The Kenyan Government has increased royalties on minerals in a move to safeguard the country’s interest in the lucrative mining sector.
Effective from 15 August, mining royalties have been increased from 2.5%-3% to 5%, while royalties for rare earth, niobium and titanium ores have gone up from 3% to 10%.
The other minerals will have royalties of between 1% and 12%.
IHS Country Risk Africa analyst Emma Gordon said that amid increasing spending pressures, the Kenyan Government is seeking revenue from the increasingly important mining sector.
"Foreign mining companies in Kenya face a high risk of contract renegotiation and cancellation," Gordon added.
Besides increasing royalties, the government also withdrew certain mining licences granted between 14 January and 15 May this year following several complaints about the issuing process.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
Mining Secretary Najib Balala said last week that the new measures are being taken following a sector-wide review and are aimed at ensuring that East African’s largest economy secures more favourable deals.
"The ministry has reviewed all royalty, licensing and drilling charges that were previously charged," said Balala.
A newly-appointed taskforce will lookinto all mining licenses issued since 2003 and no further new licences will be granted until a new mining code has been passed, which is set to be introduced in November 2013 and become effective in July 2014.
The measures are part of the government’s attempts to streamline and maximise revenues from the sector, which has grown in importance from 0.8% of GDP in 2011 to 9.8% of GDP in 2012.
Gordon said, "This comes at a time when the government faces a number of spending pressures, including funding devolution and high profile infrastructure developments.
"Given the significance of these projects, along with the need to maintain a high public wage bill, the government is seeking to increase revenue, including from the nascent mining sector."
Although the country has huge deposits of titanium, gold and coal, its mining sector continues to be a small contributor to national output.
Image: Kenya has increased royalties on minerals to maximise revenues from the sector. Photo:Africa/Freedigitalphotos.net.