Archaic 1940 law still regulating the industry

At the moment, the local mining industry is regulated by a Mining Act that came into force on October 1, 1940, a law which industry analysts fault for failing to address emerging challenges.

So far, the Act has only been reviewed twice; in 1972 and 1987 but still remains out of sync with current practices.

However, Kenya is replacing the old law with a new one which is expected to address conflicts between surging number of mining firms and local communities.

The Ministry of Environment and Mineral Resources has already prepared a draft Geology Minerals and Mining Bill 2012, and now it awaits Cabinet approval before heading to Parliament for debate.

Should the House give a nod to the draft law, mining companies will be compelled to share revenue from their activities with the national and county governments and communities around mining sites. The proposed law will come into effect after the next General Election.

“The aim of the Geology, Minerals and Mining Bill 2012 is to revitalise the mining sector by ensuring transparent and efficient management of the sector. The new legislative framework aims at providing benefit sharing and disputes resolution,” said environment permanent secretary Ali Mohammed during a mining conference held in Nairobi late last year.

Among institutions the Environment ministry has proposed in the draft mining law is the creation of a Mining Disputes Resolution Tribunal.

According to the proposed law, the body will be headed by a legal officer equivalent to a judge of the High Court and will deal with conflicts arising between mining companies and locals.

Should the proposed legislation come into effect, the national government will receive 75 per cent of the total revenue from mining activities while county governments and local communities will receive 20 and 5 per cent respectively.

Proceeds from mining are expected to rise above the current levels due to creation of a number of institutions in the draft law that are expected to tighten regulation of the sector and seal loopholes for revenue loss.

For instance, the Bill proposes decentralisation of mining regulation from the current mines and geological department within the Ministry of Environment and mineral resources which comprise the geology, mining and support services division to five other institutions — the Kenya Geology, Minerals and Mining Authority, the Kenya Geological Survey, the Mining Directorate, the Kenya Mining Investment Corporation which will oversee investments in the mining sector and the Mining Disputes Resolution Tribunal.

The draft law also seeks to increase the number of mining licences in order to raise revenue from exploration licensing.

The new categories of licences will be based on the total acreage that will be occupied by a specific mining company. Under the proposed law, royalties on the gross mineral sales have been categorised depending on the value of the mineral.

Companies mining diamond will be required to pay 10 per cent of gross sales as royalties while those extracting other precious minerals such as gold will pay 5 per cent of their gross sales.

Other minerals of lower value will attract royalty charges below 5 per cent of the total gross sale value of the specific mineral.

In a bid to fast track revenue sharing, the Minister of Environment gazetted new mining regulations in October last year requiring foreign mining companies to include at least 35 per cent of local equity in their shareholding.

The mining firms are, however, yet to comply with the controversial regulation which industry insiders say failed to specify whether they apply to new foreign companies seeking mining licences only or even those already in operation.

There is also the fear of dilution of investment interests among foreign investors, a reason that the new regulations have received strong opposition from companies.

The ministry is currently studying the gazetted regulations afresh in the wake of a number of complaints that have been expressed against them with a view to coming up with more “favourable” laws.

Though they seek to increase local interest in mining, the rules will only be effective until the mining Bill becomes law.