Indian cement firm’s 99-year Pokot mining lease under probe

Indian conglomerate Sanghi Group’s licence to exclusively mine limestone in West Pokot for nearly one century is under threat, following an order for audit of the deal.

Sanghi Group’s Cemtech was given an exclusive 99-year lease to mine limestone in the county for manufacture of cement, but the Competition Authority of Kenya (CAK) says the deal is lopsided in favour of the firm.

West Pokot governor Simon Kachapin has ordered a review of the licence, which could open the door for other cement makers into the limestone-rich county.

“We’re re-opening the file to see the terms provided in the deal and what needs to be reviewed to ensure the county benefits from the project,” said Mr Kachapin Thursday in an interview with the Business Daily.

The review will focus on the tenure of the mining permit, its exclusivity and revenue-sharing.

Construction of the Sh12 billion cement plant in West Pokot has delayed since 2012, when it was awarded the licence.

The competition authority has faulted the 99-year exclusive lease mining rights covering over 106,000 acres (42,750 hectares), saying it amounts to uncompetitive practice and is in breach of anti-trust laws.

Cemtech’s exclusive land is equivalent to about five per cent of West Pokot’s total surface area.

READ: Company secures exclusive limestone rights in Pokot

CAK said West Pokot holds enough limestone to produce one million tonnes of cement annually for 50 years, hence more cement makers should operate in the county.

“The exclusivity period is too long and way beyond international best practice,” said the CAK in its 2013 annual report.

“It is the opinion of the Authority that the Pokot area can accommodate more cement plants, now and in the near future.”

Sanghi Group, through its investment vehicle Rock Field Corporation, in February last year increased its stake in Cemtech to 74 per cent.

The competition authority made the recommendations in response to public outcry over the deal that gives the Indian investors undue advantage over local cement firms such as the East African Portland Cement Company, ARM Cement, National and Savannah Cement.

CAK has recommended reducing of the permit term to a maximum of 25 years from 99 years and increasing royalty fees.

Besides the 99-year mining permit, Cemtech was also given “authority to access and extract limestone in all established limestone areas and those that may be identified in future in greater Pokot.”

CAK says the memorandum of understanding between the defunct County Council of Pokot and Cemtech did not expressly provide a revenue-sharing model to benefit the host community and royalty fees to be paid.

“Although Cemtech indicated they intended to plough back some of its profit to the community under the socio-economic obligations, the commitments were not highlighted in the agreement,” says CAK.

These findings are likely to ignite debate on how Kenya has been auctioning its mineral wealth to foreign investors without following due process.

Former Prime Minister Raila Odinga in June 2010 broke ground for construction of the Cemtech cement plant, which has an annual capacity of one million tonnes.

It also plans to set up a 15 megawatt coal-fired power plant to cost about $50 million. However, construction of the cement plant is yet to start, two years after it secured the exclusive mining rights covering Ortum, Serbit and Chepchoi, Muino, and Alale areas.

READ: Indian firm Cemtech set to build 30MW coal plant

Rajesh Rawal, a director and minority shareholder at Cemtech, declined to comment on the issues raised by the competition watchdog, but said the firm had the financial and technical muscle to roll out the project.

“There have been delays in getting regulatory approvals,” said Mr Rawal. He added that Cemtech had spent Sh154.8 million in compensating land owners displaced by the project.