Kenya: Mining CS in talks With Miners Over New Royalties

Posted on : Wednesday , 23rd December 2015

The government plans to fastrack implementation of higher mining royalties to give Kenyans a bigger share of earnings from the country’s mineral resources, newly appointed Mining Cabinet secretary Dan Kazungu said yesterday.

Kazungu said the government is negotiating with miners for a new royalty structure, and any new miner will abide to the updated rates.

“We are negotiating with the companies that have been paying much lower rates. We are expecting a breakthrough in the introduction of the new royalty structure,” he said during his inaugural press briefing at the Ministry of Mining offices in Nairobi.

Previous plans by the state to increase the royalties on various minerals have been met with resistance by major prospecting firms like Base Resources which mines the Kwale mineral sands.

The dispute started following a legal notice issued by former mining CS Najib Balala in August 2013, stating that royalty rates had been increased from a rate below 2.5 per cent to over five per cent for most minerals.

The notice stated that royalties chargeable on diamonds shall be 12 per cent of the gross sales value, while niobium, titanium ores, zircon, and rare earth elements and radioactive minerals would attract a rate of 10 per cent.

Coal together with ores such as metallic, iron, manganese, chromium, nickel and bauxite would be charged eight per cent of the gross sale value, while gold, silver, platinum, platinoid group metals, gemstones, fluorspar, diatomite and natural carbon dioxide gas would be charged at a five per cent rate.

Industrial minerals including gypsum, limestone and silica sand would attract a charge of one per cent of the gross sales value.

Kazungu did divulge the proposed higher rates.

“The new royalty structure will ensure that we get a good return from our mineral wealth,” Kazungu said.

He added that the mining sector strategy is ready and the ministry is waiting to officially receive it from global consultancy firm, McKinsey, which was hired in August to advice on the industry growth.

“We need to have a strategy that will help us to become the best place to invest in mining. Very soon, honorable [former CS Najib] Balala will be coming to hand over that strategy to us,” he said.

The ministry, Kazungu further said, is also reaching out to MPs to fastrack the Mining Bill 2015 which will be instrumental in streamlining the sector.

“We have been relying on a 75-year old law enacted in 1940. We need to have a new legal framework which will benefit us and the investors,” he said.