Kenya to Repeal Local-Ownership Rules for Mining, Minister Says

Kenya will repeal a rule requiring at least 35 percent local ownership in mining projects to help speed up investment, Mining Secretary Najib Balala said.

The government in October published a gazette-notice stating Kenya citizens are entitled to the minimum shareholding and requested affected companies including Base Resources Ltd. (BSE) and Goldplat Plc (GDP) for proposals on how they will comply.

“The government of Kenya is repealing the 35 percent local-ownership rule after the completion of the mining bill,” Balala said in a speech posted on his Twitter account today. “We are here to crowd investors in, and not out.”

While Kenya has deposits of gold, copper, zinc, coal, soda ash, fluorspar and titanium, the industry represents less than 1 percent of gross domestic product, according to the Mines Ministry. Growth in mining will contribute to job creation and “significant” revenue expansion for the budget, Balala said. Kenya within 12 months plans to complete a new mining act to supplant one dating back to the 1940s, he said.

Investment in natural-resource development trails other countries in East Africa including Tanzania, which is Africa’s fourth-largest gold producer, and Uganda, which found oil in 2006 and may start producing small amounts next year.

Kenya restricts foreign ownership of businesses more than most other sub-Saharan Africa economies, according to the World Bank. Foreign capital participation is limited to 70 percent for telecommunications companies and 50 percent for freight railways, ports and airport operations, according to the bank’s Investing Across Borders 2010 report.

Kenyan President Uhuru Kenyatta created the Mines Ministry as a separate entity in April to help give the industry a “special focus.” Kenya discovered its first crude deposit in the northwest last year. Exploration license-holders Tullow Oil Plc (TLW) and Africa Oil Corp. (AOI) have yet to announce if the deposits are commercially viable to exploit.

“As unexplored as East Africa was for oil and gas and the consequent excitement around the resource, I am confident that the mining sector will achieve a similar outcome,” Balala said.

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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