Kenya’s royalties for base metals stand at eight per cent of gross sales, according to a Kenya Gazette Legal Notice 187 by Mining secretary Najib Balala (pictured). FILE
What you need to know:
Data in AfDB’s African Economic Outlook show that royalties for base metals are set at an average of 3.5 per cent.
Kenya’s royalties for similar metals stand at eight per cent of gross sales.
KCM, the miners’ lobby in Kenya, proposes base and rare metals be subject to a royalty of three to seven per cent.
Mining industry players are set to discuss royalties in Africa as local investors push the subtle message that Kenya’s rates are on the higher side.
A recent comparison published by the Mining ministry and those derived from the African Development Bank (AfDB) research and the Kenya Chamber of Mines (KCM) show Kenya’s charges are higher, although the verdict does not take into account the controversial tax holidays granted the largest miners.
Data in AfDB’s African Economic Outlook show that royalties for base metals — such as iron ore, aluminium, nickel, copper, lead and zinc — are set at an average of 3.5 per cent. Kenya’s royalties for similar metals stand at eight per cent of gross sales, according to a Kenya Gazette Legal Notice 187 by Mining secretary Najib Balala.
In Liberia though, the royalty for base metals is at a maximum of 10 per cent.
“They are asking for higher royalties even from those that set up shop quite a while back and had already signed agreements for a lower royalty. This is applying the law retrospectively,” said Monica Gichuhi, the chief executive of KCM.
The Legal Notice, which takes effect from October 30, is expected to feature prominently in the minerals conference set to take place on October 17 and 18 in Nairobi.
The lowest royalty for base metals stands at one per cent in South Africa and mineral-rich Democratic Republic of Congo. Mauritania charges two per cent and Cameroon at 2.5 per cent.
However, the data does not cover various country incentives. In Kenya, some explorers and mining firms are understood to have received 10-year tax holidays, which means they won’t pay the 30 per cent income tax on their profits.
KCM, the miners’ lobby in Kenya, proposes base and rare metals be subject to a royalty of three to seven per cent.
The AfDB data shows royalties for precious metals – gold, silver and platinum– are set at an average of 4.0 per cent by other African countries, while Kenya’s rate for this category has recently been set at five per cent, the same as what KCM proposes.
Liberia imposes the highest royalties for precious metals at a maximum of 10 per cent followed by Gabon (six per cent) and Niger which levies 5.5 per cent on gross sales.
KCM argues that investors would be dissuaded from putting their money in Kenya if they are forced to surrender royalties that are substantially higher than in other countries offering similar metals.
“The ministry should not make it unnecessarily difficult to do business in Kenya in the mineral sector. The royalties should be lower than they are,” she said.
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Note: The results are not exact but very close to the actual.
