Senate in new formula for sharing oil, mineral wealth

A Senate Bill meant to settle the current squabbles over the sharing of oil and mineral wealth has allocated counties where exploitation takes place 32 per cent of the fees and royalties realised.

This is a substantial increase from the 25 per cent allocated in the Mining Bill and 20 per cent proposed by the Commission on Revenue Authority (CRA).

The Natural Resources (Benefit Sharing) Bill 2014 sponsored by Senator Agnes Zani says that of the 32 per cent, 12.4 per cent of the royalties and fees paid will be used for local community projects while 19.6 per cent will be at the disposal of governors for utilisation across the county.

It defines the local community as “the people living in a ward within which the natural resource is situated and are affected by the exploitation of that natural resource”.

If approved, the new law will be a boon to resource-rich counties like Turkana, Kwale, Migori and Kajiado which will receive billions to grow the devolved units.

Under the new proposed formula the national government’s share has been reduced to 48 per cent with the remaining 20 per cent set to be put in the yet to be established sovereign wealth fund.

The Mining Bill is proposing the national government retain 75 per cent of royalties.

 “The monies paid into the sovereign wealth fund shall be paid into the following funds constituting the sovereign wealth fund—- 60 per cent of the monies shall be paid into a futures fund; and 40 per cent of the monies shall be paid into a natural resources fund,” the Bill says.

This is a departure from the CRA suggestion that the sovereign wealth fund should be allocated 50 per cent while Mining Secretary Najib Balala made no provision for the fund in the Mining Bill.

The new Bill will also now harmonise the revenue sharing from all natural resources including petroleum, water, forests, minerals and wildlife which have previously been scattered in different laws governing their exploitation.

It also vests all responsibilities regarding benefit sharing, approval and monitoring of projects funded by these revenues and review of royalties payable to a new body, the Benefit Sharing Authority that is formed.

All fees and royalties shall be collected by the Kenya Revenue Authority and paid to the Natural Resources Royalties and Fees Fund from which the allocations shall be made.

Besides payment of royalties and fees, each organisation shall be expected to enter into a benefit sharing agreement with the respective county government and the pacts shall include non-monetary benefits.

The mining sector is a relatively small contributor to national output although its revenues are expected to grow as new mines come on board.

Kenya has titanium, oil, gold and coal deposits as well as significant reserves of copper, niobium, manganese and rare earth minerals.

Last year, the country earned Sh19.6 billion from mining, down from Sh27.5 billion in 2012, hurt by lower gold prices that cut earnings from the precious metal 45 per cent to Sh7.4 billion.