Economy

Exporters of raw minerals to pay higher royalties

MUNYES

Mining and Petroleum Cabinet Secretary John Munyes. PHOTO | FILE | NATION MEDIA GROUP

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Summary

  • The proposed changes seek to reward firms which add value on minerals before shipping them out of the country.
  • The Petroleum and Mining ministry has proposed to increase royalty payments for gold in raw or crushed form to seven percent of the value from current flat rate of five percent.

Kenya plans to increase royalty rates for miners who sell minerals like gold in raw state and more than halve the fees for firms which process the ore before export in a policy move geared at creating jobs locally.

The proposed changes seek to reward firms which add value on minerals before shipping them out of the country, unlike the current mineral royalties’ regime where miners pay a flat rate on the gross value of sales.

The Petroleum and Mining ministry has proposed to increase royalty payments for gold in raw or crushed form to seven percent of the value from current flat rate of five percent, while the rates for processed and semi-processed ores have been slashed to two and three percent, respectively.

The review process of mineral royalties, if successful, will be the first since 2013.

Mineral sales, dominated by titanium, earned the country Sh22.7 billion last year, a 6.2 percent drop compared with prior year’s revenue on the back of depressed demand in international markets.

Kenya has proven deposits of titanium in Kwale, gold in western Kenya and coal at Mui Basin in Kitui. It is also believed to hold significant deposits of copper, niobium, manganese and rare earth minerals which largely remain under-exploited, dwarfing the mining sector’s contribution to the national economic output.

The sector’s contribution to gross domestic product (GDP) remained at a lowly 0.7 percent last year, according to Economic Survey 20121, unchanged from 2019’s.

The proposed fees will see fees for export of titanium sands retained at 10 percent, falling to one percent of the value if processed or halving to five percent if partly-processed.

The rates for titanium ore will, however, drop to seven from 10 percent when shipped out raw, while miners like Australia’s Base Resources will pay a royalty fee of one percent for processed minerals and three percent for semi-processed shipments.

Sale of minerals such as fluorspar will fetch royalties of one percent in processed state as opposed to five percent — unchanged from current rates — when sold raw.