Stakeholders blame ‘secrecy clause’ to graft in Kenya mining sector

Environment Cabinet Secretary Judi Wakhungu (left) and Mining Cabinet Secretary Najib Balala (second left) are briefed by one of the exhibitors during the Mining conference at Safari Park Hotel, Nairobi. [PHOTO: GOVEDI ASUTSA//STANDARD]

By Ally Jamah

KENYA:  Kenya may have hit a jackpot in its mega discoveries of huge oil, gas and other lucrative minerals that have the potential to transform the country’s fortunes.

However, many experts are increasingly concerned about lack of transparency regarding the deals the Government has struck with the extractive companies.

It’s strongly argued that crucial aspects of the mining and prospecting deals the State has signed in the recent years remain veiled in secrecy including the all-important formula for sharing the proceeds from mining or drilling activities. The experts reckon that this dubious scenario has made it impossible for Kenyans to determine whether or not the country is getting value for its natural resources.

The secretive nature of the contracts signed between the government and the exploration and production companies could turn out to be the Achilles heel in the Kenya’s finds. The laws currently in place support the confidential nature of these contracts with the Petroleum and Mining Acts having a prominent clause on confidentiality.

The clause is said to be fuelling underhand deals in the oil and mining sectors. The two sets of laws are expected to be reviewed with analysts noting that a legal framework that provides for open contracts would ensure the country benefits from the oil and minerals.

Promise

In an attempt by Government to quell down growing concerns on the secrecy in the mining sector, Cabinet Secretary for Mining Najib Balala said his ministry is reviewing the mining laws.

He told a mining conference this week that with a new legal regime, contracts that the Government signed with the miners going forward would be transparent and made public.

Kenya’s bourgeoning oil and mineral sectors have lately received major boost, thanks to the significant discoveries of oil in Turkana County, niobium deposits in Coast and coal in Kitui County to raise the country’s mining profile.

Optimism is high about further oil hits across the country, as aggressive prospecting activities continue, with the coastal region expected to yield huge quantities of natural gas.

Coal mining is expected to start in Kitui County soon despite the deal is masked in controversies.  It is estimated that about 400 million tonnes of coal is deposited in the area.

Neighbouring Tharaka has also discovered commercial deposits of iron.  Large deposits of Niobium and rare earths have been discovered in Kwale County, where also lucrative Titanium mining by Base Titanium Company of Australia began officially three weeks ago.

The earnings from minerals jumped 50.5 per cent, up from Sh18.3 billion in 2011 to Sh27.6 billion in 2012, according to data prepared by the Ministry of Mining.

It is against this background of optimism and possible takeoff of the extractive sector that the various experts have sounded a prophetic warning that Kenya needs to prepare early enough and put its best foot forward to avoid the infamous “resource curse” that has seen many countries, especially in Africa, slide into conflict due to high-level graft and poor management of mining wealth.

World Wide Fund for Nature (WWF) Country Director Mohammed Awer says all the agreements the government has entered into with extractive companies need to be made public so that Kenyans can analyse them to ensure that the interest of the country are well taken care of, including the rights of local communities, as well as the venture’s environmental and economic sustainability.

He says that it is not fitting for such momentous deals with far-reaching economic implications to be decided by a few government officials, but instead recommends that they should be opened to the public.

“If we take the oil issue in Turkana for example, we hear that production may begin in the next few years. But Kenyans remain largely in the dark, including the host residents — Turkana.  The agreements were simply done in Nairobi and kept away from public view. Such an approach is not sustainable,” he says.

“Through transparency and full disclosures, it will be a win-win for all parties, including the government, mining companies, local communities and the environment. The constitutional requirement for public participation should not be ignored when it comes to mining or drilling deals. Secrecy breeds mismanagement of resources,” he said.

Incidentally, this week, it took the intervention of the Parliamentary Committee on Energy for Kenyans to learn about details of the agreement between the government and a Chinese company to mine huge quantities of coal in Kitui County.

Energy Cabinet Secretary Davis Chirchir claimed that the state got a “good deal” from Fenxi Mining Industry Company Ltd, which got a 21-year mining licence to harvest coal deposits.

But Mwingi North MP Mati Munuve insisted that the “excessive secrecy” surrounding the deal was unacceptable saying it was the reason why the project is marred in controversy, with the local community beginning to suspect that they will not benefit from the valuable natural resource right beneath their feet.

A recent visit by Weekend Business to Mrima Hills in Kwale County, where huge quantities of niobium and rare earths are said to have been discovered, local residents lamented that the government had sidelined them

“All we see is companies coming here with mining licences from Nairobi saying they have government permission to begin mining. It seems that local people don’t matter, we are very concerned that we may not benefit from this valuable resource in our land,” says Mzee Juma, 61, the chairman of Kaya Mrima committee.

On his part, Hadley Becha, the Director of Community Action for Nature Conservation (CANCO) says that various laws in the energy and mining sector are hampering transparency and reviewing them should be a big priority.

He cites the Petroleum (Exploration and Production) Act Cap 308 of 1986, which is still used in the negotiations of production sharing contracts and processing of licenses, and has a prominent Clauses on confidentiality.

One such clause states “all information related to petroleum operations shall be confidential and shall not be disclosed to a person other than those party to the agreement.”

“This is the clause that the government always uses to suppress flow of information. However, with the promulgation of the new Constitution, this law becomes archaic. The new laws demand information disclosure and public access to this information,” Becha told The Standard Weekend Business.

Mr Becha adds that the government may not also be keen to disclose these agreements as the processing of licenses and negotiations of contracts have by and large not been transparent.

The Standard Weekend Business has learnt that ongoing reviews of mining and energy laws and policies may put strong emphasis on public disclosures about government dealings with prospecting, mining and drilling companies.