Kenya’s hidden miners: Offshore secrecy and weak oversight fuel billions in lost revenue

 Tax Justice Network Africa (TJNA) policy officer for tax and international financial architecture  Evelyn Muendo /JACKTONE LAWI

Kenya's extractive industry has become a playground for secrecy and offshore profiteering, with nearly two-thirds of mining companies registered in foreign tax havens.

Transparency International Kenya's Project Officer James Kinyua says this loophole is bleeding the country of billions in potential revenue and deepening corruption and community exploitation.

According to Kinyua, Kenya's refusal to join global transparency frameworks has entrenched shadowy ownership and smuggling networks in the sector.

"It will shock you to know that 65 per cent of extractive companies in Kenya are registered offshore. We only have data on proxies, we really don't know who the real beneficial owners are," Kinyua said.

Despite having modern laws such as the Mining Act of 2015 and Companies Regulations of 2020, Kinyua said transparency remains cosmetic.

The beneficial ownership register, established to expose true company owners, exists but is sealed from public scrutiny.

"We have the legal framework, but it's not open. The register exists, but citizens can't access it," he noted.

"Compliance stands at barely 52 percent, meaning half the sector still operates in the shadows," he said during the 13th Pan-African Conference on Illicit Financial Flows and Taxation (PAС 2025).

The session hosted by the Financial Transparency Coalition and Southern and Eastern Africa Trade Information and Negotiations Institute (SEAT-INI), detailed how Kenya's fight to get out of the Financial Action Task Force (FATF) grey list is facing issues due to lack of transparency.

He said that the opacity in the dealings of these firms has had real consequences. Communities in min-eral-rich regions like Kwale and Tur-kana continue to face land disputes, poor compensation and social unrest, while vast wealth from gold, cobalt and titanium slips through regulatory cracks.

"Communities are often not well compensated when minerals are found on their land. Boundaries are unclear, and the cadastral system re-mains weak," Kinyua added.

Although Kenya's mineral endow-ment could contribute up to 10 per cent of GDP, the sector currently accounts for less than one per cent.

The panelists said that even more worrying, Kenya's porous oversight has made it a smuggling conduit for gold from South Sudan and the Democratic Republic of Congo, further tarnishing its international reputation.

"Because of these opacities, Kenya was re-listed by the Financial Action Task Force (FATF) in 2024 - for the second time since 2014," Kinyua said, adding that the European Commission has also placed Kenya on its list of high-risk jurisdictions.

The repercussions are already being felt beyond the mining fields. "Even students are being affected-some Kenyan students seeking to study in France are experiencing de-lays in processing their funds because France considers Kenya a high-risk country," Kinyua revealed.

Kinyua blamed political reluctance for Kenya's failure to join the Ex-tractive Industries Transparency Initiative (EITI) - a global framework promoting open reporting of payments and revenues in resource-rich economies.

"There was a time around 2014 when Kenya was supposed to join EITI. But government officials felt it would tie them up and they opted out," he said.

However, Policy Officer for Tax and International Financial Architecture at the Tax Justice Network Africa (TINA), Evelyn Muendo, says the country is making strides including the introduction of beneficial ownership requirements to reveal the true individuals behind registered companies

"Kenya has made particular efforts to reform its tax system to reduce leakages that occur through illicit financial flows," said Muendo.

"We are reviewing double taxation agreements and negotiating them under a new national tax poli-cy framework to seal loopholes that have previously been exploited by multinational corporations for ag-gressive tax avoidance."

Muendo noted that Kenya is developing country-by-country reporting rules, which will compel multina-tional enterprises to disclose details of their operations, income, and taxes paid across jurisdictions an essen-tial step in tackling cross-border tax abuses.

"This framework will help ensure that international tax standards are fair, implementable, and reciprocal, empowering African countries like Kenya to effectively combat tax-related illicit financial flows," she said.

At the global level, Kenya has been a strong advocate of the proposed UN Framework Convention on International Tax Cooperation, participating in negotiations and serving on the Bureau.

Muendo said the initiative is critical in making global tax cooperation more inclusive and responsive to the needs of African nations.

A new report released by African development bank last week shows that, Kenya loses about $1.5 billion (Sh194 billion annually due to graft, misuse of public resources and cap-ital flights.

This is compounded by inefficiencies in public spending amounting to to Sh650 billion annually and tax excemption and incentives that drain another Sh105 billion each year. The report says political elites influence law making and regulation enforcement to serve private interests.