Despite the existence of a regulatory framework and the sector’s immense potential, the contribution of the mining sector to Kenya’s Gross Domestic Product (GDP) has generally been below 1% over the years.
The Bill has established structured institutions with qualified mining experts who will be well-suited to guide policy, determine disputes and drive further reforms in the sector.
It is a welcome move in enhancing the exploration of Kenya’s mineral endowments as it introduces other important amendments that could shift the policy perception rankings of the Kenyan mining sector and attract deeper investment
The Mining (Amendment) Bill, 2023 was gazetted for introduction in Parliament on 1st September 2023 and here are the highlights of the Bill;
Divested role of the Cabinet Secretary
The mining sector is one of the only sectors that does not have an independent authority/ regulator. The Bill proposes to elevate the role of the Cabinet Secretary to provision of policy direction in the sector.
Regulatory and day to day administrative supervision functions have under the Bill been moved to a newly established independent regulator.
The Mineral Rights Authority
The Bill proposes to establish the Mineral Rights Authority (the Authority), an independent regulator whose mandate shall be to administer the Act by providing the day-to-day regulatory role in the mining sector.
A Director-General (DG) shall be responsible for the supervision of the Authority. The Authority shall have the power to, among others:
(a) Issue, renew, modify, suspend or revoke licenses and permits for all undertakings and activities in the mining sector;
(b) Set, review, and approve contracts, tariffs and charges for common user mining logistics facilities and mining products;
(c) Investigate complaints or disputes between parties over mineral rights;
(d) Inspect, take soil samples or specimens of rocks, concentrate, tailings or minerals from any licence or permit area;
(e) Impose such sanctions and fines not exceeding KES 100,000 per violation per day for a maximum of 30 days.
Under the Bill, the funds to support the operations of the Authority shall consist of levies not exceeding 0.5% on the sales of electricity and petroleum products as well as licence fees.
The management of the Authority shall vest in a Board of Directors of the Authority (the Board). To ensure a smooth transition, the Bill provides that the chairperson and the members of the currently existing Mineral Rights Board (the MRB) shall at the commencement of the Bill, be deemed as the chairperson and members of the Authority respectively, for the unexpired period of their term. With the new Bill, the management of the Authority now vests in the Board.
The Bill proposes to establish a Mining Rights Tribunal (the Tribunal), another welcome move that will streamline the resolution of disputes relating to mineral rights.
It proposes for instance, that an applicant will no longer be required to demonstrate adequate financial resources or carry out a proposed reconnaissance programme. They will instead be required to simply demonstrate technical competence and geological expertise. The term of a reconnaissance licence is two years, non-renewable.
The holder of a valid reconnaissance licence shall also no longer be required to commence reconnaissance within 3 months of grant of the licence as currently required under the Act. This allows prospectors more time to plan and structure the activities.
In addition, under the Bill, the reconnaissance licence shall be subject to an annual fee whereas previously it was subject to an area-based annual charge. This creates better certainty.
Artisanal mining is an income generating activity benefiting low income and vulnerable groups.
The Bill has amended the definition of artisanal mining to cover mining operations:
(a) that are carried out by a person, groups or cooperatives using mostly basic equipment and methods, without necessarily any formal training;
(b) whose capital investment is not more than Ksh.1 million;
(c) where the vertical depth of exploration or excavation is up to thirty meters deep.
Under the Act, a prospecting right cannot currently be granted with respect to private land or community land without the express consent of the registered owner.
The Bill has removed the consent requirement for prospecting. It proposes to amend the Act by providing that an applicant for a mining right shall only require consent prior to commencing actual mining operations. To protect landowners, a mineral right holder shall be required to deposit a compensation guarantee bond with the Authority to cover demands or claims for compensation for disturbance, deprivation, loss or damage.
Under Section 117 (1) of the Act, the CS may enter into a mineral agreement with the holder of a mining licence.
A mineral agreement among other things, includes terms and conditions relating to prospecting and operations, timetables, minimum expenditure, environment obligations, settlement of disputes, community development plans, payment of royalties, taxes and other fiscal impositions.
Under the Act, the threshold for entering a mineral agreement has been USD 500 million. Very few (if any) operations in Kenya meet this threshold. The Bill has lowered the threshold USD 100 million.
Under the Act, the holder of a mineral right pays royalties in respect of mineral classes won. The royalties payable are distributed as 70% to the National Government, 20% to the County Government, and 10% to the community where the mining operations occur.
The Bill has however retained certain controversial fiscal provisions including 10% free carry interest to government as well as a mandated requirement to list 20% on the local security exchange.
The Bill now proposes that the term ‘community’ be defined to mean the people living in a sub-county in which a mineral resource is situated and are affected by the exploitation of such resources.
Environment, health and safety
Under the Act, holders of artisanal permits are required to observe ‘good mining practices, health and safety rules and pay due regard to the protection of the environment’. The Bill has raised the threshold higher to ‘good mining practices, international best standards, environment and health and safety laws.’
This tweak provides regulatory and best practice nexus to the high-risk artisanal mining sector which is highly exposed to environmental health and safety hazards.
In addition, under the Bill, an application for the renewal of a prospecting licence shall be accompanied by proof of submission and approval of an environmental management and rehabilitation plan.
Appropriation of assets on termination
The Act provides for state appropriation of private assets and unused expenditure, a provision that has discouraged significant expenditure in prospecting. The provisions allowing the vesting of assets in the Government upon surrender or termination of a mineral right have been done away with under the Bill.