Kenya Revenue Authority (KRA) Commissioner-General Githii Mburu has admitted that the government has been losing revenue worth hundreds of millions of shillings after it emerged that some local companies have been exporting huge quantities of minerals without permits.
This is notwithstanding that Section 171 of the Mining Act, which came into force in 2016, provides that exporting a mineral is only authorised by an export permit granted by the Cabinet Secretary for Mining and Petroleum.
The suspicious exports, which involves 44 companies dealing in gold, gemstones, salt and soapstone, has been flagged by Auditor-General Nancy Gathungu in the audited accounts of the Ministry of Mining and Petroleum for the 2018/19 financial year.
The audit states that the government only pocketed Sh7.20 million and Sh74.42 million in mineral export levy and mining royalties respectively for the year under review.
The amount is a drop in the ocean considering that the minerals have been exported since 2016.
No export permits
The National Assembly Public Accounts Committee (PAC) heard that while the seven companies that dealt in salt did not have export permits, the three companies that dealt in gold, the five dealing in gemstones and 29 in soapstone needed their export permits authenticated.
While appearing before PAC, which is considering the audit report, Mr Mburu admitted that some companies flouted the law while others used licenses that needed authentication.
Initially Mr Mburu had defended the salt companies, noting that they were justified in engaging in the business without an export license.
However, when he was taken through the provisions of the Mining Act by PAC chairman Opiyo Wandayi (Ugunja) and committee members Aden Duale (Garissa Township), Joseph Ngugi (Gatanga) and James Gichuhi (Tetu), he yielded.
“The ministry has been clear that it did not issue export permits to the companies. So where did they get the permits to export the minerals as required by the law?” Mr Wandayi posed.
Mr Mburu told the committee that KRA is not in possession of any export permits for entities that exported salt.
“A task force was set up for the development of a regulatory framework for the integration of salt work into the mining legislative framework. The regulatory framework is not yet in place, therefore devoiding KRA of the basis for making salt permits a requirement for exports,” said Mr Mburu.
Krystalline salt limited, Kurawa Salt Limited, Malindi Salt Works limited and Kensalt Limited are some of the seven salt mining companies that are operating in the country without mining licenses and for which assessment for royalties due has not been done.
The companies extracted the salt in the coastal region and sold their products locally and abroad without export permits.
Mr Duale told Mr Mburu that the taskforce he is leaning on to justify failures by KRA by allowing the companies to export the minerals without export licenses was not based on any law.
“The Mining Act is the law. The taskforce you are referring to has no force of law,” Mr Duale said.
The Garissa Township MP was not done with Mr Mburu just yet.
“It is interesting that the justification you are putting before this committee is the same argument the salt companies are peddling outside there. Follow the law that was given to you. As long as the law exists in its current form, we shall abide by it,” added Mr Duale.
It did not take long before Mr Mburu “saw the light”.
“It may not have been clear to us but after rereading the law, we have found out that the salt export requires a permit,” the KRA boss noted.
He, however, noted that when KRA tried to implement the law, the four salt companies sued the taxman over the enforcement of the expert permit requirement.
“The implementation of the law has led to the court order though we have appealed. We will not allow any salt export without a permit,” he said, with Mr Duale saying that the companies have been cornered.
“The audit report has cited them that is why they rushed to court,” said Mr Duale.
When the managements of the four salt companies appeared before the committee two weeks ago, they claimed that the salt they are dealing in does not qualify to be salt under the meaning of the Mining Act.
But Mr Duale reminded them that the first schedule of the Act lists salt “that you are dealing in” as a mineral.
Mr Mburu further told the committee that KRA could not confirm the authenticity of the export permits used by gold and gemstones dealers in the trade as the Mining Principal Secretary Kirimi Kaberia is yet to respond to his inquiries.
Under the Mining Act, only the ministry that issues extraction licenses and export permits can confirm the authenticity of the documents.