Put in place sound policies and laws to spur growth of the mining sector

Recently, a lot seems to be happening in local mining industry, and this may give the country some hope that this rather dormant economic sector would one day become a significant part of the GDP. I say dormant because not much ground has been broken in mining since independence.

Before independence our geography books informed us of the soda ash extraction at Magadi, and some gold mining at Macalder and Kakamega. Of this only soda ash has remained significant to date. After independence Kenya developed fluorspar mining in Keiyo valley and there was some attempt at extraction of lead somewhere at the coast in the 1970s. Gemstones mining has remained active mainly in costal areas, while limestone has serviced the cement manufacturing industry.

Positive prospects

Recently, there has been mention of prospective coal deposits in Kitui and good finds of iron ore in Kitui, Tharaka Nithi and Taita Taveta. It is understood that there have been positive prospects of “rare earth” minerals in Kwale, which also hosts the much talked about titanium. Trans Mara and Migori are working on gold mining development. Existence of limestone deposits in Kitui and West Pokot would boost cement manufacturing further.

Some minerals (coal , iron ore , limestone) would support power generation and industrialisation while others (gold, rare earth minerals and titanium, among others) would generate much needed foreign exchange. Mining in general generates employment and opens up marginal areas to socio-economic development.

With the ongoing scramble for mineral resources in Africa, Kenya is bound to experience an influx of prospective investors. The big question is whether the country has updated its mining policies and laws to reflect the investor expectations and the need to optimise value on its minerals for the wider benefit of the country.

Article 71 of the new Constitution requires that Parliament ratifies agreements involving grant of rights or concessions for the exploitation of natural resources. The Article also requires that Parliament enacts legislation to provide for classes of such transactions.

Tanzania has over the past two decades developed an extensive mining industry, especially gold mining in the north-western regions of Mwanza, Shinyanga and Mara. However, there have been murmurs, justified or otherwise, that the country may not be realising a fair share of dollar market value for minerals produced and exported. Probably Tanzanian mining agreements and concessions may be skewed disproportionately in favour of investors who are mostly foreign companies.

Any new mining policies and laws in Kenya should incorporate the principle of adequate value accrual to the country, and any mining concessions, leases, licences or production sharing agreements should reflect this. Further, the principle of local Kenyan equity participation should also be seriously considered in any future mining policies and licensing regimes.

As the devolution system is implemented, the counties would push for a share of mineral revenues and this should be anticipated, discussed and implanted in any new mining policy and law.

The recent standoff in the Kwale County between prospective mining investors and residents is an indication that to succeed in developing our mining industry, we need an effective template on how to handle expectations of local population and impact of mining activities. Fair land compensation, relocation plans, social and concerns over environmental degradation are issues that could derail mining projects.

A trip around the key goldmines in Tanzania reveal that mining has negative effects on the environment. We, therefore, should accept that some level of degradation would be inevitable if we were to enjoy economic benefits associated with mining, provided that we manage the impacts prudently.

The other subject of interest is whether our mining department has geologically mapped out the entire country for mineral presence so that it becomes easy to promote and market our mineral prospects to investors. I am inclined to think that promotion of our resources has not been sufficient, and that there may be an element of randomness in identifying prospective mining areas.

Investment promotion

I visited the vast gold mining works at Nyamongo in Tanzania in the Mara region about 10 years ago. Due to close proximity of the mines to Kenya, one would have easily assume at the time that gold existed just across the border in our Trans Mara and Migori districts. It is only recently that investors started flocking to our side of the border. This perhaps should have happened many years ago if early geological surveys had been conducted followed by investment promotion.

As we focus on future minerals and oil/gas development, there is a strong justification for creating a combined “Ministry of Energy and Mines” in the post-2012 government. Energy related resources (oil, gas, geothermal, coal) share a lot with the non-energy minerals .They are all extractive resources with cross-cutting similarities in terms of geology, principles , laws and regulations, licensing regimes and they are all apparently covered by Clause 71 of the new Constitution governing exploitation of natural resources . In many countries, energy and mines are in the same ministry.

As we anticipate increased investor interest in mineral prospects, we should proactively review our mining policies, legal and regulatory frameworks to ensure that they meet national and investor expectations, global best practices and sufficiently address social and environmental impacts resultant from mining activities.

Mr Wachira is the director of Petroleum Focus Consultants.
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