- The government’s share for the fiscal years 2016-17 to 2021-2022 would have been Sh7.2 billion.
- Mining companies were found to be operating without the required licenses.
Counties and communities with high-value minerals have lost billions in royalties following the refusal by the national government to share the proceeds as required by the law.
A new audit has revealed that for the past six years since the enactment of the Mining Act of 2016, the government has collected over Sh10 billion in royalties from mineral rights holders.
Auditor General Nancy Gathungu says in the report that there was, however, no evidence the income was shared between the national government, counties, and local communities.
The local communities and county governments would have earned up to Sh3.1 billion had the proceeds been shared in accordance with the law.
The Mining Act of 2016, provides that 70 per cent of the revenue realised goes to the national government, 20 per cent to counties and 10 per cent to local communities where the mining operations occur.
“Had the amount been shared as per the law, a total of Sh1.02 billion would have been paid to the communities and Sh2.04 billion to the devolved units,” Gathungu said.
The report reveals that the government’s share for the fiscal years 2016-17 to 2021-2022, would have been Sh7.2 billion.
Miners paid Sh2.7 billion in the year to June 2022 – the audit year, which was a sharp increase from the Sh1.8 billion state collected the previous year.
Payments for the other years have ranged between Sh1 billion and Sh1.7 billion, monies which neither counties nor locals reaped from.
The auditor said the management of the mining department was in breach of the law in the ensuing circumstances.
“The county governments and communities that hosted mining activities during the six years may lose Sh3,067,431,596,” the auditor general added.
The management attributed the situation to a lack of a framework for the remission of royalties share to the communities and county governments.
Gathungu warned that by the time the framework would be put in place, there is a possibility the minerals would have been depleted.
“If the shares for the county governments and communities are not set aside, the citizens in areas where mining activities are carried out might not benefit from royalties,” she said.
“The minerals being extracted are finite and might get depleted by the time structures for revenue sharing are established,” Gathungu added.
At the same time, mining companies were found to be operating without the required licenses.
Lake Mining Company, with operations in Bondo, was found to be operating without a mineral right, the previous one having expired in July 2022.
Auditors during an inspection established that the company had commenced processing of gold tailings regardless.
“There was no record of renewal application lodged in the cadastre system,” Gathungu said, adding that the miner had machines whose use requires licensing.
She cited gold ore processing equipment found at the site including a rock crusher, grinding mill, leaching tanks, and concentration table among others.
“Such operations would require a mining license or mineral dealings license as provided for in Section 159 of the Mining Act, 2016, but none was provided for audit,” Gathungu said.
She further flagged irregular issuance of the said licenses to Copper Hill Exploration and Mining Resources Company in Migori county.
Whereas the company held a mining permit issued in 2021, the cadastral records indicated that the mineral right was at application stage.
A moratorium issued by former President Uhuru Kenyatta’s administration froze issuance of permits and licenses for new mineral areas.
“It remains unclear how the company was awarded the mining permit, it had no continuing obligations such as prospecting or mineral dealings,” the audit reads.
“The legality of the mining activities of the Copper Hill Exploration and Mining Resources Company Limited could not be confirmed,” the auditor added.
Also flagged was Aurum Utalum Mining Company which had no valid prospecting license for its operations in Rongo, Migori county.
The firm’s license expired in November 2021, and there was no record of an application for renewal lodged in the cadastre system.
It has since emerged that the miners are operating at a commercial scale beyond the licenses they hold.
“The licensed holders were using prospective licenses to undertake mining operations thus denying the government the mineral extraction revenue,” Gathungu said.
The auditor also cited the delayed issuance of licenses to Base Titanium in Kwale from an application the prospector made in 2019.
The auditor stated that at the time of the audit, the application was still pending and no satisfactory explanation was provided for the delay.
“In the circumstances, any royalties the government may have earned on mining activities following successful prospecting, were lost,” Gathungu said.
Records maintained by the Ministry of Petroleum and Mining revealed that the ministry did not maintain up-to-date cadastre records.
-Edited by SKanyara