New rules to benefit local dealers, miners

Mining companies and small scale dealers are the winners in new regulations set to be published soon by Mining Cabinet Secretary Najib Balala.

The new regulations, through which the cabinet secretary will also increase the rates for acquiring exploration and mining licences, seek to establish a dealership permit at Sh1,000 a year, targeting local small scale miners.

Currently, traders pay Sh20,000 a year for a dealership licence. This has locked out small scale dealers and encouraged illegal trade in minerals.

“The aim of having a dealership permit is to encourage local people to participate in mineral trade. As the fee is lower than what we currently have, it is expected that it will curb illegal dealings in minerals” said Mr Said Athman, mining secretary.

The new rules will introduce exploration and mining permits that will be cheaper. They will also cover small areas, compared with the existing prospecting and mining licences.

They will be available only to Kenyan mining firms. The ministry will also introduce mineral export permits targeting local investors, for Sh5,000 a year.

Under the new regulations, mining companies which fail to give up part of their exploration acreages after the lapse of the period they were licenced for will pay Sh10,000 per square kilometre of the exploration area.

The punitive charge, according to Mr Athman, is meant to make the local extractive sector competitive by discouraging hoarding of prospecting land by mining companies.

Mining companies (both foreign and local) currently pay Sh250 and Sh600 per square kilometre for prospecting and mining licences, respectively.

Industry sources say there is a plan by the ministry to increase these rates by up to 900 per cent so as to raise more revenue from the sector.

The rates have remained unchanged for more than 15 years, which has rendered them uncompetitive in light of a rapidly growing regional mining sector.

Increased interest
A report released by Oxford Business Group last month indicated that the local extractive sector had received increased interest from investors due to a rise in global demand for minerals.

But it warned that the changing regulatory environment could slow down this boom as investors take stock of the expected changes.

Last year, the Cabinet Secretary for mining revoked 43 licences in a move that sparked a battle between the government and sector players.

According to the Kenya National Bureau of Statistics, total earnings from mineral production increased from Sh18.3 billion in 2011 to Sh27.6 billion in 2012.

Kenya is home to a number of minerals such as gold, soda ash, niobium, rare earths, flouspar, diatomite and gemstones.