Apathy towards exploiting our mineral wealth baffling
By XN Iraki | November 17th 2020
Data from the Kenya National Bureau of Statistics shows that mineral and quarrying contributed only 0.7 per cent to our Gross Domestic Product last year.
It seems the country has given up on mineral exploration and exploitation. Do you know anyone whose job description is a miner, beyond bitcoins?
Why has our mineral wealth remained underground and unexploited for so long?
The quick answer is that we seem not to know it is there.
Our exploration efforts were minimal. We only came to know about oil 10 years ago.
Maybe others know of our minerals through satellites imagery. How did we confirm the presence of water on the moon? Others argue almost to the point of conviction that we knew of our oil, but it was not the right time to mine it.
Strategic thinkers could argue that that was the right thing to do. Wait until the Kenyan economy is diversified enough to avoid the oil curse. We may have to delve into classified government information in future to confirm that.
By chance or coincidence, we got oil when it was getting out of fashion, with electric cars and renewable energy becoming more popular.
That is perhaps why oil discovery never excited us and the oil curse might never come.
I find it curious that we are very good at mining sand, building stones and water, which are cheaper, but leave minerals, which are more precious underground.
Lumping together mining and quarrying in national statistics says a lot about our view on mineral wealth. But there could be good reasons why our minerals have remained underground. One, mining requires huge capital. Think of a goldmine 3km deep and the requisite technology for drilling, cooling and safety requirements. Think of extracting oil from the ocean using oil rigs or fracking. The huge capital requirement serves as a barrier to entry. That could be the reason why few indigenous firms, if any, are mining our oil.
The heavily capitalised mining companies like BH Billiton, De Beers, Chevron, BP, and Gazprom will only undertake exploration and mining if they are assured of long-term returns.
That leaves lots of minerals underground. They want to benefit from the economics of scale, which results from having a mine that will last for many years or good enough incentives from governments.
Regulations and laws also hamper mining even if the minerals are in large quantities. Have you looked at our Mining Act of 2013?
Mineral wealth attracts brokers and speculators. Most minerals are treated with a dose of nationalism, which makes it easy to institute laws that make political sense, but not economic sense.
They also attract brokers and speculators with political links. Who gets licences and concessions for exploration is often more political than economic, away from the public eyes. Are contracts on mining public?
Let us not forget that lots of minerals are in hard-to-reach places like deserts or jungles, making it more costly and putting off lots of would-be investors. It also leads to a few big companies or countries controlling mining globally in specific minerals such as De Beers in diamonds or China in rare earth metals.
There is a myth that minerals are often found in unstable countries. It is the minerals that make countries unstable as competition for wealth goes up. It is worse if the country’s economy is not diversified and depends on only a few minerals, particularly oil.
Lack of innovations in mining also keeps off investors. While we can do non-invasive surgery, we are yet to introduce “non-invasive mining,” one that would be done without opening up the earth.
The big money needed to explore and extract minerals leads to a thriving jua kali mining sector (artisanal mining or small-scale mining).
As one expert in artisanal mining put it, such miners do not look like what they mine.
They mine gold or gemstones but remain paupers. They suffer from information asymmetry. They do not know the true value of their minerals because they have no access to market information. Who makes the money?
Mining has not grown in Kenya because it is not considered cool by the elite.
Even elite institutions have no time for such areas of study. A PhD or an MBA on stock-traded firms is considered cooler than one on gemstone mining. And the elites can make money through rent-seeking and other deals that require less risk. Remember entrepreneurship?
Despite all these barriers, it’s time to exploit our minerals lying underground. Do we even know the value? Covid -19 has closed many businesses.
Why not look at minerals as a low-hanging fruit? Would that not be a good base for Vision 2030 or the Big Four agenda?
It is paradoxical that as we dither over exploring and exploiting the minerals, other nations are already focused on sourcing minerals beyond the earth from the moon and asteroids. Last month, we confirmed there is water on the moon. Lots of minerals probably exist there too.
It will not be long before technology advances enough to make mining on the moon and asteroids economical. Shall we share that celestial wealth the same way African mineral wealth has been shared?
- The writer is an associate professor at the University of Nairobi
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