Stephen Mwakesi, policy and research manager at Kenya Chamber of Mines, emphasised that policy and legislation is a concern for the sector at the moment.
“The biggest challenges lie with having a policy framework that captures modern dynamics in contracting, mining process, capital sourcing and benefit sharing. The fact that the industry is governed by a 1940 legislation and not existing mining policy has seen a reactive and unpredictable policy stance which has contributed to some upsets in the industry in the past,” Mwakesi told CNBCafrica.com.
ESTABLISHING A FUNCTIONAL POLICY FRAMEWORK
“The need to establish a functional policy framework has been evident and over the past 20 years the country has been struggling to replace the archaic legislation and institute a mining policy. Recently upon settling in as cabinet secretary of mining, Najib Balala, went on to establish a process that has seen a mining bill ready for presentation to cabinet in under five months. In the same measure recent policy directives have led to jitters among existing and potential investors.”
Kenya recently announced plans to claim a 10 per cent stake in large mining concessions. This came under a new bill intended to give the government a greater share of profits from the sector.
“There is change in the area of policy. There is a collective desire between government and the private sector to see to it that the policy framework reflects recent global dynamics and increased predictability as opposed to the highly unpredictable past,” Mwakesi indicated.
“The focus of the new government on the industry [is] buoyed by the inclusion of the extractive sector as a key driver of Kenya's economic blueprint, with the elevation of the mining department into a fully-fledged ministry. The government has committed itself to reviewing the legal and regulatory framework of the industry a process that is presently on-going.”
Mwakesi alluded to the fact that Kenya’s mining sector had seen more exploration rather than actual extraction in recent times.
“Kenya has in the past, little activity in the mining sector. However, in the past 10 years there has been increased activity in the sector owing to recent discovery of new deposits and the quantification of already known deposits owing to increased investment in exploration and better technology,” he said.
“The level of investment going in to the industry is hard to quantify as the government has just begun to give the industry focus in its planning. In this current financial year the allocation to the Ministry of Mining by parliament was 575 million Kenyan shillings out of a requested 2.8 billion Kenyan shillings.”
He added that while both the government and the private sector seem to be fairly well-vested in Kenya’s mining sector, it’s the international investors that garner the most interest.
“The Kenyan government has intimated its intention to partner with a number of countries to enhance its investment into the sector, including a recent discussion with China to undertake Airborne Geological Surveys. The private sector numbers are equally hard to place at the moment considering some companies have halted investment owing to the present changing dynamics in the sector,” Mwakesi explained.
“Base Titanium has over the past two years invested 350 million US dollars in its Kwale Mineral Sands project. It must be said however, there is increased interest by both local and international investors into the sector owing to greater spotlight on it.”
EXPLORATION STILL AN OPPORTUNITY
Despite Kenya’s mining policy environment remaining challenging at the moment, the present opportunity in the sector lies in exploration, and in support goods and services.
“Kenya is still largely unexplored and the more investment dollars placed in exploration, [the more] the full potential of the sector will eventually be realised. Consulting services on geology, legal, financial and service provision, in terms of logistics, does portend an opportunity for investment. Another opportunity lies in the gemstone industry which, in the past, has had little and inconsistent investment despite its huge potential with regard to value addition,” said Mwakesi.
“The future for mining in Kenya looks bright. The focus by government to encourage exploration and regulate artisanal mining will see a sharp focus and a greater participation [of] Kenyans in the industry. With greater engagement witnessed between government and private sector, dialogue is enriched. The focus on the country as a mining destination has opened up greater interest and this can only mean that the once nascent industry can finally be a key contributor to the country's GDP.”