Markets & Finance

Balala pledges to resolve Mui coal mining dispute

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Cabinet Secretary for Mining Najib Balala (right), Kenya Chamber of Mines chairman Adiel Gitari (centre) and member Betty Gikonjo during a cocktail hosted by the group last Friday to welcome Mr Balala. Photo/SALATO NJAU

Cabinet secretary for the mining ministry, Najib Balala, has promised to resolve the coal mining controversy that has stalled the start of the multi-billion shilling project in Mui basin, Kitui County.

Court cases pitting the local community against the government and Chinese firm, Fenxi, have delayed award of the mining contract following controversy over the initial tendering process.   

The local community has claimed that it has been kept in the dark during tendering and negotiation for compensation and relocation of the current land owners, which Mr Balala has now pledged to resolve.

“When there is opaqueness in the whole process then there is suspicion and then objection. I will be able to put all this things in perspective of transparency as a principle so that people can appreciate the challenges and benefits of this sector,” said Mr Balala.

The government has estimated coal deposits in the Mui basin to be valued at over Sh3.4 trillion, and projects that successful exploitation of the mineral could provide up to 3,500 megawatts of cheap electricity.

A liaison committee formed last year to represent the local community during negotiations has claimed that it has been locked out of the contract drafting process.

(Read: Multi-billion shilling coal mine plan sparks anxiety over payment)

Questions were also raised regarding the tendering process which settled on China’s Fenxi Coal Mining, with some delegates involved in fact finding missions to China expressing doubt on the firm’s technical and financial ability to execute the project.

The vast coal basin is divided into four blocks and only two blocks have been tendered out.

Coal mining has now been moved from the Energy ministry to the ministry of Mining under the new Jubilee government Cabinet structure.

“If it has been moved then that is a good thing. The Energy ministry was riddled with a lot of cartels who were not interested in moving forward. I respect Balala because he understands business,” said Eric Mutua, the chairman of the local community Liaison Committee and also the law society of Kenya.

He claimed that though the Liaison committee had been gazetted with the purpose of linking  with the government to ensure that local interest were protected they had been sidelined by senior officials in the ministry of energy, including the permanent secretary.

Efforts to get comments from the permanent secretary Patrick Nyoike were not successful.

“We have been kept on the sidelines only to realise there is a draft contract and that we are expected to do advocacy to the community after it is signed. They say the community interest will be represented by the government lawyer then what was the need of forming the committee?” posed Mr Mutua.

The company which won the tender, Fenxi, said that there existed a draft contract which was the basis of the negotiations.

“In the tender there was a draft contract which has existed for over two year. This committee is an organ of the government which represents the interest of all its citizens. We, as a company, have been invited on the table by the government,” said George Kariithi a director of Fenxi.

(Read: Man behind Chinese firm in Sh3.4tr Mui coal mines)

The elevation of mining from a department to a full ministry was a surprise to many but Mr Balala said the new government was committed to ensuring the industry, riddled by cartels, received the required focus to grow its contribution to the economy.

The cabinet secretary said his first priority will be setting up a new legal structure to govern the sector as the current framework, written over half a century ago, was more facilitative rather than regulatory.

Mr Balala said he hoped to present the new legislation to cabinet within ten days and before parliament in the next two months.

Kenya has found itself in a discovery stage with announcements of mineral and oil finds pushing it to quickly review its legal structures which had lagged behind as emphasis was placed on agriculture and service industry which have been the key economic drivers.

After setting up the legislation the mining ministry will spend Sh5 billion to carry out geographical surveys aimed at identifying resources in the country, their quantities and location.
Kenya is said to have gold, titanium, niobium and rare earth metals deposits which can be exploited for commercial use.

“We will be having discussions with the National Treasury if the government can invest (the Sh5 billion) well and go if not can I be given permission to look at the options and advantages of a public private partnership,” said Mr Balala.

Other projects by the ministry include the construction of a geolabs to analyse local minerals and advise on their value addition while also serving the regional market so as to turn the country into a mining hub.

Kenya has been dubbed the gateway of East Africa which has countries such as Tanzania, Sudan and Democratic Republic of Congo producing precious minerals including gold.

The ministry said last year Kenya produced 3.6 tonnes gold which is prospected in Transmara, Migori, South Nyanza, Kakamega and Turkana. Australian company Base Titanium expects to export the first lot by end of the year.

The country enjoys a more sophisticated transport network than some of its neighbours endowed with precious minerals such as Tanzania, Democratic Republic of Congo and South Sudan.

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