Windfall for local communities in new Mining Bill

Local communities are set to be the biggest beneficiaries of a mining law passed last week that doubled their share of fees and royalties to 10 per cent.

The amendment to the Mining Bill, 2014, now forwarded to the president for assent, will be good news for communities in mineral-rich areas which have been pushing for a bigger piece of the cake.

In the original Bill, the communities had not been allocated a portion of accruing revenues but this was changed to five per cent after a meeting between MPs and Mining secretary Najib Balala in June.

“The royalties payable shall be distributed as follows: 70 per cent to the national government; 20 per cent to the county government and 10 per cent to the community where the mining operations occur,” the Bill says.

This means that cumulatively, 30 per cent of mineral wealth will remain in the county where mining operations take place. Immediate beneficiaries include communities around the Mui Basin where Chinese firm Fenxi is set to start mining coal and residents of Kwale where Australia’s Base Resources is mining titanium.

No provision, however, was made for a sovereign wealth fund after MPs ignored a proposal by Commission for Revenue Allocation chairman Micah Cheserem that half of the revenues be put in the fund.

But the law does not cover revenues from oil exploitation which will be legislated under the yet to be introduced Petroleum Bill.

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.

But local communities say they are not getting any of the benefits, prompting frictions between residents and mining firms.

Kwale, Lamu and Taita Taveta counties have proposed new taxes on investors exploiting minerals, gas and oil in these areas, proposals which the government said could scare away investors.

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.

The proposed mining law differs from the Natural Resources (Benefit Sharing) 2014 Bill in the Senate which proposes that local communities receive 12.4 per cent of revenues, the county government (19.6 per cent), national government (48 per cent) and 20 per cent be put into the sovereign wealth fund.