The Kenyan mining sector: a win-win investment opportunity

Posted on :Friday , 11th August 2017

 The Kenyan mining sector is indebted to Kenyan government and mining cabinet secretary Dan Kazungu for these changes that will enable the country to emerge as an ideal destination to build new mining businesses, writes Laura Cornish. 

 
At a national level
 
“At a national level, Kenya has been active in promulgating a legislative and regulatory environment which promotes ease of doing business and subsequently will attract investment opportunities,” Kazungu explains.
 
In May 2016, Kazungu announced the introduction of a new Mining Act that replaced a very outdated, 76 year-old act which was originally passed in 1940 during World War 2. Finalising the new act was the cabinet secretary’s entire focus after he was appointed to the position in December 2015. It was signed by President Uhuru Kenyatta on 6 May 2016 and came into effect on the 27th.
 
“Following the efforts of galvanising and reforming our legislative agenda to make Kenya a business-friendly country, we have been certified by the World Bank as the top country in Africa recognised for the ease of doing business.”
 
The country is also undertaking major infrastructure upgrades, “because investors want to be reassured that there is stable, adequate, cost effective power.
 
“As such we are implementing an aggressive plan which has already seen power capacity increase from 1 400 MW four year ago to almost just above 3 000 MW at present with the plan to increase this further to around 5 000 MW.
 
“From a logistics and transportation perspective, we are also driven to make the entire country (including remote regions) driver-accessible.
 
“That said we have a 10 000 km road project to open up the country, making it easier to transport ore for example.”
 
The country is also investing heavily in the construction of new international airports and is furthermore upgrading its two major ports in Mombasa and Lamu. The new standard gauge railway (for passengers and cargo) is set to connect Kenya to Uganda and Rwanda – positioning Kenya as a gateway and business hub for central and eastern Africa through which minerals can pass through for export.
 
As part of this hub focus, government has established special economic zones in the country for the establishment of new businesses, with a special focus on value-add/beneficiation opportunities. There are also taxation wavers for business opportunities in these zones.
 
Mining-specific focus
 
The cabinet secretary notes that investors look for progressive laws that are simple, predictable, accountable and transparent in the Kenyan mining sector.
 
“Our new Mining Act was built on these very foundations and is aligned to our 2030 vision and strategy which seek to attract and grow sustainable investment in the Kenyan mining sector while creating jobs and wealth for the country.”
 
“Following the efforts of galvanising and reforming our legislative agenda to make Kenya a business-friendly country, we have been certified by the World Bank as the top country in Africa recognised for the ease of doing business,” Hon. Dan Kazungu
 
Investors in the Kenyan mining sector also want to engage with government he continues. “To fulfil this need, we as government meet bi-monthly with industry players to address critical needs on a regular basis.”
 
“And to ensure the market understands our ambitions and strategies, we have taken an active interest in presenting our country to the industry by attending popular events and investment forums to engage with potential investors and showcase our country’s benefits and offerings.”
 
Further to this, government has employed 10 executive team members (sector lead officers) within the ministry who will oversee different sectors of the economy upon which the mining sector is expected to grow and also facilitate a smooth transition and entrance into the mining system.
 
Kazungu highlights an initiative referred to as the ‘six pack initiative’ which will ultimately comprise six key documents that provides mining players with the information they need to make informed investment decisions.
 
This includes a 20 year strategy paper on how Kenya plans to uplift the Kenyan mining sector, the Mining Act 2016, the mining and minerals policy which provides guidance on the conduct of mining and development activities in the country. It touches on environmental issues, local value addition, post-mine closure activities, mainstream, artisanal and small-scale mining.
 
The fourth pack is a set of regulations that give effect to the Mining Act 2016. These regulations have been presented to parliament after intense public participation engagement. To provide investors with reliable geophysical and geographical data, Kenya is engaging in discussions with the Chinese government to conduct an airborne survey of the country after which it can provide the latest geological data on the country to any current or potential investor.
 
Lastly, government is keen deliver the sixth and final document - a current fiscal regime that is competitive and attractive and guarantees a win-win for investors, government and communities. “We want to engage in serious dialogue with industry about our royalty structure in particular,” he states.
 
For now, legislation stipulates a 10% free-carry for mining projects, but the cabinet secretary says he is open to listening to investors’ concerns around this and also notes that government is willing to provide resources into a project in exchange to help ensure it succeeds. “We want to work alongside our investors and show that in exchange for the 10% free carry we will offer goodwill and input to see projects advance.”
 
Discussing two further key areas of importance for investors, Kazungu highlights the Community Development Agreement regulation within the Kenyan mining sector– which requires that mining companies sit down with their local communities and engage together on what needs to address for those involved communities. If this practise is honoured, it provides a social licence to operate and enables local communities to become a key driver in moving projects forward.
 
Lastly, he highlights the Kenyan mining sector's online licence application process, which makes it easy to participate in and easily accessible to the world. “And in the process of transparency, applications are reviewed by a nine member board team where all the merits and demerits of the application are reviewed before the cabinet secretary grants or denies the licence. There are also timelines in place in which we’ll give a response – no more than 180 days.”
 
For early stage explorers in particular, a new member has been appointed in the ministry to assist these companies and provide access to what they need. Further to this, the government is looking to offer a small team to accompany exploration teams on site to help communicate with communities and landowners about the exploration and mining process to ensure this does not hinder development of prospect work in the Kenyan mining sector.
 
It is these and other initiatives and efforts that have seen Kenya climb 16 places in global ranking to become one of the new emerging mining jurisdictions in the world according to the latest Fraser Institute report. It is also in line with Kenya’s ambition to become the central and eastern Africa mineral trading and value addition hub.

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