Protect foreign investors from local elites out to exploit them

What you need to know:

  • An investor operating in a county is forced to deal with multiple power seekers and pretenders to power.

  • We are at a point where elites in control of county governments are making the investment climate in rural Kenya unpredictable and uncertain for investors.

Just the other day, we were on the rooftop celebrating Kenya’s improved ranking in the World Bank’s “Ease of Doing Business” survey with its high scores in giving liberal incentives and support to potential investors.

Yet when you go to the ground and get to hear about the tribulations of some investors in this country, you wonder whether these scores and rankings have any truth in them.

The other day, I met the chairman of the investment group Maris Capital, Mr Charlie Tyron, the investors in Karebe Gold Mines in Nandi County, the only commercial goldmine in the country.

HEART-WRENCHING

Founded in 2009, the group has 20 investments in seven African countries, including gold mining in Zimbabwe.

Mr Tyron narrated to me a heart-wrenching tale of harassment and extortion by Nandi’s political elite. I then understood why the Australia-based Fraser Institute, has always ranked Kenya poorly in investment climate surveys in the mining sector.

Our mining industry has a bad reputation out there. In 2014, the Fraser Institute ranked Kenya 120th out of 122 surveyed mining jurisdictions.

Mark you, I did not just swallow all the claims, which this investor was narrating. Foreign investors, not least mining companies, are not angels. I accepted to raise the matter in this column because what he said appeared to reveal the bigger picture and trends not only within the mining sector, but in the extractives industry in general.

Indeed, Karebe’s tribulations point to profound changes happening, albeit very quietly, in the political-risk environment in which the mining and the extractives industry in general operates.

Foreign investors in this sector are increasingly going to find themselves operating in a hostile political-risk environment, instigated by agents of Nairobi-based powerful elites seeking to force their way into the shareholding registers and boardrooms of the companies.

LOCAL OLIGARCHS

For the past two years, Karebe has had to grapple with politically instigated strikes, demonstrations by local communities and attacks at public barazas convened by the local elite.

Add to that constant and repeated raids, visits and inspections by national and county government agencies — including the Kenya Revenue Authority, National Environment Management Authority and the Nandi County Health and Labour Departments. The company has even been investigated for human rights violations.

Alleged ills

Nandi Senator Samson Cherarkey Kiprotich took the matter all the way to the Senate, where he not only demanded a statement by the Mining and Petroleum Cabinet Secretary on the operations of Karebe, but also accused the company of many ills, including lacking the technical capacity and having no expertise and financial resources to operate and run a mining enterprise.

Yet, contrary to what the elite would want you to believe, the problem the company is encountering in Nandi is not a genuine rebellion by ordinary peasants agitating for a bigger share of the spoils. The whole thing is about manipulation of community politics by local oligarchs — arrogant local elites with friends in high places in Nairobi.

There are broad policy issues here. I blame the national government for failing to come out to assert itself to protect and defend obligations it signed with foreign investors such as the Nandi-based goldmine.

The trends we are seeing can only worsen our political-risk profile. An investor operating in a county is forced to deal with multiple power seekers and pretenders to power — the governor, the senator, the ward rep — all seeking to assert their authority and to be accommodated in the sharing of spoils.

FAIR SHARE

We are at a point where elites in control of county governments are making the investment climate in rural Kenya unpredictable and uncertain for investors.

Make no mistake: I am not against the idea of pushing Karebe to give more to the local community. Section 27 of the Constitution requires that management of natural resource wealth be conducted in the interest of all Kenyans. County governments will have to get their fair share of revenues.

But in seeking their fair share, counties must not forget that our mining sector is in constant competition with other investment destinations.

If you mistreat Karebe, the implications in terms of flow of investment into the mining sector will be dire.

The government must move forcefully to protect investors from extortionists and elites pretending to be fighting for the interests of the local community when it is clear to everyone that all they care for is their stomachs.