County in bitter row with miner over mining levy

Base titanium plant in Kwale County. [PHOTO: MAARUFU MOHAMED/STANDARD]

The Government’s suspension of levies imposed on mining firms has exposed the soft underbelly of county governments in regard to exploration of mineral resources.

In May this year, Kwale County Government, in its County Finance Act, imposed a mining levy of Sh5,000 on titanium per tonne.

After its gazettement, Base Titanium, a subsidiary of Base Resources, an Australian firm, says it received an invoice from the Kwale County Government to the value of Sh378,060,000 for titanium cess, which has since risen to Sh500 million.

But the national government barred Kwale County from levying the firm as it is deemed unconstitutional since mining is a function of the national government. The move has sparked protests from Kwale residents who held peaceful demonstrations last week over what they termed interference by the national government in the mining sector in the county.

Speaking to Weekend Business, Macknnon Ward MCA Ahmed Musa termed the move ‘oppressive and unfortunate’, saying it was meant to deny Kwale County the needed revenue that could go for development projects and poverty alleviation. “The minerals are in our county and we should get a fair share of the revenue,” said MCA Musa.

Both the Chair of the Transition Authority (TA), Kinuthia Wamwangi and Treasury Cabinet Secretary Henry Rotich have asked Kwale county government to suspend the levies terming them unconstitutional. “The Constitution is the supreme law and binds all persons and State organs at both levels of government.No person may claim or exercise State authority except in accordance to the Constitution,” said Mr Wamwangi, in a letter to Kwale Governor Salim Mvurya.

“Article 62 of the Constitution vests the administration of minerals under the national government and brings to question the legality of the cess that Kwale County purports to impose,” Base Titanium management question.

Economic infrastructure

In fact other Coastal counties are also headed for a collision course with the National government over taxation on minerals and oil exploration. Kwale, Mombasa, Lamu and Taita- Taveta counties have proposed new taxes on investors exploiting minerals, gas and oil in these areas, proposals which the National government says could scare away investors.

The counties want more revenue from the exploitation of resources in their regions to improve services and create jobs. “We want these mining companies to help us develop our county’s social and economic infrastructure,” said Kwale governor Salim Mvurya.

Part IV of the Public Finance Management Act, Section 161 provides that the county shall ensure that tax measures conforms to Article 209(5) of the Constitution and any other legislation and shall seek views of the Treasury Cabinet Secretary and the Commission on Revenue Allocation (CRA).

Further, the County Government of Mombasa, also in its Finance Act, has introduced a cess charge on “undefined products entering Mombasa County”.

The investor warns that county governments could scare away potential investors if they continued to charge unreasonable and punitive taxes and other levies. Base Titanium says this contravenes Article 209 of the constitution which states that “the taxation and other revenue-raising powers of a county shall not be exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.”

Mr Rotich said imposing such taxes could ruin the investment climate in the country as well as discourage private investments which is a critical component for economic growth. As though reading from the same script, mining Cabinet Secretary Najib Balala has insisted that taxation of the mining sector was a function of the central government.

Balala has already presented a new mining bill to Parliament, seeking to increase royalties to give the Government a greater share in profits from the sector.

According to Mr Joe Schwarz, the external affairs general manager with Base Titanium, the mining company has undertaken several projects in Kwale County that will have a direct socio-economic impact to the local community. These include the completion of Bwiti primary school and Bwiti dispensary, Kiruku secondary school, Bwiti Community Hall and Magaoni health centre.

Other projects in the offing include Magaoni Secondary school, Fingirika primary school and Fingirika dispensary.

“The company has also employed 850 people of which 60 per cent are from Kwale county, while another 1,000 jobs will be offered as the mining project progresses,” he told Weekend Business.

Shwarz pointed out that the company had set aside Sh340 million in their 2014/15 budget to go towards community development, including agribusiness, training of community health workers and early childhood development initiatives.