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Kenya: The path towards unlocking the mining sector – Reflections from the 2023 Kenya Mining Week

30 August 2023
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Overview

  • Our Mining team in Kenya was privileged to be part of the 2023 Kenya Mining Week.
  • The conference brought together stakeholders from across the mining value chain, with in-depth discussions held on: women's engagement in the mining sector; the mining-energy nexus; strengthening mining policies and regulatory frameworks for artisanal and small-scale mining; and the existing moratorium on mineral rights etc.
  • The discussions with respect to ASM operations were mostly centred around: the existing legal framework governing the ASM sector; the bankability of ASM operations and limited access to finance; and the lack of civil education.
  • For large-scale miners, the main concern was the moratorium on the issuance of new mining rights.

The Bowmans Mining Team was privileged to be part of the 2023 Kenya Mining Week hosted by the Kenya Chamber of Mines which brought together stakeholders from across the mining value chain in Kenya. The conference was an opportunity to discuss various pertinent issues affecting the sector and reforms necessary to improve the operating and regulatory environment under the theme of “promoting an inclusive approach in Kenya’s mining sector to drive economic growth.”

Rainbow Field, the head of Mergers & Acquisitions and Mining at Bowmans Kenya, attended a roundtable discussion on women’s engagement in the mining sector and how to further promote women and their contribution to the sector. The roundtable discussion was well attended with representatives from top industry players such as Base Titanium Limited and Shanta Gold. Also in attendance were artisanal and small-scale miners (ASM) and representatives from the Governments of Kenya and Uganda. The chief speaker at the roundtable discussion was the Ugandan Minister for Mining and Petroleum (Dr. Ruth Nankabirwa Ssentamu). Dr. Ruth provided useful insights into the Ugandan regulatory regime along with her experience as a woman working in the mining and extractives sector. Philippa Hutchinson of Shanta Gold also spoke of her experiences as a female geologist working in Kenya.

Matthew Arrumm, a senior associate at Bowmans Kenya, was part of the panel discussing The Mining-Energy Nexus which discussed the implications and prospects for Kenya in preparing for a mineral-intense just energy transition. It is widely known and appreciated that the clean energy transition requires the deployment of various renewable energy, energy storage and other technologies. Given Kenya’s potential to be a top producer of various critical minerals required for the energy transition,  the country is strategically placed and holds significant prospects in the expected demand for these minerals. However, capitalizing on this potential requires careful consideration of environmental and social concerns to ensure sustainable mining practices are adopted. The discussion among the panellists was largely aligned on the need to (i) decarbonize mining operations to the largest extent possible (with emissions reductions and offset schemes being widely recognized) and (ii) maximize local benefits by ensuring appropriate and clear benefit-sharing arrangements with affected communities.

Njoroge Kangethe, an associate at Bowmans Kenya, moderated the panel on strengthening mining policies and regulatory frameworks and formalization for sustainable development of the artisanal and small-scale mining sector. ASM play a key role in several counties (by, for instance, providing livelihood to the locals). This notwithstanding, ASM is often characterized by informality, lack of regulation, and associated social and environmental challenges. The discussion was, thus, largely focused on how strengthening mining policies and regulatory frameworks for ASM could: (i) enhance environmental protection; (ii) improve occupational health and safety standards; (iii) promote responsible mining practices; and (iv) enable better access to markets, finance, and technical support for ASM. In summary, most ASM operations are largely informal, with some operations being conducted without the requisite licences and approvals. The effect of such operations is that the miners do not prioritize site rehabilitation, mine sustainability or environmental protection – only mineral extraction. Over and above environmentally detrimental mining practices, ASM operations do not prioritize the health or safety of workers. Both these issues have led to irresponsible mining practices which explain the various collapsing mines across the country. The panel concluded that the main step in addressing these issues (and many more as articulated in our further discussion here) would be strengthening mining policies and regulatory frameworks. This would eventually not only lead to more sustainable mining practices but also allow ASM to access certain benefits such as international markets for their products and financial assistance and technical support with their operations.

The moratorium on the issuance of new mining rights issued by the Office of the President and which came into force on 3 December 2019 (the Moratorium), featured prominently throughout the conference. Stakeholders were clear on the need to lift the Moratorium to enable the development and growth of the mining sector which despite its massive potential continues to be largely dormant.

Please see below for highlights on discussions held during the Mining Week on the Moratorium and other issues in Kenya’s mining sector. For more information, please reach out to Rainbow Field, Matthew Arrumm or Njoroge Kangethe.

The Mining Moratorium

The Moratorium was put in place to allow for the mapping of natural resources by the Government through an aerial survey of all mineral deposits in Kenya (the Mapping Process). This, according to the Government, would act as a catalyst to foreign investment in a bid to take advantage of the growing investor appetite for new frontier markets.

The implementation of the Moratorium on issuing of mining licences has led to a halt in most mining operations as licence renewals and applications are unable to be processed, hence significantly reducing investment in the Sector. The terms of this Moratorium were not disclosed to the public but have been interpreted by the Mineral Rights Board to mean that they are unable to make any recommendations to the Ministry of Mining, Blue Economy, and Maritime Affairs (the Ministry) on new licensing applications.

In his opening address, the Mining Principal Secretary (the PS) stated that the Ministry has concluded the Mapping Process and has now embarked on the process of validating the findings of the Mapping Process.

The PS is hopeful that the Moratorium shall be lifted in the first quarter of the Government’s financial year. Already, following the Mining Week, media reports (click here) stated that the Government intends to revoke at least 1,500 mining licenses for various reasons including noncompliance with license conditions and expiry. The list of affected miners is to be published with the Government stating that those miners whose licenses have been revoked and those seeking to join the sector may submit applications and fulfil the necessary criteria. The uncertainty will not be helpful for a sector already plagued by unpredictability (occasioned by the Moratorium) and stakeholders will be hopeful that further guidance and direction will be provided as soon as possible. The importance of a clear, transparent and sound regulatory environment was clear from stakeholders throughout the conference to boost confidence in investing in the Sector.

Artisanal and small-scale miners

The current state of ASM is marked by illegal mining practices, the informal practice of mining and the use of harmful chemicals such as mercury and cyanide.

Discussions during the conference highlighted that whilst ASM have the potential to greatly contribute to the GDP, this is hindered by not only the Moratorium but also:

  1. the existing legal framework governing the Sector – The Sector currently has various players, from the national government, county governments, communities, investors, civil society etc. ASM however, given the informal nature of their operations, unlike all other players, lack legal identity. Some ASM are persons or informal groups who undertake mining activities individually. There is a need for ASM to be formally recognized under the current framework which would enhance ASM access to services such as finance and insurance;
  2. scope of operation of ASM – Currently, the Mining Act, 2016 (the Act) defines artisanal mining as “traditional and customary mining operations using traditional or customary ways and means.” The Act’s understanding and scope of ASM is unfortunately outdated and therefore ASM who employ rudimentary technologies outside traditional and customary means find themselves operating in a “legal vacuum” where they are neither artisanal miners, small-scale miners nor large-scale miners within the strict confines of the Act;
  3. bankability of ASM operations and limited access to finance – ASM remain to operate within a very informal sector. They are therefore plagued by limited access to finance, insurance and technology required to transform their operations. Unlike large-scale miners, ASM lack the collateral to access the required facilities to undertake their projects; and
  4. civil education – ASM should be equipped with the knowledge and skills on the international best practices with respect to occupational health and safety which would greatly reduce the number of accidents (such as collapsing mines) associated with their operations.

Large-scale miners

The focus was on the main industry players such as Caracal Gold and Base Titanium Limited, the largest exporter of tonnage through the port of Mombasa.

Base operates the Kwale Mineral Sands Operations in Kenya (the Kwale Operation), which commenced production in late 2013. The Kwale Operation features a high-grade ore body with a high-value mineral assemblage, rich in rutile, and currently accounts for approximately 65% of Kenya’s mining industry by mineral output value.

Currently, Base is facing possible closure following the exhaustion of mineral deposits in the area with respect to which Base has licences to operate. Base, and other large-scale mining companies are considering the exploration of new mineral reserves to keep their operations going, but this is hindered by the Moratorium.

The Government, through the Cabinet Secretary of Labour and Social Protection, expressed the Government’s commitment to supporting Base to prolong its mining life in Kwale  County.

Conclusion

The 2023 Kenya Mining Week was quite instrumental in articulating the concerns of different stakeholders across the Sector’s value chain. With stakeholders also expressing the need for a review of the Act, the draft Mining (Amendment) Bill (the Bill), 2022 is yet to be tabled in Parliament although the same could potentially address some of the issues discussed at the Mining Week. With the PS hinting at the possible lifting of the Moratorium in the first quarter of the Government’s financial year, many remain optimistic that this will primary action and  significantly unlock the sector which would go a long way in extending the operations of existing mining companies and attracting new investors.

Bowmans continues to monitor the sector and we will provide an update should further developments in the sector arise.