Unpredictable business laws hurt Kenya’s mining sector

By Jackson Okoth

Kenya: It is still unclear whether an investment agreement lodged at the National Treasury will be altered giving way Mining ministry to raise the level of royalties paid to the Government by all mineral extraction firms from the present 2.5 per cent of gross turnover to 10 per cent.

Already, intense negotiations is taking place between Mining Cabinet Secretary Najib Balala and officials of Base Titanium over what royalties will be paid out by the mining firm.

“There are obligations for both parties that are clearly defined in the investment agreement and the special mining lease. We have already done our project financing agreements with banks, based on the 2.5 per cent and therefore any adjustments will affect the project,” said Simon Wall, Manager External Affairs, Base Titanium Limited.

Least explored

Kenya’s nascent mining industry is deemed one of the least explored in Africa. Data from Kenya National Bureau of Statistics (KNBS) shows that Kenya produced Sh18.3 billion worth of minerals in 2012.

 A survey of current exploration in Kenya reveals very little activity, particularly since uncertainty created by the surprise introduction of 35 per cent local equity participation regulation in 2012.

 Minerals in Kenya have traditionally played only a minor role in the economic life of the country. Beyond Magadi Soda’s 100-year history, other large mining operations include Kenya Fluorspar, gemstone and small-scale gold production and some industrial minerals.

 However, in recent years a renewed interest has been revived in Kenya’s mineral potential. 

Central to this has been discovery of oil and the development of Kwale Mineral Sands Project, the country’s first large-scale, modern project undertaken by Base Titanium.