If Balala is the one to midwife Kenya’s mining industry, then we are in trouble

Thursday May 22 2014

PHOTO/ANTHONY OMUYA Mining Cabinet Secretary Najib Balala during a past function.

Mining Cabinet Secretary Najib Balala during a past function. PHOTO/ANTHONY OMUYA NATION MEDIA GROUP

The greatest impediment to the development of the mining industry is Cabinet Secretary Najib Balala and lack of a geophysical survey.

When President Uhuru Kenyatta formed the Jubilee Government, he reduced the number of ministries from 42 to 18. But he formed a new ministry of mining.

The decision to form this ministry must have been informed on the economic potential this sector has, and was firmed up by expert advice from geologists and mining experts who advised him to give special attention to this sector. He then appointed Mr Balala to take charge.

But before Mr Balala had settled down, he cancelled almost all the prospecting, exploration and mining licences issued by previous governments.

Of course, some needed to be cancelled as they had been negotiated and issued in an opaque manner. However, his style of cancellation portrayed Kenya as unsafe for international investors.

It would have paid a heavy dividend to form a commission or committee to look into the licences that had been issued and give their recomendation on the irregularly issued ones.

The increase in prospecting and exploration licence fees was the most imprudent decision he took.

MINERALS "WORTHLESS"

The explanation that an in-depth research was carried out to justify the increment was betrayed by the simple expedient of replacing Kenya shillings with the US dollar as the unit of charge for each block licence.

In other words, the prospecting licence fee was increased from Sh250 per square kilometre to $250 per square kilometre. The sad thing about this decision is that it is not informed by a basic understanding of the mining process.

Before any serious mining takes place, a company invests heavily in prospecting and exploration as a means of identifying the location, quality and quantity of minerals.

A miner who would attempt to proceed without going through this stage would be like a footballer who plays the game without knowing the location of the goal posts.

Many countries that are rich in minerals invest in aerial geophysical survey. This provides a report that assists prospectors in identifying areas with greater chances of containing minerals, thus narrowing down their search.

Kenya is yet to invest in this very important exercise that would benefit us in locating our extractive wealth.

If I were the Cabinet Secretary, I would have reduced the licence fees to attract more investors. In any case, as long as our minerals remain under the soil undetected, they are worthless.

Towards the end of 2013, Mr Balala was the chief guest at a convention convened by the Kenya Chamber of Mines. This convention had brought mining giants from all over the world to Nairobi.

INSULTING TO INVESTORS

During his keynote address, Mr Balala literally chased away the investors. His language was not only insulting to the investors, it also lacked any measure of business acumen. Half of the investors did not bother to come back for the meeting after the lunch break. We lost business.

The straw that broke the camel’s back was delivered by the Mining Bill. The ministry had been working on the Bill for some time, but what was tabled in Parliament was nothing worth celebrating.

In the Bill, all the powers, every decision and every recourse is vested on the Cabinet Secretary. He negotiates the royalties and decides who mines and for how long. Nor does it bother to align formerly issued licences with the new Act.

This is very important as some of the licences were issued during the colonial days and they needed to be aligned with the new Act so that the companies pay adequate licence fees and royalties.

The Bill envisages that the government will have 10 per cent free curry on equity in every mining company but it does not address what will happen to those companies that are already mining in the country.

Some of them have reaped great financial benefits for a long time due to lack of a proper Bill.

The Bill has the potential to cause conflict as it does not take care of county and community interests in the division of revenue.

If Kenya is to rely on Mr Balala to midwife the mining industry, then it will be a stillbirth.

Mr Njomo is the MP for Kiambu Constituency