Dan Kazungu, Cabinet Secretary, Ministry of Mining: Interview

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Dan Kazungu, Cabinet Secretary, Ministry of Mining

Interview: Dan Kazungu

How can Kenya reach its Vision 2030 mining goals?

DAN KAZUNGU: For years, mining has been put on the back burner, but the current administration is focusing on the sector in line with Kenya Vision 2030. To meet targets, mining’s share of GDP should reach 10%; it currently contributes less than 1%. Mining’s input into the economy has been low, but it has every ability to rival major sectors like tourism or agriculture.

Foreign direct investment in Africa is largely in the extractive sectors, and we need to attract more of this. Achieving growth from this low level requires high levels of productivity, and in the mining sector this demands high levels of investment.

Another important aim is for us is to become a regional centre for value addition in gems and precious metals. Far too much of the value-addition process is outsourced at the moment, and this prevents Kenya from realising the majority of these gains. Mining should also benefit Kenyans, and therefore small-scale miners should benefit from knowledge transfer and education on best practices, which can partly be achieved through proper management of our domestic mineral resources.

How are the changes to policy and regulation likely to impact mining activity in the future?

KAZUNGU: Kenya’s mining framework had not changed since the British implemented it in the 1940s. The policy needed to be modernised, and the Mining Bill 2014 was conceived with that aim. We have engaged in dialogue with the private sector and the bill passed into law in May 2016. The Mining Act 2016 should create a stable, transparent and predictable framework that represents all stakeholders in the sector, creating more certainty in the investor community. It includes provisions to address revenue-sharing conflicts by designating 70% of royalties to the national government, 20% to counties and 10% to communities. We have developed 14 regulations that have already been subject to public scrutiny and are currently at the publication stage. Environmental concerns are being assessed, and we are working to represent the communities affected by them. In addition, we have set out provisions for mining companies to engage with communities, which ensures a level of cooperation and mutual interest between the two groups. This all corresponds with our goal of attracting responsible mining. We will soon discuss and conduct studies on how to attract mineral sub-sectors from the region as a whole. Currently, $10bn worth of raw minerals are flown out of Africa to Asia for processing. However, if Kenya was to retain just a fraction of this amount, it could be a big boost. We are looking to set up a mineral processing hub in the country to scale up mining activity.

What is being done to modernise the sector?

KAZUNGU: We are currently working to find a partner to conduct airborne mapping of Kenya so that we can provide investors with accurate, up-to-date data. We are also working towards a straightforward licensing process with clear provisions for revocation of licences that are unused. In addition, we have begun evaluating our royalty structure to make sure it is as globally competitive as any other market’s. Royalties are a very small part of the equation; mining investment can create new jobs and infrastructure, while also facilitating skills transfer and countless other benefits. We should not focus solely on royalties, or we will miss out on other potential benefits. Establishing legislation to formalise the artisanal mining sector is another aim, along with working on ways to educate miners on best practices. Infrastructure development should also be a boon to the sector and increase its attractiveness to investors. Lastly, we are looking at incentives for value addition to make Kenya a regional hub for processing. This will require the harmonisation of an attractive, stable fiscal regime and legal framework.

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The Report: Kenya 2017

Energy & Mining chapter from The Report: Kenya 2017

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