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Political intrigues stall coal mining project in Kitui County

BUSINESS
By Philip Muasya | December 18th 2016

Three years after the signing of a concession agreement to award a Chinese firm exclusive rights to mine coal in Kitui County’s Mui basin, the investor curiously went quiet, leaving residents and their leaders baffled.

On numerous occasions since the signing of the contract between the national government and Fenxi Industry Mining Company (FIMC) in December 2013, the county leadership has tried to seek information on the status of the multi-billion coal project without much success.

Recently, however, Deputy President William Ruto, while speaking in Mutomo town during an event to commission works on the tarmacking of Kibwezi–Mutomo–Kitui Road, blamed the county government for impeding the start of coal mining in the mineral-rich county.

The import of Ruto’s statement was that Governor Julius Malombe’s administration had failed in setting up a framework to guide investment in the county.

Prerequisite framework

Although Ruto did not elaborate on the specific involvement of the county government in a project that would ordinarily be the function of the national government, his ‘revelation’ on the stalling of a project  became the talk of town for several  days.

Two days later and in what appeared to be an attempt to absolve himself and his administration from blame that he was standing in the way of the coal mining project, Dr Malombe placed a full page statement in local dailies explaining the status of coal mining in the county and his administration’s interventions.

Malombe said the national government was complicit in the delay of coal mining in Kitui County.

The governor while quoting various articles in the Constitution noted that coal mining was an express function of the national government.

“Article 62(1) (f) provides that all minerals and mineral oils form part of public land and shall vest and be held by the national government in trust for the people of Kenya.

This is further elaborated in Section 6 of the Mining Act 2016. The county government does not issue mining licences,”  Malombe’s statement read in part.

It added: “Coal is classified as petroleum regulated under the Petroleum Act of Kenya (1986). The Act vests all petroleum in the national government and its licensing is undertaken by the Cabinet Secretary for Energy and Petroleum.”

But what has not been coming out clearly from both the national and county governments and the investor FIMC is the issue of an addendum; a document that was drafted days after the signing of Benefit Sharing Agreement (BSA) to safeguard the interests of the Mui basin community in the coal mining project.

The addendum, which is yet to be signed and adopted as part of the BSA, became a highly contested document and practically stalled the Mui coal mining project. 

Soon after the signing of the BSA between FIMC officials and the then Energy and Petroleum Cabinet ministers Davies Chirchir, Najib Balala of Mining and National Treasury’s Henry Rotich in Mwingi Town, the Mui community protested, saying their interests were not captured in the agreement.

Drawn into intricacies

A technical committee chaired by Kitui Senator David Musila which drew  its membership from the county government, the Mui community and Ministry of Energy and Petroleum was then formed to re-look at the BSA and propose amendments that would protect the interests of the community.

The committee made a raft of recommendations in form of an addendum that was to be signed between the county government, the national government and the investor.

It was to be annexed to the BSA as part of the concession agreement, but this never happened.

The investor felt that the addendum had the potential of changing or mutilating the original terms of the contract by introducing a ‘strange’ entity to the agreement in the form of community/county government.

This perhaps explains why many believe the signing of the BSA was premature, especially because the final details of the agreement indicate that it would work against the interests of local people.

Governor Malombe says the BSA document was prepared by the investor without involving the community’s liaison committee.

However, Dr George Kariithi, a director of Great Lakes Corporation, which is FIMC’s Kenyan partner in the coal project, takes a different view.

In the concession agreement, Mui’s block C and D —with an estimated 452 tonnes of coal—were awarded for exploitation to a consortium of FIMC of China (70 per cent) and Kenya’s Great Lakes Corporation (30 per cent).

Dr Kariithi said the sticking points must now be resolved by the national government and the county government of Kitui.

“The national government and the county government should discuss and find a solution regarding the addendum; we are not signing any other agreement with the county government,” said Kariithi.

FIMC was set to invest $189 million (Sh19 billion) to mine coal in each of the two blocks, raising most of the funds from Chinese lenders.

Kariithi said any international lender funding a foreign project of such an amount would only be bound by an agreement between the investor and national government. Introducing a third party in the concession contract would make the agreement unbankable, he says.

Kariithi explains the Kitui County Government can hold the national government to account.

The reasoning behind this, according to the investor, is that the national government is ordinarily tasked with the duty of protecting the interests of its people.

He said activists had poisoned the community against the project, leading to numerous court cases that were dismissed by a three-judge bench in 2014.

Kariithi believes the recent issuance of title deeds to the people of Mui basin will help resolve issues of who is entitled to compensation and ease the way for the  project to begin.

Drafters of the proposals recommended that Great Lakes Corporation, which is partnering with FIMC, cede part of its shareholding to the Mui basin community.

“The investor must also prioritise employment of locals in the coal project and after the expiry of the mining contract, the land should revert back to the Mui community,” the document reads in part.

Stimulate growth

It further recommends that a coal power plant be set up within Mui basin and a Special Economic Zone be established in the area to stimulate economic growth and open up the area for other business opportunities.

The reluctance by the concessionaire to sign the addendum flies in the face of assurances by FIMC’s  Vice Chairman Yang Wusheng who in a letter to the Cabinet Secretary for Energy and Petroleum in December 2013 indicated that they were committed to discussing and adopting the proposed amendments before the mining begins.

Mr Yang had further noted that FIMC would work with the government and the local community to develop a  Resettlement Action Plan that addresses the compensation and resettlement of Mui basin residents  affected by coal mining and related activities of the project.

Mwingi Chief Lands Adjudication Officer Simon Nyakoria said the land adjudication process in both blocks C and D of the coal belt is complete. He said most of the locals have been issued with title deeds—the certificates yet to be issued  are at the titling centre in Nairobi awaiting the mark of authentication to prevent counterfeits.

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