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Opinion & Analysis

Kenya’s mining sector has great growth potential

Mining secretary Dan Kazungu. FILE PHOTO | NMG
Mining secretary Dan Kazungu. FILE PHOTO | NMG 

Mining secretary Dan Kazungu was recently quoted as saying “Mining is the next economic frontier for Kenya, so get on board and be part of the mining boom.”

True to his word, following the enactment of the Mining Act 2016, he has been leading a national and international charm offensive to attract investment in the sector while also advocating for the interests of small-scale miners.

One would expect these efforts to be reflected in positive movements of various data points. The Fraser Institute’s annual mining survey being a good reference, surveys mining and exploration companies to assess how mineral endowment and public policy factors, such as taxation and regulatory uncertainty affect investment in various jurisdictions.

In 2014, in what was a disappointing result, the Fraser Institute ranked Kenya 120th out of 122 surveyed mining jurisdictions. However, since Mr Kazungu’s appointment in late 2015, Kenya has steadily improved and was ranked 86th out of 104 in the 2016 report.

The Kenya National Bureau of Statistics (KNBS) annual Economic Survey is another useful tool for assessing the economic performance of the country across various indicators.

The 2017 survey recorded a slight decline in the value of Kenya’s mineral output, from Sh23.8 billion in 2015 to Sh23.3 billion last year. This was mainly the result of international forces that saw the value of Kenya’s fluorspar production decline by Sh560 million as international prices dropped forcing local production to be suspended.

On a positive note, the value of Kenya’s gemstone production rose nearly 20 per cent, while the value of mineral sands products from Base Titanium’s Kwale Mine rose to Sh13.3 billion, an increase of 46 per cent since 2014.

As an export orientated industry, the mining sector also plays a significant role in generating foreign exchange for the country.

Take Kenya’s trade with China for example. According to the KNBS Economic Survey, the value of Kenya’s exports to China in 2016 was Sh10 billion.

Of this, exports from the Kwale mine to Chinese customers accounted for Sh5.7 billion. The mining sector’s potential to drive economic growth, create jobs and improve living standards is huge.

A well-managed and sustainable mining sector will deliver significant multiplier benefits to other sectors of the economy through the supply of goods and services, notably in the areas of logistics, energy, consumables and a variety of services.

A further benefit derived from mining investment is development of infrastructure required to support mining operations that subsequently serve the public good – such as roads, power reticulation and water supply.

These wider economic and social benefits in turn spur further job creation and economic activity and additional contributions to GDP and government tax revenues.

John Ngumi is a director at Base Titanium.

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