Training key in realising mining sector goals

Friday December 8 2017

Titanium mining plant

The multi-billion Titanium mining plant in Kwale County. Training is a starting point to help track operations in the extractive industry. FILE PHOTO | NATION MEDIA GROUP 

Increasingly assertive in regional politics and highly regarded for the potential of its extractive sector, many observers continue to wonder why Kenya’s mining industry has remained low-key.

Consequently, the extractive industry has not received as much attention as other sectors such as agriculture and manufacturing.

The discovery of crude oil in Turkana in 2012 lifted the veil on this nascent sector, giving it a rare focus, which is yet to translate into something more tangible.

One of the key lessons from the Turkana adventure is that the industry lacks experts.

The government had to outsource expertise from the UK’s Tullow Oil, which discovered the crude oil in Turkana.

PRECIOUS STONES

Besides oil, the country has billions of shillings worth of precious stones that remain untapped.

Recent prospects have hinted at potential significant reserves, including coal and gold.

Countries such as Australia have been able to use the extractive industry to generate revenues.

This sector in Australia is amongst the best in the world.  Can Kenya emulate Australia and leverage on this sector for progress? The answer is yes, but with sustained capacity building through thorough training.

With the expected growth in the industry, we need to train more people, especially of youth who are mostly idle.

This will also help by reducing unemployment and improving household earnings.

The Australia Africa Energy and Mineral Institute (AAEMI) that has for the past 10 years been actively involved in training personnel across the world in the extractive industry, comes to mind.

It has a pool of experts, who offer high-end training in petroleum engineering and exploration, drilling engineering and certification and mineral exploration.

BALANCE SHEETS

Resource-rich African countries are determined to capitalise on high commodity prices to bolster their weak balance sheets.

Governments are revising taxation systems, laws and renegotiating agreements to capture greater rent.

Uganda has enacted several pieces of legislation to reinforce extractive sector governance.

Last year, Kenya reached a major milestone after the Mining Act 2016 was signed into law, replacing the Mining Act Cap 306 of 1940.

Although the experience from the previous wave of state-ownership in sub-Saharan Africa was less than positive, the desire to capture some of the opportunities brought by the present high price of commodities is powerful and is underpinned by the belief that states are better prepared to actively participate in their mining sector than before.

But by relying on ready cash from oil and mineral extraction, African countries risk squandering their chance to maximise on returns and invest in the continent’s future.

Unfortunately, governments can only move from being bystanders to active players in the industry when they have the expertise that understands what is going on.

TAX HAVENS

The AAEMI has demonstrated this after training staff of East Africa Portland Cement Company and KenGen (Kenya) and Barrick Gold (Tanzania).

The EAPCC increased kiln availability and supply circle time, saving $2 million, while Barrick Gold saved $4.5 million on logistics after the training.

African countries have a big problem. Mining is mostly done by multinationals, which move profits to tax havens. Kenya will need to follow data. Such information is vital to detect tax abuse and hold companies to account.

The public also needs details of these firms’ finances, the taxes they paid, profits made and number of people they employ.

COAL MINING

If a Peruvian coal mining subsidiary of a multinational claims it suffered losses, while its subsidiaries in the tax havens of Bermuda and Switzerland are making profits, it is time to ask questions.

But if you don’t know about the Bermudan and Swiss operations, you have no hope of assessing the payments in Peru.

When suspicious patterns are there for all to see, the chances of powerful people doing the right thing are higher.

That is why we advocate training as a starting point to help track operations in the extractive industry.

Keynote speakers at a mining conference held earlier this week in Nairobi attended by delegates from across the world, spoke of the need for a well-anchored and governed extractive industry that effectively deploys resource rents while addressing safety, health and overall environmental and social issues.

Mr Kuria is the chairman the Kenya-Australian Chamber of Commerce and CEO, Australian Africa Energy & Mineral Institute.[email protected]