Nairobi – Kenya has ordered mining firms to cede a 10 per cent stake in their mines to the government for free, or pack and go. Cabinet secretary Najib Balala gave the tough message to the mining industry on Thursday.
This followed an industry wide uproar over a new mining Bill that has proposed to drastically increase royalties paid by mining companies. The Bill also seeks to give the government a 10 per cent stake in big mining companies without paying a fee. This will be held by the yet-to-be formed National Mining Corporation.
Miners have opposed the new charges, arguing they will push away investors from the country’s nascent industry that is yet to reap any benefits from its mineral.
But a furious Balala told the miners off, arguing that government’s intention is to see that Kenyans gain from the minerals as much as possible, while the companies make their profits.
“I would rather see those minerals remain underground than to benefit companies only while people remain poor,” Balala told miners while opening a mining conference in Nairobi.
The government has proposed that royalties on gold would increase to 5 per cent of gross sales value from 2.5-3 per cent, while those for rare earth, niobium and titanium ores would rise to 10 per cent of gross sales value up from 2.5-3 per cent.
“If you think those royalties are very high...it’s bad luck,” Balala said, arguing that the new rates are benchmarked against other African countries.
“We have realised that we are losing out,” the minister said, adding that Uganda and Botswana have a 10 per cent free-earned interest at mining companies.
The Kenya Chamber of Mines and a section of miners said this week before the conference the new rates would put off international investors, arguing they are out of touch with international best practice.
The miners were, however, unwilling to engage the minister during the conference bringing out the fragile nature of the relationship between them and the government.
Balala hinted the door for any review of the Bill are closed, adding that it is likely to be passed by the Cabinet next week on Thursday before being presented to Parliament for debate.
But even as Balala stuck his guns, a Tanzanian deputy minister for mines Julius Masele cautioned Kenya to be careful in its dealing with the international mining companies so as not to send the wrong signal. Tanzania has a much developed mining industry than Kenya.
“Understanding the sector will help Kenya to be considerate when making certain decision...the investors are very important for Kenya,” said Masele calling for soberness while trying to strike a balance between investors’ needs and that of the communities.