Why mining CS Dan Kazungu is cautious about exposing the billions under our feet

Four years after making the announcement, Kenya is yet to actualise an ambitious plan to establish the location of its mineral wealth.

The timelines for the airborne survey project remain unclear, despite a contractor being identified to help with mapping. The country has also put in place a new Mining Act to replace 76-year-old laws.

However, the Dan Kazungu-led Ministry of Mining has called for a cautious approach on mapping.

“Because this is our heritage, we want to be very careful so that we go about it in a way that integrity and use of that data is guarded to give us comfort. That is why we said it has to be Kenyan-led,” he said at a press briefing last week.

The aerial geophysical survey was to happen this financial year, but it now hangs in balance.

Financial focus

In the Treasury’s Supplementary Budget, the ministry may see Sh2.9 billion scrapped from its budget if Parliament approves the spending proposal. This would dash hopes of the project happening in the current financial year.

Further, with this being an election year, a change in regime would mean that unless the new government favours the project, it may end up stalling.

“There was directive from Treasury about cutbacks on budgets because of emerging new pressures requiring financial focus. We await a final decision from Treasury and Parliament on that, and in their wisdom we will stand directed,” said Kazungu.

The proposed changes in the Supplementary Budget affect 34 other State departments, as the Treasury seeks to scale down on expenditure by Sh181 billion.

The Ministry of Mining had earmarked Sh3 billion for the first phase of mineral mapping, targeting the Coast, Eastern and Western regions.

In total, the Government plans to spend about Sh6.2 billion ($60 million) on the survey. This was to revive attempts that began in 2013.

On August 13 of that year, the Government negotiated and signed a memorandum of understanding (MoU) with China’s Geological Exploration Institute (GETI) to carry out the exercise using a grant from the Chinese administration.

GETI was to use up to $70 million (Sh7.3 billion at current exchange rates) in an exercise that was estimated to take 36 months.

However, with the Export-Import Bank of China remaining, non-committal on funding part of the project, talks collapsed.

But in the latest attempt to map the location of Kenya’s minerals both on land and at sea, the Cabinet Secretary appears wary of getting funding from foreigners for the project, unlike the then ministry boss, Najib Balala.

“We have been asked in a communication from the National Treasury to engage with a Chinese institute that had an MoU with the Ministry of Mining. We have respect for bilateral relations, but we believe for this project we have to be a lot more sensitive on how we do it,” said Kazungu.

Secure data

According to the CS, the ministry is wary of getting funding that is tied to an “institute somewhere” that it does not have proper due diligence on in terms of its technical, legal and financial abilities.

Even if Kenya is to get foreign funding or contractors, the CS said the process of getting them has to be Kenyan-led so that the data is secured.

“Things around minerals and airborne surveys also touch on security and it makes us concerned. We believe reason at some point will prevail and then the project will be done the correct way,” he said.

“With all the innovations today, you could be having a project here and data is taken up and stored in another place, or you could be given data which is essentially non-helpful. We do not want to do that.”

For the over seven decades that Kenya had operated under mining laws drafted by the colonial administration, Kazungu said the country had been exploited by people who capitalised on loopholes in the legislation.

In a report titled The New Colonialism: Britain’s Scramble for Africa’s Energy and Mineral Resources, Kenya is listed among 37 African countries that have handed over lucrative oil and mineral licences to British companies.

The report, which Kazungu said he was not privy to, was published by British charity War on Want, and reviewed energy and mining companies listed at the London Stock Exchange. It found that 101 companies controlled the bulk of Africa’s most valuable resources.

Terms of reference

Reacting to the report, Kazungu said without proper controls, polices and strategies from mines to market, “then you open up yourself to people who can come and mine without your control”.

Since July last year, a team of 16 top Kenyan geologists drawn from Ministry of Mining, National Council of Science and Technology, and top universities have been in Nairobi.

The team has already drafted the terms of reference for the mineral mapping exercise that will see Kenya compile comprehensive data on its minerals for the first time. Kazungu insists the process has to be taken with “weighty concern”.

However, the process will still have a foreign firm involved. A UK-based consultancy company, International GeoScience Services (IGS), was picked last December to be part of the crucial exercise.

“We sat here with the team to draft the terms of reference, but at some point they said since we have not done such project before, we need a consulting firm to help us put this exercise in more refined way,” said Kazungu.

IGS, a specialist firm in geological surveys, will partner with Paterson, Grant and Watson – a Canadian geophysical consulting company. The tender had attracted 17 global companies.

While they are fine-tuning the document that the Kenyan geologists had drawn up, Kazungu said the ministry is ready to make a call for bids for a contractor to do the mapping.

IGS and the 16 geologists, the CS said, will become the monitoring and evaluation team to protect the data and ensure it is secured “because a lot of things can go wrong if we do not secure this data”.

“If as a country you want to do mining and you can’t getting it right, I advise you, don’t touch it. Mining without the right controls can be dangerous. You get fleeced and it can even bring up unrest,” warned Kazungu.

The extractives sector in Africa continues to attract the most foreign direct investment, and the ministry is upbeat that a successful mapping exercise will see Kenya benefit more. It has already come up with a mining mineral policy that is before Parliament.

And as the ministry waits to hear if it will retain its Sh3 billion for the project this financial year, the CS said he would like to launch the project before March.

Aside from replacing the 1940 mining laws, the ministry is also in the process of coming up with county licensing committees to help small-scale miners get licences more easily. This is set to be operationalised in four months.

Other reforms lined up include addressing the taxation regimes for minerals coming in or leaving the country. According to Kazungu, the current fiscal regime is unattractive to investors and encourages tax evasion.

“When we put so much taxation here, people look for alternatives. We must not just be competitive, but attractive as well. We want to look at zero taxation for raw minerals coming into the country. That is the best way to confront the black market,” he said.

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