Kenya’s New Mining Act is a modern piece of legislation with a few issues to iron out

15 Feb 2017

Kenya’s new Mining Act is the first major revision in mining law in the country since the 1940s. The new Act is largely considered to be a modern piece of legislation that is clear in terms of timelines and structures, but that still has a few challenges that need to be addressed.

The Act requires the establishment of the Mineral Rights Board, which is a positive development in that it takes away some discretion from the Cabinet Secretary. The eventual constitution of the Mineral Rights Board will end the current state of flux whereby companies have not been able to receive renewals or approvals because the Act prescribes that the Cabinet Secretary will grant approvals on the recommendation of the Board.

Concerns surrounding the Mining Act include the pre-emption rights of the government in relation to strategic minerals, the government’s 10% free carried interest, and the requirement for the listing of 20% of the equity of large-scale projects.

In effect, this all means investors could find a large percentage of their company not being under their ownership and, to some extent, given over for free! While certain other countries do have a free carried interest in mining, Kenya’s relatively new industry may mean that giving away 10% is premature.

We also have a concern that this provision is unconstitutional. The constitution states that a person or company cannot be arbitrarily deprived of their assets without market value payment.

Wherever a mining operation takes place, the community needs to be involved and to feel a part of the project. Some of the royalties prescribed by the new Act go some way to assisting with this, as they are directed specifically to communities. However, there is an additional need to engage communities and ensure there is local employment.

Another issue relates to securing land rights. In the Mining Act, landowner consent is required even when applying for a license. This is extremely arduous. Considering the huge areas over which exploration licences may be granted, there may be 200,000 or more individual landowners and it is simply not possible to get consent from all of them in writing. We will hopefully see this provision reviewed and revised in due course.

We expect a number of foreign mining investors are holding back and are waiting to see whether the current issues surrounding the new Mining Act will be ironed out over the next year or so. We believe the new Cabinet Secretary has the opportunity to turn the sector around, because of his enthusiasm and the fact he has gained the trust of a lot of mining companies. In this regard, it should be an exciting year in the mining sector in Kenya.

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)

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