New mineral Bill promises resource windfall for locals

By MACHARIA KAMAU

KENYA: A new Bill that promises mineral windfall for local communities with vast natural resources is in the offing.

The draft Bill proposes that communities get 20 per cent of the mining royalties paid by companies undertaking the commercial production of minerals across the country.

This is a radical change from the past, where communities used to get nothing, and better than a recent proposal of five per cent. The proposals are contained in the Natural Resources (County Royalties) Bill, 2013.

The Bill spells out how returns from minerals will be shared out between the national and county governments as well as the communities that live in the mineral rich areas. A final Bill is expected to be ready for tabling at the Senate when it resumes in January.

Sharing formulae

The Bill proposes that the national government takes 60 per cent of the royalties ­— down from a previous proposal of 75 per cent — while county governments will get the remaining 20 per cent.

“The sharing of royalties between the central government, county government and the community shall be as follows — national government (60 per cent), county government (20 per cent and community (20 per cent),” reads the Bill in part.

The Bill is in expected to quell fights between mining companies and local communities on sharing proceeds from minerals. This has been a factor that has held back the commercial production of minerals and rare earth elements, despite some areas having large deposits. “The draft Bill has gone through stakeholders forum where there were inputs that have now been incorporated in the document,” said Dr Agnes Zani nominated senator and chair of the Senate ad-hoc Committee on Legislation on Royalties Accruing from Natural Resources

“We expect to have a final Bill by early next that will then be tabled when the Senate resumes. More input is expected when the Bill is tabled as well as during the committee and public hearing stages.”

“We have looked at the Water, Mining and Environment Acts to ensure that the new law is in tandem with other laws.” The Natural Resources (County Royalties) Bill, 2013 restricts the use of money received by the communities to developing public utilities.

The Bill comes at a time when Kenya is moving to grow returns from minerals and other rare earth elements including titanium and niobium.

Good returns

 It spells out the specific areas where the beneficiary communities can use the returns from their mineral wealth as education, health, water and roads. It will also require that the communities to file a budget on how they plan to spend the money with the mining ministry as well as be open for audit by Government. “Every community benefitting from the royalties must annually submit a proposed programme and budget to be used thereat as appropriate,” reads the Bill.

“Community programmes approved shall be subjected to financial audit on the utilisation of the resources expended.”

It adds, “The community will submit a report on the usage and disbursement of royalties … the programmes will be limited to public utilities on education, health, water and roads.”

According to the Bill, the Cabinet Secretary will set royalties paid by the mining firms. In September, Mining Cabinet Secretary Najib Balala revised upwards the royalties that miners pay to government.

Mining fortunes

He defended the move, saying that the government has been earning close to nothing while mining companies made fortunes.

Under the new regime, miners will pay a royalty of 10 per cent on the gross sales of rare earth, titanium and niobium up from the three per cent previously charged.  Royalties on gold went up to five per cent from a previous three per cent while diamonds increased to 13 per cent.

There is also a planned review of the Mining Act. Balala recently said the mining ministry had drafted a new Mining Bill that it expected would transform the country into a minerals trading hub.

 The Bill proposes the setting up a minerals and metals commodities exchange. The exchange will target firms undertaking mining activities in the region to raise funds.