Regulatory approvals can determine how quickly a project moves from planning to implementation. Understanding the legal and commercial risks of regulatory delays in Kenya can help you protect your timeline, costs, and investments as an investor.

Regulatory delays in Kenya aren’t new. According to a recent report, these delays are costing Kenyans billions in losses, as investors pull back. Despite progressive legal frameworks, administrative issues, application backlogs, and overlapping institutional bureaucracies are causing these unprecedented delays.

You are an investor.

You have committed capital to a project.

Approvals have been delayed. Contractors are waiting, and financing headlines are approaching.

Your costs are rising, and contractual milestones are at risk.

What do you do?

What legal options do you have?

A regulatory delay is more than an administrative inconvenience. Actual deliverables are at risk;  construction may be pushed back, financing commitments become hard to manage, and the projected revenue is delayed.

You should treat regulatory delays in Kenya as a commercial risk from the outset. This way, you can plan for it and take necessary measures.

In this blog, we examine how you can protect timelines for energy and extractive deals in Kenya against regulatory delays.

Why Do Approvals Take So Long in Kenya’s Energy and Mining Sectors?

Most Kenyans have experienced regulatory delays in one sector or the other, prompting them to ask whether they did something wrong or could have done things differently to avoid the holdbacks.

What causes these delays?

Is it something under your control?

As an investor or developer, you’ll quickly realize that a mining or energy project in Kenya goes through several regulators before it can materialize. You’ll need sign-offs from officials in the land, environment, mining rights, water, and county government. These agencies operate with their own timelines and internal processes.

Furthermore, the mining and energy laws don’t impose actionable deadlines for decision-making. What this means is that your application can sit on an official’s desk for weeks without them violating any provided obligations.

Another factor for these delays is policy shifts and leadership changes within agencies. As these changes happen, your application may change hands a lot.

Lastly, the lack of coordination between the national government and county government offices affects regulatory approvals more than we may want to admit. If you take your application to the national office and they send you back to the county office for any reason, it can take time for the two systems to clarify their roles and obligations.

As you can see, it’s not that the system is broken. Regulatory delays in Kenya are a normal part of the project landscape. You may get lucky and avoid them, but it’s wise to be prepared to deal with them when they occur.

How Regulatory Delays Affect Energy Projects in Kenya

Project timelines in mining, energy, and other related sectors are built around several phases. These phases are connected, whereby a delay in one area affects the others and everything that follows.

For instance, in a mining project, the phases might include securing the land, arranging financing, engaging contractors, and obtaining regulatory approvals.

You need to navigate various licensing and approval departments, including the ministry, environmental, and land sectors. These approvals dictate when you can begin exploration, development, and extraction.

A delay in any of these phases can result in:

• Missed contractual milestones
• Delayed revenue generation
• Disputes between investors, contractors, and other stakeholders
• Project termination
• Rising development and financing costs
• Delayed project commencement

The impact depends on how exposed your project is.

How dependent on the timing are your contractual agreements and financing? If your project has tight optimistic deadlines, you’ll feel the delay and its effects sooner than a project with realistic buffers and room for systemic delays.

Therefore, regulatory risk in Kenya should be part of your investment assessment from the outset.

Regulatory Delays Aren’t Just Inconveniences; They Are Commercial Risks

A stalled approval gives you a headache. It’s frustrating. The most sane thing to do is to wait it out, right?

Yet, it’s more than a mere inconvenience. It is a financial leak.

With every passing month that your project waits, costs keep accruing. Your retained staff need wages. You need to finance hired equipment. Contractors also demand standby charges.

Ultimately, a delayed approval may put you at risk of breaching project terms and agreements.

Regulatory delays may also taint your name. Investments come with relationship risks. How will you communicate a delayed approval to your financial partners, lenders, and co-investors? Will it affect your future opportunities in the sector?

How Can You Protect Your Investment Before a Delay Happens?

Legal and commercial risks for investors might be inevitable, but they are largely manageable.

But there is a catch; you need to address them in the structuring stage, not after they have occurred.

If you’re investing in the Kenyan energy sector or considering a project in the mining sector, here’s how to address regulatory risks during the planning and transactional stages:

• Identify Relevant Approvals for Your Project: Conduct due diligence to understand the approvals needed for your project, when they are needed, and whether their approvals depend on each other.
• Understand the Regulatory Framework Early: Before you commit your time and resources to an energy or mining project, investigate whether there are regulatory issues that could affect its viability or timeline. Understanding the regulatory landscape allows you to address the problems while you still have room for negotiation.
• Build Realistic Timelines: Let your project timeline account for the possibility of regulatory delays. Include reasonable contingency periods too.
• Add Delay Provisions in your Commercial Terms: If it’s possible, include extension rights, cost-sharing provisions, and renegotiation triggers in your contractual agreements. These are provisions that account for delays when they happen.
• Consider the Commercial Sequences During Negotiations: Include regulatory risks in your assessment of investment risks in Kenya. A delayed approval is likely to affect your financing, construction costs, and expected revenue. As such, it should be reflected in your investment plan and transactional negotiations.

Plan For Regulatory Risk Before It Becomes a Major Problem For Your Project

Regulatory delays in Kenya’s energy and extractives sector are normal. Investors should treat them as a planning issue and not a surprise. If you want your project to run smoothly, structure your contracts and other stakeholder relationships with possible delays in mind from day one.

At Waren Law, we provide legal advice on licensing, regulatory approvals, mining rights, energy projects, land access, and project structuring.

If you’re considering energy investment in Kenya, mining investment in Kenya, or another related infrastructure project, our mining and energy law services are tailored for you.

Let us help you build the right protections from the outset. Talk to our mining and energy law experts today!