Could you situate the extractive industries within Adam Smith International’s overall business portfolio?
Adam Smith International (ASI) is a global leader in delivering projects that support economic growth and government reform. Our reputation has been built on the positive results our projects have achieved in many of the world’s most challenging environments. We are headquartered in London, with offices in Nairobi, Delhi and Sydney, along with major project offices in many developing countries worldwide. Our projects are funded by a wide range of donor organizations and we also work directly with host governments.
How has ASI previously worked to support Kenya’s mining industry?
We have worked extensively in Kenya’s mining sector starting in 2013 when we wrote a seminal report providing recommendations on how Kenya’s mining industry could provide inclusive benefits for the country’s citizens. This report assessed the opportunities for support across sector stakeholders including government, corporates, communities and civil society.
Based on the report’s recommendations, the United Kingdom’s Department for International Development funded a 30-month program called the Kenya Extractive Industries Development Programme (KEIDP), which ASI implemented. We also supported Kenya’s Ministry of Mining in drafting its first new mining legislation in 76 years, which was enacted in May 2016, guiding the Ministry in the development of priority regulations associated with the act. We then supported the Ministry to set up an online mining cadastre with the assistance of experts from Spatial Dynamics, to improve transparency in the licensing process.
What steps are you taking to help facilitate the push to grow Kenya’s mining sector and attract investment?
We have contributed to the emerging local content debate in the country by conducting the first holistic baseline local content report produced in the country. The analysis in the report is aimed at understanding the demand from extractive industry companies for goods, services and labor, the potential for supply from the Kenyan private sector and labor market, and the gaps that need to be addressed in order to optimize the broader impact of the extractive industries on Kenya’s economy.
How realistic is the goal to drive the mining sector to account for 10% of GDP by 2030?
The 10% growth hinges on quality and quantity of resource, so we are very encouraged by the ministry’s move to self-fund the airborne geophysical survey as it shows a strong degree of commitment. Doing the survey is not a guarantee that mining will suddenly take off. There is a chance that the commodities found in abundance are not really what is in demand, or that the geology in other countries offers better prospects. Furthermore, considering the commodity cycle, if global demand is not high, it will be difficult to meet that 10%. Encouragingly, the Ministry has been proactively engaging investors and realizes that to get the best deal for the country, it has to know to some degree what it has.
It is important to take into account the journey on which Kenya is embarking to develop its extractive sector. The industry is coming from a low base with little legacy, so while jumping from $1 million to $2 million is a 100% increase, as the figures get bigger it is increasingly difficult to achieve those double-figure growth rates. For a number of years investors were adamant that that Kenya’s legislation was throttling investment. Now that the legislation has been revised, the question is how investors will respond in the form of new investment. The new legislation is yet to be ‘battle-tested’ and the litmus test will be how the Ministry adjusts its royalty regime and licensing procedures as commodity prices rebound.
What should be the main objectives to keep supporting the industry?
The priority is to understand the quality and quantity of the resource, followed by attracting the right type of investor. Base Titanium is a good example of how companies in Kenya can create a gold standard for others to follow. Another key factor is to choose which minerals to prioritize for extraction, because the space is very competitive. Companies tend to follow the resource rather than strictly following borders. Finally, it will be important for the government to continue to work very closely with the private sector as it is currently doing to create advocates, because mining companies listen to other mining companies.