Delays of new laws costing Kenya billions yearly

Kishushe mining site

Kishushe iron ore mining site in Taita Taveta County. Lucy Mkanyika | Nation Media Group

Photo credit: Lucy Mkanyika | Nation Media Group

What you need to know:

  • Kenya has delayed tabling the Kenya Sovereign Wealth Fund Bill, 2019.
  • The Sovereign Wealth Fund Act will set up structures meant to administer resources accrued from minerals.

Long delays in adoption of mining laws are costing Kenya billions of shillings yearly as mining companies evade payment of royalties, impacting negatively on communities living within mining areas, according to experts.

Kishushe, Taita-Taveta County, where mining is being conducted, lies in a 60,000-acre land and is believed to have deposits of more than 230 billion tonnes of iron ore.

In the past decade, more than 100,000 tonnes have been mined annually in the area for export, according to the Kenya Mines and Geological Department. 

The locals have little to show for it. Kenya has delayed tabling the Kenya Sovereign Wealth Fund Bill, 2019, which, once enacted into law, will pave the way for county governments and communities to receive royalties from mining activities.

The Sovereign Wealth Fund Act will set up structures meant to administer resources accrued from minerals.

"We suspect the delay is influenced by miners so as to continue exploiting our resources and exporting them to China without leaving any money to the community. We want the government to speed up the process since we are rich but we live in a poor county," said Ms Clara Mwaningo, a Taita-Taveta County resident.

In an audit report covering the 2019/2020 financial year, Auditor-General Nancy Gathungu said a number of companies have not paid royalties some amounting to close to Sh300 million, attributing the failure to laxity by some Ministry of Mining officials to ensure the law is implemented. 

In the report, Ms Gathungu says some of the firms have defaulted on commitments to settle the arrears stretching between two and five years back while others have contested the bills presented to them by the ministry which is also being accused of not making enough effort to collect the pending payments. 

Ms Gathungu said the discrepancies were found through data comparison with the Kenya Revenue Authority which revealed exports of minerals by persons and companies who, according to the Mining Department's data, were not holders of valid export, mining or dealers' permits. 

In an interview, the Environment and Natural Resources Committee of National Parliament chairperson Kareke Mbiuki said the National Treasury was to blame for the delayed collection and disbursements as required in the Mining Act of 2016. 

Mr Mbiuki said they will summon the Treasury and the State department of Mining to explain why the Public Finance Management (Royalty Fund Sharing) Regulations have not been concluded and tabled for House approval following the enactment of Mining Act, 2016. 

"The Public Finance Management (Royalty Fund Sharing) Regulations are under consideration by the National Treasury. Royalties have not been shared due to the absence of these regulations. Sharing will only start once the Treasury publishes the regulations," said Mr Mbiuki. 

The locals are also pushing the Ministry of Petroleum and Mining to gazette a Community Development Agreement (CDA) committee that will see locals benefit from the resource. 

Development initiatives

Through the committee, Samruddha Resources Kenya Limited, which is currently mining iron ore at Kishushe Ranch, will be obliged to support community development initiatives in the area and its environs. 

The Mining Act provides for the establishment of CDAs that will help in development of schools, health facilities, transport systems and water projects, depending on priorities listed by locals. 

The CDA is part of the structures being put up to support disbursement and utilisation of the Sovereign Wealth Fund. 

The setting up of the committee, which will be headed by Taita-Taveta Governor Granton Samboja, was formalised through a government Gazette notice in July this year and will represent the interests of the locals and ensure implementation of projects derived from the CDA. 

The committee will come up with an agreement that provides for at least one per cent of the investors' annual profit to be set aside for the respective community for projects. 

The mining company has been contributing at least Sh1.2 million to the county government every month as levy which is stated in the local government by-laws where any mining is done. 

Taita-Taveta County Deputy Governor Majala Mlagui said delays in laying out of structures meant to administer resources accrued from minerals have resulted in residents of mining areas continuing to live in poverty. 

"We have been complaining to the government through the ministry of Petroleum and Mining over the delay in disbursement of royalties,'' the deputy governor said. 

For transparency and to curb mis-invoicing, the local government of Taita-Taveta has advertised for weighbridges to calculate the amount being ferried to the Port of Mombasa for export as it pushes Samruddha Resources Kenya Limited to pay a Sh190 million levy this year. 

The company has accused county government officials of trying to frustrate the investor, leading to losses worth millions of shillings. 

Samruddha Resources Kenya Limited manager in charge of liaison, Mr Benedict Mwabili, said an estimated 45,000 tonnes of iron ore meant for export is lying at the Kishushe mine following the standoff. 

Mr Mwabili alleged that political interference by the county government saw the investor incur losses to the tune of Sh40 million. 

He said the company was ready to settle the cess debt owed to them by the local government which accrued for 2019 when it stopped remitting taxes for that year over the dispute. 

County executive for Finance Andrew Kubo said the county government is not fighting the investor over the iron ore project, but merely wanted them to abide by the county laws as communicated before mining started. 

"The position of the county government is that they have to clear the debt before they can proceed with ferrying the ore from Kishushe and ensure they pay cess accordingly as we move forward to ensure we get our royalties percentage," he said. 

"We sent an invoice to them accordingly but they went contrary to the directive and brought trucks to transport the ore, that is why we are opposing their operations." 

This story was produced by Anthony Kitimo as part of Wealth of Nation, a media skills development programme run by the Thomson Reuters foundation in partnership with the African Centre for Media Excellence.


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