Kenya eyes Sh200b from its minerals

Cabinet Secretary for mining Dan Kazungu addresses the press during the official handing over of the mining Ministry to him by Najib Balala. This was at The Mining ministry on 03/01/2016. (PHOTO: PIUS CHERUIYOT/ STANDARD)

The Government expects to generate more than Sh200 billion a year mainly from exploitation of precious stones.

Among the minerals the country can expect higher returns from are rubies and emeralds, two of the rarest and most valuable commodities in the world.

Mining Cabinet Secretary Dan Kazungu said the country should use the minerals as a basis for setting up a global exchange in Nairobi.

“We are losing most of our minerals to informal markets across our borders. Kenya must formalise the trade and have a mineral exchange,” he said while visiting gemstone dealers’ premises in Nairobi yesterday.

There are an estimated 200 licensed mineral dealers in Kenya, including Machakos Senator Johnstone Muthama.

Mr Kazungu, who was appointed in November but was formally taking over yesterday, said most of the trade in precious minerals was being handled outside the formal sector, and that the country had not benefited through royalties or taxes.

Among the priciest stones ever sold in the global market was a 1.5 gramme ruby that was bought at Sh220 million. Such stones can be found in Baringo, according to a director at Corby, a Nairobi-based gemstone dealer.

New regulations

And now, in new regulations in the mining sector, investors will be required to submit a daily work plan and expenditure records to the Mining ministry to enhance transparency.

Holders of exploration licences will also have to show records of their milestones for the Government to determine how lucrative their venture is, and if their investment should be promoted to a mining company.

These are some of the plans set out to help the ministry achieve its target of bringing in Sh200 billion in revenue by 2025, according to the Kenya Regulation Mining Strategy. Last year, the ministry brought in Sh1.3 billion.

In the strategy, gold extraction is expected be a pivotal contributor, with the potential to bring in Sh120 billion.

Mr Kazungu further warned local companies against holding on to mining licences for decades, with no actual work being done.

“The country does not benefit from exploration of resources until actual mining happens. That is when money is made. We will only take in serious investors who have the financial muscle,” he said.

During his tenure, Najib Balala, who is now Tourism Cabinet Secretary, said he had to cancel more than 60 licences as they had been hoarded for long, with no prospects of exploration due to the global drop in mineral prices.

“There was no need to award tax incentives to an investor with Sh5 billion who would carry out exploration for 10 years and then mine for only three,” said Mr Balala, while officially handing over to Kazungu.

Kazungu said his plan is not to align himself with the 10-year strategy, as it would then take too long to grow the sector.

“Once the Mining Bill and all legal framework is in place, we should leapfrog to higher heights.”

The Treasury has allocated Sh50 million towards the ministry’s legal and technical needs.

A transparent fiscal regime, reduced bureaucracy in licensing and reduced community conflicts with mining companies are part of the CS’ plans to attract investors.

“However, we need to know exactly what we have for us to know how to market it to prospects.”

Only 5 per cent of the country’s minerals are known, with 95 per cent still unexplored, according to the ministry. The country largely sells gold, fluorspar and iron ore, whose value has depreciated from Sh20,000 to Sh3,000 per tonne.