Economy

Covid hits mineral royalty earnings

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National Treasury building. FILE PHOTO | NMG

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Summary

  • Kenya’s earnings from mineral royalties are expected to decline by 12.7 percent to Sh1.4 billion this year after the coronavirus pandemic interrupted mining and export value chains.
  • The country’s biggest mineral royalty earner, cement will bring in Sh651.7 billion down from Sh686.9 billion while titanium will deliver Sh479 billion down from Sh582.9 billion, according to the Commission on Revenue Allocation (CRA).
  • The Treasury has continued to accumulate mineral riches while denying counties revenues where the precious commodities are extracted.

Kenya’s earnings from mineral royalties are expected to decline by 12.7 percent to Sh1.4 billion this year after the coronavirus pandemic interrupted mining and export value chains.

The country’s biggest mineral royalty earner, cement will bring in Sh651.7 billion down from Sh686.9 billion while titanium will deliver Sh479 billion down from Sh582.9 billion, according to the Commission on Revenue Allocation (CRA).

The Treasury has continued to accumulate mineral riches while denying counties revenues where the precious commodities are extracted.

The CRA said counties had continued to miss out on the Sh5.8 billion cash pile of mining royalties which have accumulated over the last four years due to delays in concluding a legal instrument required to unlock the funds.

“Revenues from mining royalties collected overtime but have not been shared to the county governments as regulations have not been put in place to operationalise the Mining Act 2016… The cumulative amount due to counties is Sh1,760.6 million, which is 30 percent of the total royalties,” said CRA chairperson Jane Kiringai.

According to the mining law, counties are entitled to 20 percent of royalties, with the local community receiving 10 percent. The petroleum and energy laws anticipate that counties will get 20 percent and local community will get five percent of royalties. There is no revenue yet to be shared to counties from both petroleum and geothermal resources as no commercial production of petroleum has commenced.

The CRA said the Treasury and the State department of Mining must move to establish modalities of sharing natural resource revenues by finalising regulations to operationalise the Mining Act 2016, Energy Act 2019 and the Petroleum Act 2019.

Parliament last year challenged the Treasury and the State Department of Mining to explain why the Public Finance Management (Royalty Fund Sharing) Regulations have not been concluded and tabled for House approval following the enactment of Mining Act, 2016.

In 2018, Mining Principal Secretary John Omenge told Parliament that the draft Royalty Fund Sharing Regulations had been sent to the Attorney-General and the Treasury for approval.

Mr Omenge disclosed then that the ministry had collected Sh3.43 billion in the past three financial years all of which was remitted to the Consolidated Fund in the absence of regulations guiding the sharing of the royalties.

As at 2018, Mr Omenge said the Treasury held Sh686 million, being 20 percent of the counties’ share and Sh343 million or 10 percent share to communities where minerals were exploited. The balance of Sh2.4 billion (70 percent) was the share of the national government.