Markets

Kenya plans tax cuts to kill black market mineral trade

Mining secretary Dan Kazungu (right) and PS Mohamed Ibrahim at a past media briefing. PHOTO | FILE
Mining secretary Dan Kazungu (right) and PS Mohamed Ibrahim at a past media briefing. PHOTO | FILE 

Kenya is moving to curb illegal mineral trade fuelled by smuggling syndicates through roping in key agencies including the central bank and Kenya Revenue Authority (KRA) as well as granting generous tax incentives to traders.

Mining secretary Dan Kazungu said his ministry would push for a change in the law during the next budget to rein in the black market.

“We are working round the clock to ensure that the next Finance Bill that accompanies Budget 2017/2018 has provisions that gives the mining sector a lot of incentives and leeway to help it leapfrog,” he said.

“The plan is to advocate zero-rating mineral inflows and fast tracking entry of mineral inflows at border points by working closely with the taxman. We want to make the black market an unattractive option.”

Mr Kazungu said the country is losing unquantified but monumental taxes as a smuggling gateway and hub.

The Ministry of Mining on Wednesday announced a high level multiagency committee to clamp down on the illicit trade and come up with ways of openly trading in the commodity.

The team includes the ministry officials, the Treasury, Central Bank of Kenya (CBK), the Kenya Institute for Public Policy Research and Analysis, the KRA, Kenya Airports Authority, Kenya Ports Authority, Kenya National Bureau of Statistics and the Office of the Inspector General.

“It will look into issues, challenges, bottlenecks and barriers of mineral trading both from within the country and inflows from the eastern Africa region and beyond,” he told the Business Daily.

Kenya has in the past held the dubious distinction as the hotspot for channelling contraband from the region to the international market.

A 2013 United Nations report showed that gold worth at least $400 million (Sh40 billion) was smuggled out of the Democratic Republic of Congo to East African countries. The report prompted Kenya and the DRC to agree to jointly investigate the illegal gold trade.

In 2011, East and Central African states agreed to issue a regional export certificate to dealers in precious minerals to avert conflicts fuelled by the commerce.

The illegal trade had flourished with the protection of influential politicians and rogue security personnel, said the UN report.

“It is unflattering for a country to be having the profile of being the centre or conduit for illegal mineral trading,” he said.

“We do not have the figures yet but the country loses hundreds of millions of revenue every quarter through illicit trading.

“Today, the black market is much bigger than the legitimate channel costing the country much needed revenues, jobs and reputation.”

Mr Kazungu said the ministry would continue to fine tune its operations and improve efficiencies so that dealers do not have a reason to go to the black market on account of administrative hindrances.

“After the passage of the Mining Act 2016, there are 16 pieces of regulations that we have been taking through public participation to give effect to the new act Some of these regulations are specific to mineral dealing and value addition and also focus on regional mineral inflows,” he said.