Kenya Chamber Seeks Lower Power Charges, Clear Laws for Mining

The Kenya Chamber of Mines wants reduced electricity charges for its members and clearer royalty rules as it seeks to lower production costs and nurture the growth of the nascent industry.

Mining companies want to benefit from “cheap, reliable and quality power,” Stephen Mwakesi, acting chief executive officer of the chamber, said in an e-mailed response to questions on July 14. “We have had a lot of discussions with the government on electricity tariffs. We would really appreciate a special rate.”

Kenya is the world’s third-biggest producer of soda ash used to make glass and seventh in output of fluorspar needed for steel. The country has a population of about 45 million people, about the same as Colombia, but contends with almost a 10th of the power, with installed generation capacity of about 1,700 megawatts.

Kenyan power consumers pay an average of 18.7 U.S. cents per kilowatt-hour, compared with 9 cents in neighboring Tanzania and 3 cents in Ethiopia, African Development Bank data shows Costs in South Africa, the continent’s biggest electricity producer, range from to 7 cents to 18 cents, according to th country’s power utility.

East Africa’s largest economy wants to add more than 5,000 megawatts to the national grid by 2016 from 1,700 megawatts currently installed, according to the energy ministry.

The chamber is pushing for further refinement of a new mining law, expected to come into force this year, so that it includes stability clauses and consensus on royalties, he said.

“There should be no changing of goal posts once an investment is at play,” Mwakesi said.

Regulatory Framework

Mining Secretary Najib Balala canceled 43 prospecting and mining licenses in 2013, citing irregularities when they were granted. Cortec Kenya Mining Ltd., a unit of Canada-based Pacific Wildcat Resources Corp., sought arbitration at the International Center for Settlement of Investment Disputes, as it battles to reclaim a permit canceled in a row over royalty payments.

Disputes are partly to do with an existing regulatory framework that’s “archaic and not fit for today’s business complexities,” Mwakesi said. The chamber wants the government to scrap “centralized discretionary powers that are currently vested in state officials” and bring about transparency, he said. “That’s where we find discomfort; current law doesn’t allow for consistency and a measured approach to issues.”

The country, which also has deposits of coal, gold, rubies and sapphires, remains largely unexplored from a mining perspective and the lobby backs the government’s plans to conduct a countrywide airborne geophysical survey, Mwakesi said.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE