Lack of rules delay remittance of royalties to counties and locals
By Macharia Kamau | February 27th 2018
The Government is still holding on to hundreds of millions of shillings belonging to communities in mineral-rich regions citing lack of a framework through which it can forward the money to the communities.
Firms mining and exporting minerals have paid royalties amounting to billions of shillings to the State which it is supposed to share with the communities and devolved units where the minerals are being extracted.
This has however not been happening, with the Mining Ministry attributing it to lack of a framework to remit the money to the communities.
According to the Mining Act, communities should be getting 10 per cent of the royalties paid to Government while the County Governments are entitled to 20 per cent share while the National Government keeps the balance of 70 per cent.
The Mining Ministry, however, said a framework on sharing the royalties has seen the National Government retain the money, despite the mining works going on for years.
Among the counties where there mining firms undertaking commercial exploitation of minerals include Kwale where Australian firm Base Titanium has been mining and exporting mineral sands and Narok County where the UK based Goldplat mines gold.
“Base and other mining companies have been paying royalties… they have been making regular payments to the exchequer. The challenge we have been having is that we do not have a structure to ensure that when the money goes to Treasury, it is paid back to the counties and the communities,” said former Mining Cabinet Secretary Dan Kazungu last week.
This was during the handover of to the new CS for Petroleum and Mining John Munyes. He said the Ministry is in the process of setting up a fund to hold the cash meant for communities and counties.
“We have come up with the mineral royalty fund and late last year, we sent a proposal to the director of budget at the Treasury. We have been pushing to ensure that it is finalised as soon as possible but it has not happened. When in place, that is when communities and counties can start getting their cash,” said Kazungu.
He said the facility had been developed by the Ministry together with officials from other Government agencies include the Commission on Revenue Allocation, the Attorney General’s office and Treasury.
Although the Mining Ministry declined to give the amount that Treasury owes communities and counties, it runs into hundreds of millions. This considering that Base Titanium has over the last five years paid more than Sh1 billion as royalties.
According to its latest financial statements, the company said it has paid Sh1.2 billion to the Government as royalties.
This would translate to Sh120 million being the amount that Treasury should have paid to the community and another Sh240 million to the devolved unit. Last year alone, Base Titanium paid Sh400 million to the Government in royalties and a further Sh800 million in taxes.
The company remits 2.5 per cent of its revenues from the sale of mineral sands such as zircon, rutile, and ilmenite to the State as royalties.
There are plans to increase the royalties to five per cent of the revenues.
The mineral sands are the primary sources of titanium oxide, which is used as a base pigment in paint and the manufacture of ceramics as well as the production of titanium.
Goldplat, which has been mining and exporting gold from Narok County, has in the recent past grown exports of the commodity.
While it did not report the royalties paid to Government, the firm recovered 3,200 ounces of gold from its Kilmapesa Gold Mine in the year ended June 2017, compared the 1,999 ounces recovered in 2016. These are in addition to other miners that have been extracting and exporting minerals from Kenya.
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