FLAWED LAW

Miners say bad law making Kenya lose out

In Summary

Kenya Chamber of Mines says the Mining Act as it is today has staged bottlenecks which have hampered the business

A file photo of mining scene
A file photo of mining scene
Image: FILE

Kenya is losing billions in foreign exchange to Uganda due to flaws in the Mining Act, according to the Kenya Chamber of Mines.

In an interview, chairman Charles Mwangi said the Mining Act as currently formulated has several bottlenecks forcing most dealers to opt to relocate their operations to neighbouring countries.

Some of the barriers include hostile community reception, complex fiscal regimes at county and national levels, political interference, and outrageous Corporate Social Responsibility demands.

He cited the row between corporations like Tata Chemicals and Kajiado county government; Base Titanium vs Kwale locals; Kencoal Ltd vs Kitui MPs; Kerebe Gold Mining in Kakamega; Kilimapesa vs landowners; and Kenya Fluorspar Company vs the community as some of the cases involving conflict with the local communities.

As a way out, he said the law should be amended so that miners do not have to directly engage communities at the sites.

He said the difficult business environment, coupled with a two percent duty does not give value to miners which fuels a blackmarket.

Owing to the tax, Kenya’s gold exports declined to 471.98g last year from 502.57g in 2017.

Mwangi said Uganda could soon become Africa’s leading gold exporter as it has invested in the trade despite not mining any.

He said Uganda has zero-rated all its gold trade and set up a refinery, a situation  Kenya should borrow from earn more than the $301 million (Sh30.4 billion) it got last year.

“Kenya has an opportunity of earning five times what it gets if it deals with the issues that frustrate investors seeking to explore minerals,” Mwangi said.

He said the requirement that one presents gemstones for photo taking before clearance for export is major downside.

“This is a security risk. We wait for days to get clearance and at times miss exhibitions because of the difficulties in getting clearance from the mining ministry,” he said. 

The chamber wants the Act amended to clearly define the role of counties in the mining. 

Mwangi said the sector is not devolved yet counties have imposed taxes and other levies.

“Kenya has a lot of minerals but investors are running away because the state has not done enough to protect their interests,” Mwangi said.

He said the industry players were not consulted when the Mining Act was formulated.

"Our numbers are doing badly in the market hence losing a lot in foreign exchange earnings," he said.

The bad business environment, he said has led to the country not being ranked  in the 2018 Frazer Index Ranking which looks at countries with the highest level of economic freedom.

Kenya was placed at position 90 out 91 in the 2017 ranking, a situation the miners said will not change if the country does not correct the issues in the sector.

The chamber further cited high royalty rates charged on gold saying it has made the trade in the precious metal untenable hence the dwindling figures.

The chamber holds that Nairobi stands a chance to a hub for mineral business in East, Central, and West Africa if it considers making the law work.

The import is to reduce friction between communities that have the mineral and the miners who explore and extract the same.