Kenya's mining risk hitting rock bottom amid declining trend

Kenya’s mining sector has been on the decline over the last two years, casting doubt as to whether it will ever live up to the hype.

Surveys undertaken over the years show the country is endowed with different minerals, and that the sector could be a key contributor to the economy.

However, over the years, successive regimes have failed to get the sector moving in any meaningful way.

The result has been that the sector has for about a decade posted growth but just supported by just one mining project in Kwale County.

And with the mine now drying up, the sector appears to be on its deathbed.

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The sector posted a massive contraction of 11.1 per cent over the third quarter of 2024, according to data by the Kenya National Bureau of Statistics (KNBS). 

The sector has been posting successive contractions (negative growth rates) since the fourth quarter of 2022, save for the third quarter of 2023 when it grew by a paltry 0.8 per cent.

It was particularly bad in 2024 when over the first quarter, the sector contracted by 14.8 per cent and again by 2.7 per cent over the second quarter.

In 2023, the sector contracted by 6.5 per cent. Going by the quarterly numbers by KNBS, the contraction could be bigger in 2024.

The sector could also be grinding to a halt this year, following the end of life in December 2024 of one of the projects that supported the sector’s growth over the last decade, the Kwale titanium ore mining project.

Mining has previously been on a growth path and it was a particularly good year in 2021, with the sector registering an annual growth rate of 18 per cent. Over the fourth quarter of 2021, the sector grew by an impressive 35.5 per cent.

The growth for about a decade was supported by mining activities in Kwale, where Base Titanium has been mining mineral sands.

The impact of the project has been such that while the sector earnings stood at Sh33 billion in 2023, earnings from titanium ore minerals alone stood at Sh24 billion, accounting for 72 per cent of the sector earnings.

The project, however, came to an end in December 2024 following the exhaustion of the titanium mines.

“We have explored all avenues for further extending the life of Kwale Operations. However… we have been unsuccessful in identifying additional mineral deposits of sufficient grade or scale to support a further extension," said Base Titanium in a recent update.

The firm noted that while the Kwale mines had been exhausted, it would accelerate its wider Kenyan exploration efforts.

It hopes that with the lifting of the licensing moratorium, it would be able to get a licence for exploration of other sites.

“Following the government of Kenya’s lifting of the moratorium on issuance of mineral rights in October 2023, four of the company’s outstanding prospecting license applications have since been gazetted and are going through a public notice period,” said the firm.

The moratorium had been in place since November 2019 and was "partially" lifted in October 2023. More than a year since the state lifted the moratorium, players say the sector is still a mess, and urgent action is needed to breathe life into it.

Among the areas of concern is licensing, with players accusing the Mining Ministry of little action. This, they warn, could be detrimental for the sector not just now but in years to come as no new projects are coming on board.

During the moratorium period, the Mining Ministry did not issue any licences, including exploration.

Without exploration work done for over five years, it would mean that no new mining projects will be coming on board any time soon, considering the time needed to make a find and move it from being a resource to commercial production.

During the moratorium period, a countrywide geophysical survey was conducted to map mineral resources. The Mining Ministry has since been undertaking an exercise to ascertain the minerals, prioritising strategic minerals. 

Another key mining project extracting fluorspar at Kerio Valley shut down in 2016. The project sunk with rural towns in Elgeyo Marakwet County.

Other than the direct and indirect jobs, which different reports put at between 2,000 and 4,000, the Kenya Fluorspar Company supported schools, health centres, provision of water and even building some of the roads.

Kimwarer and other trading centres nearby are today shadows of their former selves. Businesses such as petrol stations that serviced transporters have since shut down, while some of the transporters ground their vehicles and others moved away.

In a past report by Lotus Consulting firm titled "The Economic and Social Impact of Fluorspar Mining in Kenya," the company’s operations directly employed approximately 600 staff in 2015, who earned about Sh160 million in wages annually.

The local mining industry is tipped to hold immense potential, but its performance has over the years been underwhelming.

The sector on average contributes 0.7 per cent to Kenya’s Gross Domestic Product (GDP), but with the right policies and investments, the industry says this can increase to 10 per cent by 2030.

A 2015 report by consultancy firm McKinsey for the Kenyan government indicated that the full potential of mining could be in the region of $2.5 billion (Sh350 billion) in terms of direct revenues annually.

Patrick Kanyoro, who is the chairman Kenya Chamber of Mines, said different factors have the years crippled the mining sector in Kenya and needed to be addressed to “save the sector from imminent total collapse.”

He noted successive governments have not paid adequate attention to the mining sector despite its lucrative nature that has the potential to become a significant economic sector for the country.  

“The current situation in the sector is dire. Kenyans and foreigners who have invested in this sector are on the edge, most considering closure and relocating to more attractive jurisdictions within the East and Southern Africa region,” said Mr Kanyoro.

The factors he sees as currently dragging the sector in recent years include the Mining Act, 2016, which he noted vested heavy power on senior Mining Ministry officials who are now frustrating sector players.

“The Mining Act, 2016 created unfettered powers for the Cabinet Secretary responsible for mining which essentially obliterates the Constitution of Kenya 2010,” said Mr Kanyoro in a letter to the President dated December 31, 2024.

“The reality is that those you (the President) have entrusted with that momentous responsibility are either unwilling to serve Kenyans or they have no understanding of the dynamics of the mining sector.”

He noted that the licensing regime in Kenya appeared like one set out to frustrate miners and that it compares to “none in the region”. 

“Mineral rights have become the most downtrodden of all rights in Kenya. The fact that the powers to grant mineral rights are entrusted to the Cabinet Secretary and not a board or regulatory authority is a perfect recipe for rent-seeking and outright obliteration of accountability and transparency.”

The powers of a CS are seen in how applications for licences are approved. Applications are made to the Mineral Rights Board (MRB), which after consideration makes recommendations to the CS, who then grants or denies players the licences.

Players have in the past also voiced concerns over MRB’s role where the CS can approve or reject the issuance of a licence despite the board’s recommendations.

A recent proposal to amend the Mining Act, with the Mining (Amendment) Bill 2023 proposes to split the policy formulation, administrative and dispute resolution functions.

The Bill also proposes to replace MRB with the Mining Regulatory Authority. The Authority is expected to have powers to issue, renew, modify, suspend or revoke licences and permits for all activities in the mining sector.

Mr Kanyoro also takes issue with what he sees as a heavy focus on a few minerals that the state has designated as strategic.

Minerals designated as strategic are reserved for the government and exploitation will be done by the National Mining Corporation (NMC).

However,  an investor can enter into a Joint Venture with NMC and get a mineral right. These mineral rights shall be awarded on a case-by-case basis.

According to the Ministry, the strategic minerals are radioactive (such as uranium and thorium), cobalt, tantalum, lithium, coltan, niobium, copper, nickel, graphite, tin, tsavorite, chromite and rare earths.

This designation could see local communities locked out of benefitting from minerals found on their lands.

Despite what Mr Kanyoro noted was an obsession with “just about fifteen minerals,” he said they contribute just about five per cent to the entire sector.

“The hype and unbridled focus on the strategic and critical minerals needs an honest review; with cartels emerging along political alignments, making (Kenyans) just mere bystanders, instead of being the drivers of the sector,” he said.

The designation of minerals such as the tsavorite, heavily mined by small-scale miners, as strategic could also be problematic as it would mean the artisanal miners would need to partner with NMC in mining their ventures. This could further marginalise them in the industry that has always pushed them to the periphery.