Kenya wants uniform mining regulations for East Africa

Kenya is lobbying to have a uniform legal and fiscal regulatory framework for the region’s mining sector as the country eyes more revenues from its natural resources.

Addressing the 3rd edition of the Mining Business and Investment Conference in Nairobi last week, mining cabinet secretary Najib Balala said that he will use his position as the chairman of the Southern and Eastern Africa Mineral Centre (SEAMIC) to push for the proposed reforms.

The country will also be seeking to have all African countries apply a uniform rate for royalties, a move that Mr Balala said will prevent mining companies from hopping from one country to another in search for cheap exploitative royalties.

“We must benefit from our minerals. I am going round Africa to lobby that all African governments should have one legal framework and royalties so that mining companies do not run from one country to another, just seeking low royalty rates which basically means exploiting those countries,” Mr Balala said.

SEAMIC is established under the United Nations Economic Commission for Africa and it acts as a centre for information for the region’s mining industry providing technical assistance, research and development, training and analytic services for members.

Mr Balala was appointed chairman of SEAMIC mid this year, a position that put him at the centre of mining activities in the region.

PUSH FOR UNIFORMITY

The push for uniformity in both the legal and fiscal frameworks guiding the region’s mining industry comes at a time when Kenya, like some other regional countries, is undertaking a review of the mining law to address emerging issues in the sector.

The Mining Bill 2013 that seeks to update the current Mining Act which dates back to 1940 proposes, among other things, an increase in the royalty rates from the current 3 per cent to as high as 12 per cent for precious minerals such as diamond.

The rates, according to the draft law, are to be charged on the gross value of minerals.

The proposal has already received criticism from the Kenya Chamber of Mines, a lobby group representing mining companies, saying that “it fails to take into consideration costs associated with the mining process.”

SECTOR EARNINGS

The lobby group is proposing to have 5 per cent charged as royalty on diamond and between 3 and 7 per cent to be applied on rare earth metals, against a proposal by the Ministry of Mining to have a royalty of 10 per cent charged on rare earth metals.

“In determining royalty rates and licensing fees, the government must take into consideration the impact on the country’s competitiveness and attractiveness to both local and foreign investors. The proposed royalty rates are out of sync with international best practice,” said Adiel Gitari, Kenya Chamber of Mines chairman in a statement.

According to the Kenya National Bureau of Statistics, the mining sector contributes about 0.8 per cent to the Gross Domestic Product very year.

Earnings from the sector grew from Sh18.3 billion in 2011 to Sh27.5 billion last year, according to the Economic Survey 2013, mainly due to increases in the value of gold and soda ash during the period.

This is despite the fact that Kenya is endowed with valuable minerals with the potential to fetch the country billions in annual revenue.
The Bill also seeks to establish the National Mining Corporation, an investment arm of the government in the mining sector.
It will hold interests on behalf of the government in mining companies.