Mining sector reforms fall flat as licence issuance stalls

Mining, Blue Economy and Maritime Affairs CS Salim Mvurya. [File, Standard] After a four-year lull caused by a freeze on issuance of mining licences, there were expectations the sector would roar back to life after the government lifted the moratorium last October. The freeze in licensing miners was meant to give the state time to reform the industry and enable the industry to explore its untapped potential. Things, however, appear not to have taken the expected turn, with the issuance of licences still lagging. Mining Ministry officials and miners last week traded accusations, each blaming the other for the industry going back to "default settings." The sector players said the ministry has made it difficult for miners to get licences, noting that despite the lifting of the moratorium in October last year, no licences had been issued. This, they say, is due to ministry officials imposing rules outside the legal framework that have made it difficult to do business, including application of new licences and renewal of expired ones. The ministry, however, blames the sector for being slow in the application of the licences and even when they have been processed, the industry players take long to collect them from the ministry's offices. The local mining industry holds immense potential, but its performance has over the years been underwhelming. The sector on average contributes 0.7 per cent to Kenya's Gross Domestic Product (GDP) but with the right policies and investments, the industry says this can increase to 10 per cent by 2030. The sector last year earned Sh33 billion from exports of minerals, a drop from Sh35 billion in 2022. This is set to further decline as the titanium mines in Kwale are set to close down by the end of this year after the depletion of titanium ores at the site. Titanium ores accounted for 72 per cent of the sector's earnings last year and will leave a gaping hole when the minutes shut down. Mining industry players now warn of further decline in the sector's fortunes as the government blows hot and cold on the reforms. The State in 2019 started a reform process that saw it freeze issuance of licences to industry players to weed out rogue players as well as map out the country's mineral resources. New projects More than nine months since it lifted the moratorium, players say the sector is still a mess as far as licensing is concerned. They warn that this could be detrimental for the sector not just now but in years to come, with major mining projects coming to an end and no new projects coming on board. The Kenya Chamber of Mines (KCM) and the Artisanal and Small Scale Miners Association (ASM) of Kenya noted that industry players still face difficulties in obtaining licences, with issuance being discriminatory. They say while the lifting of the moratorium on mining licences last year was initially a breath of fresh air for the sector, it has not been followed by necessary policy changes and actions. "The processing of permits and licences has been excruciatingly slow and costly for investors. Without these permits, the sector has no future," the two groups wrote in a letter to President William Ruto on July 8, asking for his intervention. "Private sector actors want to apply and receive licences as guaranteed by law within a reasonable time. It's mid-year, and applications are still pending." The Mining Ministry refuted these claims, attributing delays to an overwhelming number of applications, and added that some licences that have already been awarded had not been picked up by licensees. In the letter, signed by KCM Chairman Dr Patrick Kanyoro and chairman of the ASM Association Dan Odida, the lobbies also accuse the ministry of issuing licences in a discriminatory manner. They claim that foreign players are getting preferential treatment, while local firms, including the artisanal miners, have had to wait for lengthy periods. "Foreign nationals continue to get licences, while Kenyans cannot, another pain point for Kenyans," said the lobbies in the letter. "ASM players are concerned that they risk missing an opportunity that they have waited for well over a decade, not getting formalised despite the promise by the government." Additionally, the lobbies note that the introduction of a mineral movement permit had added to the layers of bureaucracy that are making it difficult to do business in the sector. "The issue of movement permits for minerals being applied in a discriminatory manner has elicited hopelessness in a sector that is just emerging from a moratorium that was aggravated by Covid-19 and the Ukraine war," said the lobbies in the letter. "The aftermath of the triple tragedy requires that policymaking is sensitive and geared towards stimulation and support, not constricting the arteries of the sector. Mineral movement within Kenya needs to be liberalised to support and promote trade and value addition." In lifting the moratorium on the issuance of licences, the recently disbanded Cabinet also declared some minerals as strategic, a move the miners said was rushed and ignored the Mining Act, 2016 and Mining Regulations 2017. "The issue of the Cabinet declaring some minerals as strategic requires revisiting. The process was rushed and executed with little regard to the Mining Act 2016 and the Mining Regulations 2017," said the miners, noting that locals cannot touch strategic minerals even when they are in their backyards with the National Mining Corporation solely mandated to handle this class of minerals. "The reality is that since October 2023, hundreds of thousands of rural livelihoods have been driven to the edge and cannot do business that touches on the minerals tagged as strategic. There is a need for fresh and honest engagement on how ASMs will engage the National Mining Corporation." Licence issuance The ministry has, however, refuted accusations from the Kenya Chamber of Mines and the Artisanal and Small Scale Miners Association, stating that the sector is poised for growth after resuming licence issuance. It noted that by June 2024, Sh221 billion in new investments had been processed, including a Sh5.8 billion gold refinery in Kakamega, a Sh2.5 billion granite processing plant in Vihiga, and the revival of the Fluorspar plant in Elgeyo Marakwet. "By June 2024, new investments worth Sh221 billion had been processed by the ministry," said the immediate former Mining Cabinet Secretary Salim Mvurya on Thursday, hours before President Ruto dismissed his entire Cabinet. The government holds a 10 per cent interest in these private-sector mining investments through the National Mining Corporation (NMC). Since the licence ban was lifted, the Ministry said, the Mineral Rights Board has processed 477 applications, granting 37 mineral rights, deferring 37, rejecting 187 for failing to meet requirements, and removing 216 from the mining cadaster, an online portal for tracking licence applications. It has processed another 358 applications for dealership licences, with 162 collected, 125 pending collection and 71 rejected. Acknowledging slow processing, the CS attributed this to many applications. The ministry, he said, had requested the Salaries and Remuneration Commission (SRC) to increase the monthly sessions of the Mineral Rights Board (MRB) from two to three. SRC guidelines limit MRB's sessions to two every month. Additionally, the ministry said it had formalised artisanal miners into 129 marketing cooperatives and operationalised 29 Artisanal Mining Committees. During the four-year moratorium, a countrywide geophysical survey was conducted to map mineral resources. It is now undertaking an exercise to ascertain the minerals, prioritising strategic minerals. "Priority has been given to areas with strategic and highly sought-after minerals. The exercise is expected to continue in the coming days. We are optimistic that this ongoing exercise will yield actionable data on mineral presence and boost the updating of the mineral maps that will, in turn, inform investment decisions," said Mvurya. Mineral origins The ministry also introduced a cost-free road transport register to improve accountability and trace mineral origins, aiding in the fair distribution of royalties to national and county governments and communities. He also explained that the movement permit that the KCM and the ASM lobbies are against is aimed at helping in the distribution of royalties. "As part of our administrative processes, we introduced a cost-free road transport register to boost accountability for minerals and assist in tracing the origin especially when aggregation is done from different counties," said Mr Mvurya. "Through the road registers issued free of charge to mineral right holders by Regional Mining Officers, it has become easier to determine the origin of minerals which helps in the fair allocation of royalties accordingly." Aside from the differences between the sector players and government, a new report shows that Kenya could be losing billions in tax revenue as foreign firms exploit loopholes in the local laws to repatriate profits without paying their fair share of taxes. The report by the Global Financial Integrity (GFI) noted that there could be serious profit diversion from Kenya into other countries that causes financial flows out of the country in an illicit manner.

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