MACIG Connect Series
The 2014 Mining Bill will be transformational for Kenya’s mining sector.
Hon. Najib Balala (HNB): The mining sector can contribute significantly to the 10%-economic growth that is envisioned in the Vision 2030 and aims to propel the country into a middle-income economy by 2030. Currently, mining contributes roughly 1% to the country’s GDP and 3% to its total export earnings. This contribution is expected to rise significantly to 3% by 2017 and 10% by 2030. In addition, the sector will contribute 100,000 direct and indirect jobs over the next five years and spur economic growth through infrastructural and industrial development and foreign exchange earnings. All of these are major avenues and vehicles for investments.
What factors have prevented mining from reaching its potential?
HNB: The mining sector has great, unrealized potential for Kenyans but has been unexplored due to a number of factors, including: an archaic legal framework enacted in the 1940s and unsuitable to the current information age; lack of capital due to the expensive nature of mining; lack of technology, as Africa relies on imported technology, while there has been failure to transfer knowledge, leading to a lack of capacity in terms of trained personnel in mining technology; and lastly, exploitation and conflicts in major minerals countries.
Kenya is on the verge of entering an important new stage in developing its mining sector with the most recently approved Mining Bill. How will this bill help improve Kenya’s economy and mining sector?
HNB: The 2014 Mining Bill is transformational to the mining sector in Kenya. Once enacted into law, the bill will enable the ministry to establish a simple, clear, transparent, and predictable legal framework for the management of mineral resources in Kenya, a development that will streamline mining in the country and increase the contribution of mining to Kenya’s gross domestic product, increase employment opportunities, and spur economic growth and development in the mining areas.
With the passage of the Mining Bill, the government will take a larger stake in mining projects as well as provide a more solid foundation for the ministry to grow. What measures will the ministry take in order to ensure transparency and reduce criticism of possible corruption?
HNB: Africa has 40% of the world’s minerals, but every year, $150 billion of this wealth is lost. In the East African regions, and by extension the whole of Africa, the extractive sectors are governed under a multiplicity of legal, policy, and fiscal regimes.
By having established a ministry dedicated to mining, we elevated a sub-sector that was hitherto shrouded in mystery and opaqueness to the national limelight for it to deliver tangible and transformative results to Kenyans. Additionally, we also refocused the Vision 2030, so that the extractive industries are a key sector in Kenya’s economic blueprint.
The launch of the online cadaster allows any qualified person from anywhere in the world to apply for a mineral license and have the ability to track the processing of their application and, once granted, they can submit their compliance documents and, most importantly, pay online. This is a major shift in the management of Kenya’s minerals that will enhance efficiency, raise transparency, and increase predictability in the regulatory sector. The transparency however, must be from both the government, as well as the mining companies.
One of the trends common to developing countries with strong mining sectors is that the citizens see little-to-no benefit from mining revenues. What steps will this ministry take in order to ensure that Kenyans receive tangible gains from mining activities?
HNB: The government has now developed a formula to share benefits accruing from mineral resources between national and county-level governments, and the local communities living in mining areas on a 70:20:10 ratio respectively. The formula ensures that mineral benefits will be shared equitably and spur economic development in the rural areas where the minerals are found. The ministry also aims to contribute to the National Sovereign Wealth Fund once the National Treasury establishes it. This will provide financial resources for infrastructural development that will translate into jobs and economic growth.
According to the Canada-based, Fraser Institute’s Mining Investment Attractiveness Index, Kenya has been ranked near the bottom, leaving investors uneasy with topics such as terrorism and unclear regulations. As the Minster for Mining, what message would you like to deliver to ease the concerns of potential and current investors?
HNB: My message to all investors is that Kenya, and all of Africa by extension, is the new frontier for any serious investor. Kenya is on the rise. Terrorism is a global challenge, facing us all, not just Kenya. In any case, Kenya is recognized as a leader in the region in peace initiatives. The most powerful economies in the world have come calling, and leaders in information and communication technologies as well as other businesses have already established their regional bases in Nairobi. Kenya is an emerging mineral center with massive potential and huge minerals deposits. This is the place to be for any serious investors.
This interview was conducted as part of research being conducted by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2016. A pre-release report on the Central African Copperbelt was released in May 2015 and can be accessed here. To participate in this report, please contact Josie Perez at email@example.com.