Foreign firms to pay more for Kenya’s minerals

• Environment and Mineral Resources PS Ali Mohammed said the existing fee structure is being reviewed to set specific charges for each mineral.
• The proposals are contained in the Geology, Minerals and Mining Bill 2012 that the PS said is with the Cabinet.
• If passed, exporters of raw minerals will face an additional four per cent royalty charge while those shipping out refined or processed metals will pay rock bottom fees chargeable at one per cent of the total value.
• Kenya’s decision to increase its royalty fees comes a few months after Tanzania made a similar move, raising royalties charged on minerals such as gold from 3 to 4 per cent.

International companies seeking to exploit Kenya’s mineral wealth could pay up to three times the current rates as the government moves to increase its earnings from the mining sector with higher royalty fees.

Environment and Mineral Resources Permanent Secretary Ali Mohammed Thursday said the existing fee structure is being reviewed to set specific charges for each mineral away from the current policy that levies the fee at the rate of three per cent of a contract’s value for all minerals.

Under the proposed structure, diamonds and other precious minerals such as gold will be charged royalty at the rate of 10 and five per cent respectively. The proposals are contained in the Geology, Minerals and Mining Bill 2012 that the PS said is with the Cabinet.

If passed, exporters of raw minerals will face an additional four per cent royalty charge while those shipping out refined or processed metals will pay rock bottom fees chargeable at one per cent of the total value.

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Mr Mohammed said the export charges are aimed at discouraging the shipping out of jobs and investment to help tackle the ever rising challenge of mass unemployment among the youth.

The Bill proposes that the threshold for value addition on minerals be set at a minimum of 30 per cent -- meaning that anything below the set limit would be considered raw and taxed at the rate of four per cent.

“We plan to get better returns from this sector that has recently become one of the most promising segment of our economy,” the PS told delegates to a mining conference in Nairobi.

In Kenya, royalties charges are pegged on gross earnings of an exploration firm in addition to a 30 per cent corporate tax on profits.

Kenya’s decision to increase its royalty fees comes a few months after Tanzania made a similar move, raising royalties charged on minerals such as gold from 3 to 4 per cent.

Dar also wants mining companies operating within its borders for more than five years to start paying corporate tax at the rate of 30 per cent regardless of whether they are making profits or not.

Mr Mohammed said revenue from the mining sector will be shared among the central government, which will retain 75 per cent, County government 20 per cent with the remaining five per cent going to communities living around the project sites.

Environment minister Chirau Ali Mwakwere said lack of sound regulations has denied Kenya its fair share of the mineral wealth, an anomaly that the new laws aim to correct.

“Things have been slanted in favour of investors leaving the government with a paltry five per cent of the proceeds,” he said.

Kenya’s mining sector is currently operating on the Mining Act of 1940 that has been revised only twice, in 1972 and in 1987 but without the inclusion of contemporary practices such as fair sharing of revenue.