2. 1.1 Facts and Figures on Kenya (Kenya Chamber of
Miners)
The mining sector contributes 14.2% of the GDP and
employs 200,000 people, It contributes 3% of Kenya’s
total export earnings and it is anticipated that this
may rise to 10% by the year 2030 Potential for growth
of the mining industry led to the creation of a fully
fledged Ministry of Mining in 2013.
The Government collected Kshs.1.25 billion (approx.
USD 11.9 million) in 2014/15 and the total production
by the industry for 2014 was worth Kshs. 20.9 billion
(approx.USD 199 million).
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3. The Mining Act vests ownership of mineral
resources in the Government as the trustee of the
people of Kenya.
The Cabinet Secretary administers the right to
explore and exploit mineral resources and appoints
the Commissioner of mines and geology to
implement the provisions of the Act.
In order to carry out mining activities, an investor
would apply to the Commissioner for:
- Exploration – prospecting right or exclusive prospecting licence
-Exploitation – mining lease or special mining lease
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4. 3.1 Creation of the Ministry of Mining
Kenya did not have a Ministry dedicated solely to
oversight of its mineral sector until 2013 when the
Ministry of Mining was established. Prior to this, the
Mining industry was overseen by the Ministry of
Environment and Natural Resources through its mines
and geology department.
The Ministry is mandated with the implementation of
Article 69 of the Constitution which gives the State the
responsibility for ensuring sustainable exploitation,
utilization, management and conservation of the
environment and natural resources, and equitable
sharing of the accruing benefits.
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5. 3.2 Achievements of the Mining Ministry
Roll out of targeted initiatives geared at improving the
contributions of the mining sector to the national
economy -significant example is airborne geo-physical
surveys for mapping of resources
Collaboration with tertiary institutions to develop and
strengthen professional and skills capacities for
mining/extractive industries(geosciences, engineering)
Revocation of numerous prospecting licenses which were
granted without regard for due process.
Preparation of the National Mineral and Mining Policy to
guide statutory and regulatory reform in the mining
sector – to increase transparency in granting of licenses,
attract investment and increaseGovernment income.
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6. 4.1The Mining Bill – Key Institutions
This will replace Kenya’s 1940 MiningAct - it
has been passed by the NationalAssembly and
is awaiting presidential assent
The Bill proposed to establish the following
institutions:
A National Mining Corporation to be
managed by a Board and act as the
investment arm of the national government
in respect of minerals.
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7. A Minerals and Metals Commodity
Exchange to facilitate efficiency and security
in mineral trade transactions.
A MiningTribunal which shall hear matters
relating to mineral Rights .
The institutions are intended to increase the
commercialization of the mining sector.
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8. 5.1 Pertinent provisions of the Mining Bill
Under the Bill, the awarding of mineral rights may be
done through competitive bidding for large scale
operations over land designated for such tendering.
The Bill provides for ‘strategic minerals’ for socio-
economic development and national security
purposes.
Counties to gain from new sharing formula of any
government revenue from the mining industry: 70%
shall be allocated to national government, 20% to
county government and 10% to local community.
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9. Cont…Pertinent provisions of the Mining Bill
Environmental protection measures: holders of
mining permits and licenses must exploit the
land in accordance with designated terms and
conditions in order to ensure sustainable
development. Licensees will have to provide a
bond or other form of financial security
sufficient to cover any costs associated with
their environmental and rehabilitation
obligations.They will additionally be required to
formulate rehabilitation plans.
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10. 5.2 Mining Rights
The Mining Bill recognizes the following categories of
mining rights:
For Large scale operations
Prospecting license
Retention license
Mining license
For Small scale operations
Prospecting permit
Mining permit
Mineral dealers permits which are issued for the sale and
purchase of minerals locally shall only be issued to Kenyan
individuals or companies whose ownership consists of at
least 60% Kenyan shareholding.
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11. Local Ownership
•The Mining (Local Equity Participation)
Regulations, 2012 prescribed a local
shareholding stake of at least 35% in every
mining company to which a mining license is
issued.
•The implication of this directive was that
foreign mining companies would have to
progressively divest up to 35% of their equity to
locals.
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12. ..con..ed Local Ownership
•The Mining Bill provides that:
for large scale mining and strategic minerals, the
State shall acquire 10% ‘free carry’ – no financial
contribution shall be paid by the state.
The Cabinet Secretary shall prescribe capital
expenditure limits- a mining company whose
planned capital expenditure is over the prescribed
limit shall, within 4 years after obtaining a mining
license, offload at least 20% of its equity at a local
stock exchange
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13. Under the Environmental Management &
Coordination Act (EMCA) 1999, the fee payable
for an environmental impact assessment report is
pegged at 0.1% of the project cost.
EMCA, the Environmental Management and
coordination (Deposit Bonds) Regulations, seek to
require any person intending to undertake mining
activities to submit a Deposit Bond Assessment
Report as an integral part of the Environmental
Impact Assessment (EIA) report prior to the
commencement of facility operations. 13
14. This will form the basis for assessment for
payment of a deposit bond amount which
may be refunded once it is established that
the operator has observed good
environmental practices.
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15. Taxation of income from Mining is provided
for in the Ninth Schedule to the IncomeTax
Act (ITA) entitled “Taxation of Extractive
Industries,” which was brought into effect by
Kenya’s FinanceAct 2014.
The following are some of the significant
provisions of the revised Schedule that will
affect taxation of stakeholders in the mining
industry:
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16. Licensees are subject to income tax in the manner
provided in the ITA for other persons- subject to any
modifications made by Ninth Schedule.
Losses from mining operations may be carried back
for up to three years; and may be carried forward
indefinitely against income in subsequent years
provided that the income relates to the same license
area.
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17. Capital deductions relating to the prospecting phase
are available at the rate of 100% as opposed to the
previous rate of 40% in initial year and 10% in
subsequent years.
When computing taxable income, interest expenses
can only be deducted to the extent that the
company’s debt to equity ratio does not exceed 2:1
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18. Fees paid by a licensee to a non-resident
sub-contractor are subject to withholding
tax at the rate of 20%.This provision was
however amended by the FinanceAct 2015
which brought the rate down to 5.6%
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19. Withholding tax will also accrue with respect
to outflows made to non-residents:
dividends- 10%; interest- 15%; royalty on a
natural resource- 20%; management and
professional fees- 12.5%.
Additionally, any service fees paid by a
licensee to a non-resident subcontractor with
no permanent establishment in Kenya are
subject to withholding tax at the rate of 20%
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20. Having recognized the great potential that mineral
resources have in contributing to poverty alleviation and
to national and regional economic development, the
Partner States have decided to harmonize their mineral
laws and policies.The areas to be considered during the
harmonization process are:
Access to and ownership of land,
Access to and ownership of minerals,
Mineral royalties to Government and Communities,
Procedures to follow for environmental Impact
Assessments and monitoring of environmental plans,
taxation regimes.
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