya
Agriculture: Acting for Proparco in its facility of USD 23 million to Sugar Corporation of Uganda Limited, a company specialized in planting, growing and processing sugarcane. The loan was to finance expansion of production capacity by supporting out-growers, improving existing plantations under the estate, rehabilitating the factory, purchasing new equipment and refinancing outstanding loans
Projects and Infrastructure: Acting as lead advisor to Botswana Power Corporation on a USD 16 billion Mmamabula coal development project
33
Anjarwalla & Khanna is the largest
corporate law firm in Eastern Africa. The
firm is ranked first in Kenya by various
legal guides, including Chambers Global,
IFLR 1000, Legal 500, PLC Which Lawyer
and Euromoney Guide to the World’s
Leading Project Finance Lawyers.
Introduction
Kenya has seen a significant rise in infrastructure developments in the recent past, especially in the fields of real estate development, energy and transportation infrastructure. This has been caused by various factors including a demand for housing by the rising population, infrastructure demands caused by growing investor interest in the country and the Government’s Vision 2030 development blue print, whose aim is to achieve industrialization by the year 2030.
Putting together an infrastructure project, be it skyscrapers, roads, power projects or a real estate development involves amalgamating several constituent elements. An integral ingredient to any project is the construction contract which sets out the terms and conditions pertaining to the carrying out of the main building works in respect of the project. A well drafted contract that is clear on the terms could have a significant effect on the cost, timing and completion of the project.
What should a project contract provide for?
The key concerns for most developers of a project are as follows:
• ensuring that works are completed in accordance with the construction programme for the project;• ensuring that the works are completed within budget;• where projects are to be financed, ensuring that the risk allocations in the various project contracts will be
acceptable to potential lenders and financiers; and • ensuring that the works are fit for purposes.
Undertaking infrastructure projects in Kenya:Get the contract right!
Aleem Tharani I Anjarwalla & Khanna I at@africalegalnetwork.com
KENYA
Representative DealsALN enjoys close working relationships across its members and an established network of best friends across the African continent.
By leveraging the expertise and skills of each member firm, the group offers seamless legal advisory and transactional services, particularly on
complex ad multi-jurisdictional matters. ALN’s continued success in advising on cross-border matters comes from its “one firm” approach of
collaborating in virtual teams across multiple offices.
Horizon’s primary activities are M&A advisory, capital raising and
corporate fi nancial brokerage in Sub-Saharan Africa.
Our approach is based on providing differentiated, integrated
fi nancial advisory services throughout the life of a transaction,
from inception to execution. We have expertise in a number
of sectors including Energy, Real Estate, Heavy and Light
Manufacturing, Hospitality, Aviation and Agro-processing.
Our value proposition is enhanced by the strength and breadth of
our relationships. Horizon has cultivated a strong global network
of private equity fi rms, family investment offi ces, development
HORIZON AFRICA CAPITAL LTDApollo Centre, 2nd Floor Wing A, Ring Road Parklands
P.O. Box 103646, Nairobi 00101, Kenya
Tel: +254 20 3742614/5 | Mobile: +254 717 722827
Website: www.horizonafrica.com
Horizon Africa Capital is a boutique mergers and acquisitions (M&A) advisory fi rm headquartered in Nairobi, Kenya
fi nance institutions and commercial banks from which it routinely
draws upon to identify investment opportunities and potential investors
for transactions in Africa. Our network also includes the ALN, a leading
independent African Association of top tier law fi rms specializing in
corporate and commercial legal work.
Horizon is Global M&A’s fi rst African partner, and its exclusive
partner for Kenya. Global M&A is an international partnership of
leading independent M&A advisory fi rms specialized in mid market
transactions in a range of $5M – $500M. As GMA’s Africa partner,
Horizon also serves the adjacent territories of Uganda, Tanzania,
Ethiopia, South Sudan, Rwanda, Burundi and Zambia.
Horizons
ExpandingBusiness
Horizon Africa.indd 5 10/3/13 2:13 PM
ALNEmail: alnhq@africalegalnetwork.com
ALN HEADQUARTERSPort Louis, MauritiusTel: +230 213 7920Email: alnhq@africalegalnetwork.com
www.africalegalnetwork.com
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