Kenya’s mining legislation was overhauled in 2016 by introducing the Mining Act (the Act), which was considered a modern legislation expected to transform and expand the mining sector. Whilst the new Act was an improvement on the old legislation (which had been in place since the 1940s), productivity in the mining sector remains low, with only a handful of projects in a sector that is largely under-explored and with a potential to contribute to Kenya’s economy significantly.

The growth of Kenya’s mining sector has been further stagnated by the moratorium issued by the Government in 2019, restricting the processing and issuance of licenses and renewal applications. The Government has argued that the moratorium was necessary for streamlining the sector, mapping mineral resources, and ensuring the validity of permits and activities. However, the moratorium’s extent, duration and general ambiguity have negatively impacted the sector, frustrating investors, and other stakeholders by preventing any new investments and slowing down operations and possible expansion of existing projects.

Recent pronouncements by the new Government indicate a possible “light-at-the-end-of-the-tunnel moment” and end to the moratorium, with the President highlighting the need for a conducive business environment for investors and a pledge to unlock the potential of the sector.

As investors and stakeholders await this intervention, other key aspects will significantly feature in the growth of Kenya’s mining space, including:

• Environmental footprint and sustainable mining practices – Whilst the Government has noted the potential of Kenya’s mining sector, the new regime has taken a keen interest in climate change and the need for sustainable development practices and climate-focused infrastructure projects. With global mining companies making commitments towards decarbonization efforts and net zero goals, mining participants in Kenya may need to have in place appropriate mechanisms to address environmental concerns in mining operations, including emission reduction policies and programmes. This may point to a focus on Kenya’s rapidly developing carbon markets, under which mining companies may wish to participate in offsetting schemes to mitigate their carbon footprint.
• Renewable Energy mix – Kenya continues to take steps towards the energy transition with the President’s bold pronouncement that Kenya will aim to achieve 100% renewable energy by 2030. Recently the Cabinet has lifted the moratorium (yes indeed – a different one: see previous article here), on power purchase agreements with independent power producers as it seeks to realize a sustainable energy mix. This development is expected to ignite continued investment in Kenya’s energy sector, which has tremendous renewable energy capabilities. From a mining sector perspective, should we see the growth of mining projects, we may concurrently also see the possible development of renewable power plants for power supply to mines which will enable mines to reduce their development costs and plug into their decarbonization efforts and goals.
• Community engagement – the development of the mining sector will amplify further the ever-present challenges in community engagements by mining companies. The Act already provides for entry into Community Development Agreements with local communities as a pre-requisite to issuing a mining license. The Mining (Community Development Agreement) Regulations further require community consultations with all stakeholders at the village level. Further, the Mining (Licence and Permit) Regulations state that the support of community leaders shall not substitute the need for community consent. These consents will continue to be a challenge to obtain especially in respect of large-scale operations traversing multiple areas since the various Regulations under the Act generally require that the community’s voice is heard in negotiations with holders of mining licences. Courts have previously ruled on the requirements for public participation. Still, community engagement continues to be a paramount consideration for mining projects, particularly where significant benefits are to be realized from the mining operations. Local community acceptance of projects is critical in Kenya, and significant projects have failed due to lack of “buy-in” by the local community.
• Government pre-emption – The pre-emption right to strategic minerals continues to be a key issue for most investors. Depending on the minerals discovered during exploration, it remains to be seen to what extent the State shall exercise this right and what impact it would have on future investments. In our experience, however, the State would ordinarily grant a mining licence (following the requisite application) to the holder of a prospecting licence who discovered the minerals during exploration.
• Land rights – Securing land rights will remain a key consideration for those seeking to invest in new projects and/or expand existing projects. Careful navigation around Kenya’s land regulatory framework is critical for the bankability of major projects and will continue to be key in mining projects. This is especially in relation to the different land tenure systems and compliance with local and national legislation and authorities regarding land issues.

Overall, whilst the mining sector currently remains dormant, should the pronouncements by the new administration be actualized they may be the much-needed catalyst to revive and expand this sector which could enhance its contribution to Kenya’s economic output. Interestingly, even with the moratorium in place, the M&A market continues to present possible opportunities for willing investors, scanning for opportunities in existing operations through business and/or asset acquisitions.

The Bowmans team actively participates in the mining sector and continues to advise on matters relating to mining legislation and the acquisition of mining rights. We will continue to keep an eye out and update you on the developments made in this sector