Kenya clips foreign miners’ wings

of foreign investors in Kenya’s mining sector as well as promote the interest of local investors.
“It shall be a condition of every mining licence that the mineral right in respect of which the licence is issued shall have a component of local equity participation amounting to at least 35 percent,” notes Mr Mwakwere in the gazette notice.
A surge in global commodity prices and investor appetite for new frontier markets has revived interest in Kenya’s mining potential.
Investors are interested in gold; mineral sands such as titanium; coal, and mineral earths such as titanium, rutile, zircon, and ilmenite.
The law will affect firms such as UK-listed GoldPlat, which was granted the first gold mining licence in the country last year; China’s Fenxi Mining (coal); and Australia’s Base Resources, which will start extracting rutile, zircon, and ilmenite at Kenya’s first large-scale mine in Kwale next year.
Canada’s Pacific Wildcat is involved in rare earth and niobium prospecting, while London-listed African Barrick Gold is prospecting for gold in western Kenya.
The government is also in the process of awarding mining rights to its coal blocks in the eastern part of the country.
The new law took effect from September 27. Firms will be given between three and five years to cede the 35 percent ownership to local investors in what echoes shareholder rules in the telecoms sector where residents must own at least 20 percent of the firms.
To attract new investments into Kenya’s telecoms sector, the regulation capping foreign ownership of companies at 80 percent was relaxed in 2009 to allow foreigners to launch operations then find partners within three years.
The rule also applies to firms facing difficulties raising capital from local shareholders. Such firms may seek exemption to allow Kenyan investors to dilute their holding below 20 percent for the new buyers to inject capital.
This change of regulation cleared the Information and Communications Ministry to allow businessman Naushad Merali to reduce his holding in Airtel Kenya (then Zain) to 5 percent from 20 percent, enabling India’s Bharti Airtel to own 95 percent of the firm.
Foreign firms are expected to pay about 5 percent, above the 30 percent corporate tax, of their profits as royalties to the State. Mr Mwakwere said that the sector is prone to under-reporting earnings.
“It is now a win-win situation for both the government and citizens who will have to be part of the industry,” said Mr Mwakwere in an interview. “It (the industry) has been sort of lopsided in favour of investors.” — Business Daily Africa.