Kenya is richly endowed with mineral resources and has reformed the legal framework of the sector through the Mining Act 2016 and updated geodata through a recent airborne survey.
However, this potential is yet to be fully realised and Kenya has seen limited mining exploration and almost no new investment due to several reasons, among them; expensive exploration with an extremely low success rate. Without a proper enabling environment and support from the government, it is impossible to undertake exploration.
Secondly, the Mining Act 2016 contemplates 10% free carried interest in the share capital of large-scale mining operations and imposes a requirement for the listing of 20% of the equity of large-scale projects. In effect, investors could lose ownership of a third of their companies which, to some extent, is given over for free.
Mining Act 2016
Another reason is the Mining Act 2016 which imposes blanket landowner consent as a requirement when applying for a prospecting licence. This is extremely arduous and poses a high risk to investors of failure to comply with the law. Implementation of the Mining Act 2016 has been an ongoing challenge resulting in fraught relations among the mining companies, government, and local communities.
In the context of a globally competitive investment environment, where investors are looking at all opportunities, these issues mean that many potential Kenyan mining investments are not attractive compared to opportunities in other countries.
The hindrances can be rectified through combining regulatory reform, engagement with counties and small miners, and integrating equity and sustainability into the sector. Special incentives for investing in exploration should be considered.
Amendments to the Mining Act 2016 coupled with an expedited licensing process will help to ensure that a conducive environment for investment for exploration is established and sustained. Additionally, mining investment is fundamentally driven by the attractiveness of the country’s geology, and inextricably linked to this is the availability of data on the geology.
Finally, a national special mining recovery committee should be set up, with both government and the industry to drive a set of competitiveness reforms for the mining industry. The role of the county government should be clearly articulated to prevent friction between investors and county governments, especially around taxes and levies.
Furthermore, Kenya can raise the productivity of artisanal and small-scale mining (ASM) investments, for instance by reorganizing ASM operators, consolidating many of them into collective investment groups, and licensing their new collective companies. Community Development Agreements are a great start, and consideration should be given to a similar initiative for environmental issues where local community representatives are trained on environmental issues and participate in monitoring them.
If Kenya generates enough interest in its mineral wealth, then several more could potentially be built. To achieve this, policymakers and industry players must work together to revive, and build the mining sector, and help drive the country’s economic recovery.
