The Ministry of Mining has reduced royalties for gold miners in the hope of attracting more investment in the nascent industry.
Regulations recently published by the ministry show that miners will now pay a royalty of three percent on the total value of gold extracted, down from three percent previously.
Kenya has proven deposits of titanium, gold and coal. But the country’s mining sector contributes only a relatively small percentage of GDP, although revenues are expected to grow as new mines and investors enter the market.
Gold mining has over the years been largely artisanal and small-scale in a largely informal operation, although many medium-sized companies have entered the industry.
Kenya’s earnings from gold mining fell to Sh3.17 billion in 2023 from Sh3.38 billion the previous year, according to the 2024 Economic Survey.
Data shows that 410 kilograms of gold were produced last year, down from 563.6 kilograms in 2022.
Section 183 of the Mining Act 2016 provides that every holder of a mineral right shall pay royalties to the state in respect of the various classes of minerals obtained under the mineral right.
Revenue from mineral revenues is then shared between the national government, the provinces and the beneficiary communities.
Official data shows that at least Sh7.5 billion in mineral revenues have been collected as of June 2022. This means that the national treasury retains Sh1.5 billion for counties and Sh750.39 million for communities where the minerals are exploited. The balance of Sh5.25 billion (70 percent) is the national government’s share.
The National Treasury has allocated Sh1.05 billion as mineral revenue to 23 counties in the 2024/25 financial year, as part of revenue sharing arrangements between the national government, beneficiary decentralized units and local communities.
The National Treasury did not mention which counties would benefit from the Sh1.05 billion royalty, although records show that some of Kenya’s mineral counties include Makueni, Taita Taveta, Kwale, Homa Bay, West Pokot, Kericho, Kakamega, Elgeyo Marakwet and Kericho.
The share of mineral revenue will form part of the total additional allocation (conditional and unconditional) of Sh54.7 billion to the counties in the current financial year.
“Of this amount, Sh19.06 billion will be financed from the national government’s share of revenue, and Sh35.66 billion from proceeds from loans and grants from development partners,” the Treasury said in its 2024 Budget Policy Statement.
Although mining has been active in the country for over 50 years, productivity has remained low, with large-scale operations limited to soda ash, mineral sands, and, since 2013, titanium ore at Kwale.
The country is also believed to have large deposits of copper, niobium, manganese and rare earth minerals, which remain largely untapped, reducing the contribution of the mining sector to the national economy.
Kenya also faces the problem of illegal mining and extraction, which is punishable by a fine of up to Sh10 million or two years’ imprisonment, or both, under the Mining Act 2016.
On the other hand, smuggling of minerals is classified as an economic crime and is punishable by a fine of up to one million shillings or imprisonment for 10 years.