Lack of law steals the glow from locals hosting mining firms

As matters stand, Parliament will wind up its business before concluding debate and legislation on a proposed law governing mining in the country.

Tuesday January 8 2013

PHOTO | FILE A proposed law seeks to among others determine a revenue sharing formula between the central and regional governments as well as with the local community.

PHOTO | FILE A proposed law seeks to among others determine a revenue sharing formula between the central and regional governments as well as with the local community. NATION MEDIA GROUP

By GRIFFINS OMWENGA [email protected]

As matters stand, Parliament will wind up its business before concluding debate and legislation on a proposed law governing mining in the country. The August House holds it final session next week though the draft Geology Minerals and Mining Bill 2012 is yet to make its way to the floor of the house.

Despite the delay, there is hope by communities occupying mining areas that at least a law will be enacted to make it easy for them to lay claim to a portion of revenue accruing from mining. To many, their only evidence to the mining boom has been the low pay in exchange for menial labour. (Read: New mining rules to be amended, says official)

“We had a very good opportunity to enrich ourselves financially but soapstone has never had a good market price in this region,” said Mr Cosmas Onchomba who owns one of the biggest soapstone quarries in Tabaka region, Kisii County.

Mr Onchomba’s comments resonate with many other communities hosting mining firms and in some doing the mining themselves but selling the stones to middlemen who benefit more due to lack of laws on revenue sharing.

In Kisii, famous for its soapstone, dealers and quarry owners say they are languishing in poverty as middlemen gain handsomely from their sweat.

The stones are excavated and shipped to countries such as Uganda, Tanzania and South Africa for processing into expensive artifacts.

Quarry owners sell over 5 kilogrammes of the raw stones at less than Sh100 while such a boulder can be carved into finished products of visual nourishment fetching over Sh1,200 apiece.

At the same time, a fight has broken out between residents of Mui Basin, Kitui County and a company over their demand to have a share of revenue realised from coal recognised.

Awarded to Chinese Company Fenxi Industry Mining Group, extraction of the estimated 400 million metric tonnes of coal has not began as prevailing issues are yet to be ironed out and concession agreement signed between the government and the firm.

Many were pushing for the revenue earned by the government to be split at a ratio of 80:15:20 between the national and country governments and, social projects around the mining areas.

Titanium mining at the Coast has not been spared either with the unsettled communities’ interest delaying the project for years now.

Last year, a conflict erupted in Athi River between the Maasai community and cement makers over access to gypsum, limestone, pozzolana and kunkur mines in Kajiado County on claims that the largely pastoralists community was getting a raw deal. As a return to business formula, the Maasai elders detailed a list of projects that the cement firms were to undertake while financing education for their children.

Kenya is also endowed with minerals such as titanium, iron ore, manganese and gemstones in the coastal region. Fluorspar is also mined in Kerio Valley and Soda Ash in Lake Magadi.

Former Industrialisation permanent secretary, Dr Karanja Kibicho, recently said Kenya is losing over Sh300 billion in untapped revenue to the black market and unexploited mineral resources.

He said the clause requiring that at least 3 per cent of revenues from Kenya be paid as royalties is exploitative on the Kenyan people since it was enacted in 1948 by the colonial government which wanted to ship a lot of the minerals to their mother countries.

“At just Sh250, there are individuals who have literally leased out some parts of the country especially Coast Province on claims that they want to exploit mineral ores in the region,” said Mr Kibicho.

However, the Ministry of Environment, through the mining and geological department, which drafted the Mining Bill 2012, said the proposed law is expected to streamline operations in the sector if passed by Parliament.

If it sees the light of day, the law will among other things see revenues realised from mining shared between the national government, county and the community where a particular mineral is found in the ratio of 80 to 15 to 5 per cent respectively. (Read: House urged to look into two mining sector Bills)

Parliament has already laid the ground for a review of regulations in the oil and gas sectors with the Mining Bill 2012 which is set to address some of the issues.

Speaking  during an East Africa Energy and Gas summit in Nairobi in November last year, Energy minister Kiraitu Murungi said Kenya is planning to amend the Petroleum Exploration Production Act to align it with the present situation in the wake of oil and gas discoveries.

Currently, there are two laws covering mining, oil and gas sectors. The 35 per cent local shareholding is covered under the Mining Act (of minerals like gold and coal).

A 25 per cent local shareholding structure is covered under the Petroleum Exploration and Production Act.

Experts say striking of oil in Kenya is likely to spur business in the country thus more revenue through taxes to the government. It will also compel internal minerals prospecting companies to train and transfer mining skills to locals and workers in the particular field as a benefit to the society.

Dr Kibicho said the government needs to set up a parastatal charged with overseeing operations in the minerals sector only.

Finance minister Njeru Githae has called on the Kenya Revenue Authority (KRA) to hasten the establishment of mechanisms on taxation of mineral resources in the country. He said there are many minerals in Kenya and a lot of untaxed mining activity which, if harnessed, would help widen the tax bracket.

“We must strive to set up a comprehensive framework to govern the mining activities and mineral exploitation in the country in order to boost our revenue collections,” said Mr Githae, who spoke during the launch of the fifth KRA corporate plan.

And this is the plight of soapstone dealers and owners of quarries in Kisii especially in terms of setting a minimum price for the raw material and for the middlemen as well.

“Leaders from this region have always been lying to us ever since the times of the first president,” said Mr Onchomba.

Kenyatta’s government established the Kisii Soapstone Cavers Cooperative Society in 1965 to help develop an industry and centralised market for soapstone products. However, what remains of that cooperative now is a pale shadow of its former self with old and tired sculptures in it.

The resource, which is unique to the region, could have created employment for hundreds of young people as well as contribute a large portion of the county’s revenue. Sadly, the reverse is the reality as most shops that used to sell sculptures have collapsed.

And as soapstone deposits start to dwindle, industrial demand for the raw material is on an upward trend. Makers of ceramic tiles and chalk are just a few examples of firms whose insatiable need for soapstone can be tapped to shore up the livelihoods of thousands of families which depend on it.

According to many small-scale traders in the region, the only possible remedy that can revive the business is to set up an industry which can buy the stones at a good price and harmonisation of prices to weed out the unscrupulous traders.

Undercutting one another

“This is the bane of the once vibrant industry that supported thousands of livelihoods in this area. People are undercutting one another and in turn drastically reducing the value of the whole industry,” said Mr Onchomba.

He said all they hear is that soapstone bought by middlemen is transported to Nairobi’s Athi River area and sold at fairly competitive prices and some even exported to Jinja in Uganda yet they have nothing to show for it as the source.

The fears by locals having little to show for minerals in their regions have also permeated the nascent oil sector, with some of the communities where the black gold has been struck calling on the government to ensure they benefit from the revenues that will be realised if the mining goes commercial.

The Turkana County Council has written to the government demanding oil exploration be halted until an agreement is reached on how to share the resulting revenue.

“There are issues which as leaders and residents of Turkana, have to agree upon with Tullow Oil and the government so that exploration can go on smoothly,” said Turkana Central MP Ekwe Ethuro.

Tullow Oil and the government have agreed that 15 per cent of the revenues will go the local community but the council wants 25 per cent.