The government will revise mineral royalties for miners, Cabinet Secretary Dan Kazungu has said, setting the stage for a fresh battle with investors.
This is part of the mining ministry’s efforts to streamline the sector after coming into force of the 2016 Act five months ago.
Miners have continued to pay the old royalty rates for different minerals despite the new law, with the ministry treading carefully so as not to create a harsh investment environment.
“We have a strategy on royalties. We will continue revising them as we go on,” Kazungu said yesterday on the sidelines of a two-day Mining Forum in Nairobi.
The ministry contracted audit firm Deloitte, to conduct a study on new royalty percentages for different minerals found in the country.
The study was expected to be complete by July though it is yet to be made public.
“We want to get it right so that people don’t get excuses to smuggle minerals. We want something that is attractive and competitive to investors. We must have something that will not scare investors but make Kenya a mineral investment hub,” Kazungu told the Star.
The move now puts investors in a wait-and-see situation after a long battle with the government over royalties, with the state keen on setting higher percentages to reap more from the sector.
The new law has outlined revenue sharing, giving 70 per cent to the national government, 20 per cent to counties and 10 per cent of mineral revenues to community where the mining operations occur.
The government is also keen to get a 10 per cent free-carried-interest, with Kenyans owning 20 per cent of any locally listed mining company.
Last year, a revision on titanium royalties by the ministry was disputed by Kwale based Australian miner -Base Titanium.
The dispute was initiated by a legal notice issued by former Mining CS Najib Balala in August 2013, stating that royalty rates had been increased from below 2.5 per cent to over five per cent for most minerals.
Kazungu said the government will involve miners in the new royalty structure to be defined in the Mining Act.
The ministry has already developed a 20-year strategy to leapfrog the sector’s contribution to the Gross Domestic Product to 10 per cent by 2030, from the current one per cent.