Let Mining Bill consider the interests of all stake holders

It is important that we get the various concerns and interests surrounding the mining industry right. 

Mining adds to the export column and gets us foreign exchange, which should help ease our current account deficit problem, particularly now that the bottom is falling out of tourism.

The support industries for miners provide employment to thousands, and its royalties and taxes to the Treasury are usually much higher than those of manufacturing industries.

Minerals represent a one-off chance to add to our GDP, and provided the tide in global commodities remain high, Kenya’s mining industry is still experiencing its birth pangs as Parliament rushes to put in place the scaffolding that will hold up the industry.

The National Assembly is currently in the final stages of deliberating the Mining Bill, which, when passed, will provide the guideline for the exploration and extraction of minerals. This will include all minerals, apart from hydrocarbons, which are governed by the Petroleum Act.

Initially, the Mining Bill gave the Cabinet secretary too many discretionary powers. Some of his decisions on permits, prospecting, hiring and licensing were final. When the avenues aiding corruption are so inviting, it would take an angel not to try and exploit them. 

Consider the hydrocarbon sector; the energy CS does not have as many powers as the mining Bill had proposed for the mining CS.

Now, many of the powers that were vested in the CS will be vested in the Mineral Rights Board. The nine-person board, will be entirely staffed with presidential and Cabinet secretary appointees and government employees, alongside the principal secretaries for devolution, mining and the national Treasury.

DECISION-MAKING
There are no slots for miners or the Kenya Association of Manufacturers (KAM). The sector’s decisions will be made by political appointees and government employees, which is not the right way to police a business in which the risk and activity will be borne by the private sector.  

Then there is the issue of royalties. Mining is capital-intensive, and for some minerals like soda ash, the profit margins are low.

In an era when capital flight can happen instantly via a smartphone, it is important that the bodies setting the royalty rates take into consideration the royalty régime in other countries, particularly those close to us, like Tanzania.

Take titanium sands for instance: It is believed that the mineral runs the entire length of the Eastern side of the African coast, from Somalia to the lower tip of Mozambique. The only difference is the concentration.

If you were a new investor, wouldn’t you be better off prospecting in a country with low costs, considering that for titanium, you would have four countries to prospect in?

Tanzania has a better developed mineral industry that is more than 10times the size of ours, has had more mineral finds than we have, larger areas to prospect than we do, and will soon have a Chinese-built port more than 15 times the size of ours.

LOWER RATES
In addition, their rates are lower across the board. We should never lose sight of the fact that they are our direct competitors.

With our current small mining industry and an unproven record of minerals, we cannot act as if we have guaranteed riches under our feet.

Our goal should be to get as many prospectors searching for minerals through our front door as possible.

We should put in place laws and infrastructure that take all stakeholders’ concerns on board. Also confusing in the last draft of the Bill is the requirement that a miner must get an export permit every time he seeks to export a product.

I understand the logic but fault the application. Such a provision is necessary if you are dealing with radioactive metals like uranium.

The original Bill did have provisions for radioactive minerals, which immediately attract additional security considerations and would be better policed by the Cabinet secretary. 

This makes sense because there are global security implications to lax export procedures concerning uranium.

If we are lucky enough to get radioactive elements in the soil at some point, it would be a good idea to involve senior government officials whenever a shipment is planned.

However, for products without additional security implications like soda ash, coal or titanium sands, the requirement merely wastes time and provides avenues for corruption.

SHAKE DOWN
It stops a company from ramping up production and also makes them easier to shake down.

The ships that transport the minerals from the Mombasa harbour are between 300 metres and nearly a kilometre long. Even if they can wait, demurrage charges (money paid for delays in either loading or unloading cargo) must cost a fortune.

Part of the reason oil from Kenya Pipeline Company was so costly was that it was forced to pay demurrage costs due to inadequate oil storage facilities.

A friend at the Energy Regulatory Commission told me that ships used to make a fortune running up charges just sitting on the docks as the crew partied in Mtwapa waiting for space to be freed up at Port Reitz to store the oil.

So, an unscrupulous Cabinet secretary could, for example, delay the release of an export permit and make a miner incur high costs and delays to those who have placed orders for the product until the miner gave him a backhander.

It would be cheaper to pay a bribe than pay an extra day for a stationary ship in the harbour.

The Bill still does not acknowledge the county that is the source of the minerals as a basis for sharing. 

LEGITIMATE LICENCES
Earlier this month, ODM nominated Senator Agnes Zani, proposed a Bill that sought to solve the conundrum of how to solve revenue sharing regarding natural wealth. I agree. The county where the minerals lie should benefit more than the others.

Also interesting is the fact that the Act proposes that all licences issued before its enactment be cancelled until they are reapplied for 18 months after it becomes law.

But what if companies with legitimate licences, which are going concerns, are forced to reapply and then denied licences? Besides, isn’t it punitive to ask companies to reapply for licences.

There are jobs at stake and several investors already have boots on the ground. Coal mining in Kitui will be big, but it is yet to begin.

So far Titanium mining in Kwale is the whole of the industry. Currently, there are no mineral deals being negotiated, and this year is yet to yield a single deal. 

Requiring people to reapply for licences will likely send the wrong message to an industry in which activity that is currently in abeyance.