MPs should toss out the new Mining Bill – we have no industry to regulate
What you need to know:
The Mining Bill that was recently published is based on a very narrow vision of the mining industry. It is based on a phantom boom.
Truth be told, we currently don’t have a mining industry to speak of. If you want to be brutally frank, the only serious players in this space are Base Titanium, Barrick Gold and the activity going on in the Kitui Basin.
As a matter of fact, the only new company engaged in wide-scale mining activity is Base Titanium. I have not counted Magadi Soda because it has been here for decades.
With a mining industry that is still in its infancy, you expect the government to avoid introducing laws that are likely saddle the few serious players in the industry with stultifying regulations.
Does it really make sense to saddle an industry still so young with a burdensome regulatory regime? Why is the government obsessed with control in a sector with such few serious players?
Today, we earn approximately $90 million per annum in exports from mining. The Tanzanians earn approximately $1 billion.
The Mining Bill that was recently published is based on a very narrow vision of the mining industry. It is based on a phantom boom.
At the stage we are in right now, regulation should be about facilitation – a supportive regulatory framework – and how to attract new investors.
Today, most of the international investors will engage well-paid consultants to assess and manage for them “regulatory risk”. By introducing the new Mining Bill, we have shot ourselves in the foot.
MASSIVE DISCRETIONARY POWERS
Yet it does not surprise anyone that the government has come up with such draconian laws. If you look at it carefully, you will realise that we live in very illiberal times.
Yes, the intellectual distaste for big government still lingers, but the State is becoming more interventionist than ever.
Cabinet secretaries say they want to simplify regulation, but most of the decisions they take often seem to result in more complexity.
What you will observe is an unstoppable momentum to expand bureaucracy.
This is exactly what the Bill seeks to do. We have had a Mining Act for many years and opinion has been unanimous that the law needed to be amended.
But instead of coming up with a simplified and more succinct code, what is proposed is a Bill that muddles things further.
In contemporary anti-corruption literature, we read that corruption thrives where one public officer or a small group is handed too many discretionary powers especially over issuance of scarce resources such us licences and permits.
The most bizarre aspect of the Mining Bill is the plan to place massive discretionary powers in the hands of the Cabinet secretary in charge of mining.
If the law is passed, he will have powers to issue the following licences: a prospective licence, a retention licence, a mining licence and a mineral permit.
In addition, the Cabinet secretary will have powers to cancel licences and permits. All mining companies must submit for approval to him a detailed programme for employing Kenyans. He also has powers to write regulations providing for how the companies are to replace expatriates.
NATIONALISTIC SENTIMENTS
Indeed, all powers over approvals and issuance of permits will now sit with the Cabinet secretary himself, not geologists, mining engineers or technocrats.
Under the Ministry of Energy and Petroleum, the responsibility of issuing permits for oil exploration blocks to investors sits with an inter-ministerial committee.
The Bill also introduces new provisions stipulating thresholds for local shareholding for mining companies.
For instance, if the Cabinet secretary designates a mining company as “large-scale operator”, it must cede to the government 10 per cent shareholding for free.
The Cabinet secretary has the powers to introduce regulations prescribing thresholds for State participation.
The Bill also prescribes circumstances where mining companies will be obliged to off-load up to 20 per cent of their shares to locals through the Nairobi Securities Exchange.
Without a doubt, these requirements sit very well with nationalistic sentiments. But why are we so quick to set rules and formulae for sharing wealth yet to be made?
Parliament should throw the damn thing out.
