Tailing storage facility stacking operations at the Titanium field in Kwale. [File, Standard]
The mining sector reforms that the government is instituting have been met with mixed reactions.
Analysts note that while the lifting of the four-year moratorium on the issuance of new mining licenses will do the industry good, designating some minerals as strategic and requiring miners to partner with the National Mining Corporation (NMC) in extracting them could be a turnoff for many investors.
The government froze the issuance of new mining and prospecting licenses in November 2019 in what it said was necessitated by the need to clean up and reform the industry.
There is still debate as to whether a total freeze on issuance of licences was necessary and players have in the past argued that the government could have undertaken the clean-up while still issuing licenses.
They noted that over the four years, Kenya may have missed out on billions of investments as investors were kept waiting.
Without any activities being undertaken on the mineral prospecting and exploration front over the four years, the moratorium has also meant that no new mineral deposit finds have been made and the result no new mining project will come on board soon.
The Cabinet in August partially lifted the moratorium. In elaborating what this means, the Mining ministry has in recent weeks said licensing for construction and industrial minerals is now fully open but partially open for strategic minerals, where licenses will be issued on a case-by-case basis.
"Construction and industrial minerals mining rights shall be issued on a first-come, first-served basis," said the ministry, adding that issuance of licenses for strategic minerals would follow more scrutiny and be issued on a case-by-case basis.
"Strategic minerals are reserved for the government to be exploited by National Mining Corporation. However, an investor can enter into a joint venture with NMC and get a mineral right. These mineral rights shall be awarded on a case-by-case basis."
According to the ministry, the strategic minerals are radioactive minerals (such as uranium and thorium), cobalt, tantalum, lithium, coltan, niobium, copper, nickel, graphite, tin, tsavorite, chromite and rare earths.
The government said the moratorium and the reforms that have been instituted are now bearing fruit.
President William Ruto, when he spoke during the opening of the Voi Gemstone Value Addition and Marketing Centre two weeks ago, said the revamped sector has attracted Sh187 billion in new investments that had a potential to create 32,780 jobs.
He added that the match is on to get the sector's contribution to the gross domestic product to 10 per cent.
Analysts are however poking holes at some of the reforms and caution that these might slow down investors.
Among the issues that could become contentious include the listing of certain minerals as well as the requirement for miners to form joint ventures with NMC, which could see major miners become hesitant in investing in Kenya.
Partnerships between NMC and small-scale miners could also remain elusive, with the industry segment being highly informal.
"Whilst the mining industry does welcome the partial lifting of the moratorium and whilst the Cabinet Secretary is empowered (by) the Mining Act to declare certain minerals to be strategic minerals, industry players are uncertain on the rationale adopted in the declaration of the minerals as strategic. Some of the industry players are concerned that the listing of certain minerals as strategic may do more harm than good," said Njoroge Kangethe, an associate at legal firm Bowmans Kenya.
The designation of minerals such as the tsavorite, heavily mined by small-scale miners, could also be problematic as it would mean the artisanal miners would need to partner with NMC in mining their ventures.
This could further marginalise them in the industry that has always pushed them to the periphery.
"To give an example, a majority of the world's gemstones are mined by artisanal and small-scale miners (ASM). In Taita Taveta for example, this is true with respect to tsavorite. For the past four years, there has been a moratorium on licenses meaning ASM could not legally mine and extract Tsavorite," said Kangethe.
"Although the ASM community may be relieved following the lifting of the moratorium, the Cabinet Secretary's classification of tsavorite as a strategic mineral may have subjected ASM to additional regulatory requirements and bureaucratic processes since mining of tsavorite can now only be done under a joint venture agreement (JV) with the NMC."
"There have also been concerns, especially from large-scale miners, with respect to the NMC's proactivity. Most large-scale miners are indeed interested in the minerals that have been listed as strategic such as Lithium, Niobium, Rare Earths and others. There are therefore concerns over the NMC's ability to conclude timely JVs with strategic investors some of whom are already looking outside Kenya on account of the four-year-long ban on issuing of licenses."
He noted that while the lifting of the moratorium and the reforms that the government is instituting has gotten the attention of mining that are now considering investing in Kenya, the requirement to partner with NMC might not sit well with some of them.
"We are hopeful that the partial lifting of the moratorium will attract strategic investors who could not make applications for prospecting or mining licences previously," said Kangethe.
"Some strategic investors may however not be readily willing to enter into JVs with the NMC with respect to the strategic minerals and therefore the full potential of the mining industry may not be immediately realised."
"There has been an increased interest in Kenya's mining industry by some global players. There has however equally been concern expressed over the NMC's mandatory involvement with respect to strategic minerals."
Kenya's mining industry has been touted to have huge potential but its performance has been dismal over the years.
A 2015 report that consultancy firm Mckinsey did for the Kenyan government indicated that the full potential of mining could be in the region of $2.5 billion (Sh350 billion) in terms of direct revenues annually.
Over the last decade, the bringing to life of the titanium ore minerals has significantly pushed the industry's earnings. Other segments of the sector however remain subdued, with the titanium mineral sands mined in Kwale County accounting for 80 per cent or Sh28 billion of the Sh35 billion that the industry earned in 2022, according to data by the Kenya National Bureau of Statistics.
Bowmans noted that other than the moratorium that has in recent years reduced investment inflows, the setup of the sector has also reduced
"The industry's potential has been affected mostly by the moratorium that was in place hence the limited number of key large-scale players. Even before the moratorium, the industry suffered what some players considered to be a bureaucratic license application and approval process," said Kangethe.
The reforms have seen the government weed out miners that it said are not in compliance with the conditions of their licenses and had issued stop orders for over 3,000 operations.
These operations are by firms issued with permits to prospect or undertake mining activities but have been speculating waiting for an opportune time to sell them off and had not made investments as required by the terms of their licenses.
During the moratorium period, the government concluded a process of mapping out the country's mineral resources through an airborne survey, during which it identified a total of 970 mineral occurrences.