Credit to miners drops as State projects dry up

ODM leader Raila Odinga flanked by Transport Cabinet Secretary James Macharia, Petroleum & Mining CS John Munyes and Trade Cabinet Secretary Peter Munya and other elected leaders at Kisumu Pipeline during a tour of various projects in Kisumu County on May 13, 2019. [Denish Ochieng/ Standard]

Fortunes have declined for the mining and quarrying sector, with banks turning off the credit tap to companies in the once vibrant industry.

The end of the construction boom that started with the election of President Uhuru Kenyatta in 2013 has reversed the fortunes of stone miners while other investors have seen their markets disappear.

As a result, their trips to the banking halls have reduced with the latest data from the Central Bank of Kenya (CBK)showing that the industry saw its stock of credit dip by Sh15 billion, or more than half, to Sh13 billion in five years.

The CBK report covered the period from July 2018 to July 2019.

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Five years ago, banks had extended Sh28 billion to the sector following a construction boom that was bolstered by the Jubilee Government’s mega infrastructural developments, whose signature project was the Standard Gauge Railway.

The performance as at July was a continuation of negative growth at a time when credit to the private sector was just picking up, registering a growth of 6.1 per cent.

While almost all the sectors registered some growth in credit, mining and quarrying registered negative growth of -13.5 per cent, stretching the negative growth to 11 months.

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The sector’s output has also been slowing for the last five years, the same with private enterprises under this sector that have been receiving loans from commercial banks.

The mining sector, which in 2018 saw the end of mining fluorspar due to closure of Kenya Fluorspar Mining Company, has also been underperforming even as the Government continues to tout the industry as a game-changer in the country’s economic plans.  

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Minerals whose output declined in 2018 include salt, gemstones and gold, according to a report by the Kenya National Bureau of Statistics (KNBS).

“Quantity of titanium ore minerals produced declined from 643.5
thousand tonnes in 2017 to 597.7 thousand tonnes in 2018,” said KNBS.

Besides the decision by the Government to go slow on construction to reduce its uptake of loans, underperformance in the real estate sector has also affected the quarrying sector.

Various indices, including the Kenya Bankers Association Housing Price Index, have shown that house prices have either declined or stagnated, pointing to an oversupply.

Fewer houses were built last year, leading to depressed consumption of cement as the real estate sector showed signs of distress, according to available data.

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The value of buildings approved for construction by the County Government of Nairobi over the period declined by 13 per cent to Sh210.3 billion, according to the report by KNBS.

This is down from Sh240.7 billion worth of buildings approved in the previous year.

As a result, consumption of cement plunged to a four-year low, with developers absorbing 5.4 million tonnes of the commodity - the lowest since 2014 when 5.1 million tonnes were consumed.

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CBKPresident Uhuru KenyattaCentral Bank of KenyaMiners