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Fund artisanal and small-scale mining

In Summary

• It would go a long way in developing the mining of high-value minerals such as gold and gemstones, which have great potential for growth 

According to the Economic Survey of 2018, the mining sector contributed only 0.8 per cent to the GDP in 2017, even with large-scale miners such as Base Titanium. This is a far cry from the expected three per cent and 10 per cent by 2017 and 2030, according to the Mining and Mineral Policy 2016.

The sector could be one of the biggest contributors to industrialisation and development if well incentivised and supported by the government. Mining has played a huge role in the development of economically mature nations such as the US, China, India, Australia, Canada and South Africa.

Acute cash shortage caused by poor linkages with the financial sectors of the economy is one of the biggest impediment to the growth of the ASM sector. Being a nascent, capital intense and high-risk sector, it is difficult for local banks to finance it. However, with government intervention, this challenge could be a thing of the past

Though a lot more needs to be done on regulation to make the country attractive to international investors, the Mining Act 2016 has made it easier for global mining giants to invest in the sector.

These companies are able to raise capital through stock markets and international lenders and have the required technical capacity to develop large-scale mines. 

The government has shown support for the sector through training institutions such as the University of Nairobi, Jomo Kenyatta University of Agriculture and Technology, Taita Taveta University College and South Eastern Kenya University. 

These are playing a huge role in building technical and human capacity, with hundreds of geology and mining engineering graduates already in the Job market.

Being a nascent, capital intense and high-risk sector, it is difficult for local banks to finance it.

Even though more needs to be done in capacity building, this kind of support or better yet mobilisation of finance, could revolutionise the ASM sector. The mining sector has a huge role to play in Kenya’s industrialisation and growth in manufacturing—one of the Big Four agenda.

 

A fund tailored for the sector could play a huge role in transforming mining. This kind of fund is not new, the colonial government had a mineral development fund in the 1930s. The fund had a huge impact in the gold sector in Western Kenya so much so that in 1938 gold was the second-largest export commodity, in terms of value, only after coffee.

Zimbabwe, one of the biggest mining countries in Africa, introduced a gold fund in 2016 through the Reserve Bank of Zimbabwe. Since then, its mining sector has experienced robust growth, with gold production projections of 30 tonnes this year from 24 tonnes last year—60 per cent of this being from the ASM sector.

In 2017 Nigeria's Ministry of Solid Minerals and Steel Development and the Bank of Industry of Nigeria launched a N5 billion fund to benefit the ASM sector. The fund is meant to provide loans and bring the sector under a structured system. The introduction of the fund is seen as one of the efforts by the government of Nigeria to diversify foreign exchange revenue base beyond oil.

A similar fund in Kenya would go a long way in developing the mining of high-value minerals such as gold and gemstones, which have great potential for growth and are largely extracted by the ASM.

The fund can assist miners to procure essential equipment and/or scale up production through loans. Scaling up could translate to increased mineral production, employment and rural development, contributing greatly to industrialisation, manufacturing and increased contribution to GDP.

The government has a huge role to play in facilitating the creation of linkages among various sectors of the economy to encourage growth of business. Even as the government tries to raise funds through tax for development, building capacity in potential sectors such as the ASM could broaden revenue collection bases, ultimately reducing the tax burden Kenyans face today.

Chairman, Mining Engineers Society of Kenya

[email protected]