Budget to slap new laws on oil, mineral sectors

PHOTO | SALATON NJAU IMF African Department director Antoinette Sayeh (left), World Bank country director Diarietou Gaye (centre) and Mr Ally Khan Sachu during the launch of IMF’s Regional Economic Outlook for sub-Saharan Africa at Serena Hotel, Nairobi, on April 24, 2014.

What you need to know:

  • Sub-Saharan region to grow by 5.5pc this year, from an average of 4.9pc last year
  • National Treasury Cabinet Secretary Henry Rotich disclosed this in Nairobi on Thursday.

New taxes will be introduced for the oil and mineral industry in the upcoming budget.

National Treasury Cabinet Secretary Henry Rotich disclosed this in Nairobi on Thursday.

“In the coming budget, I will be including new tax measures to capture the extractive industry. We do not want to enter into a situation where mineral extraction slows down economic growth, like has been the case in some countries,” Mr Rotich said.

He was launching the Regional Economic Outlook report for sub-Saharan Africa, prepared by the International Monetary Fund at the Serena Hotel in Nairobi Thursday.

The Cabinet Secretary, however, declined to disclose the specific tax measures.

In its past, the monetary fund hinged the expected accelerated growth in the economies of East Africa on minerals and fossil fuels.

Last year, international firms opposed a plan by the mining ministry to increase the local shareholding requirement to 35 per cent for fear of diluting foreign investment.

If the new Mining Bill that has been tabled in Parliament becomes law, international mining companies will be required to float at least 20 per cent of their shares at the Nairobi Securities Exchange within four years of obtaining a licence.

The latest IMF report has warned that growth of sub-Saharan region will be subject to more risks in the medium term emerging from tightening of global monetary policies. These may to increase the cost of credit to developing countries.

The fund also said that factors that have supported the region’s growth in the past, such as commodity sales to economies like China, India and Brazil, have started fading as these markets cut demand for African exports, thus exposing the region to lower revenues from exports.

“The strong growth of recent years in sub-Saharan Africa looks set to continue. The outlook is nonetheless subject to more downside risks than in the recent past.

More focus is called for on sustaining the macroeconomic stability that has underpinned high growth in recent years,” said Antoinette Sayeh, director of the fund’s African department.

The region is expected to grow by 5.5 per cent this year, from an average of 4.9 per cent last year, supported by investments in mining and infrastructure.