Efforts by Kenya to transform the mining sector into a key economic pillar are being hampered by policies that make the country unattractive to foreign investors.
According to a new report from the Fraser Institute, of Canada, Kenya’s mining sector ranks among the bottom ten in the world in terms of attractiveness for mining investors because of the country’s regulatory environment.
‘The Annual Survey of Mining Companies 2015’ report ranks Kenya second-least-attractive destination for investments in Africa. Guinea is ranked the least attractive country, while Zimbabwe is third-least attractive.
In Africa, Morocco is ranked the most attractive mining investment destination, followed by Burkina Faso and Ghana.
“Some general trends seen among those countries rated at the bottom of the survey on policy are big concerns about security, political stabi- lity and trade barriers,” states the report.
Among the issues that make Kenya unattractive is the proposed Mining Act, which stipulates that foreign companies licensed to prospect and conduct mining operations must cede 30% of their shareholding to local companies.
Foreign companies are also uncomfortable with the Kenya government taking a 10% equity in all mining ventures, unilateral cancellation of exploration licences and a moratorium on the issuance of new licences, as well as demands that unused funds budgeted for exploration be forfeited to the State.
Further, a massive increase in the royalties for various minerals has resulted in foreign investors perceiving Kenya as an expensive mining investment destination.
The report comes at a time when Kenya is implementing strategies to make the mining sector attractive to foreign investors and transform it into a driver of economic growth.
The strategies include the development of a comprehensive 20-year master plan and an aerial geological survey to ascertain the country’s mineral wealth.
According to the Fraser Institute report, glo- bally, Australia is the most attractive country for mining investors, while Venezuela is the least attractive.
The report was compiled based on a survey of 449 companies that cumulatively spent $2.2-billion on exploration activities in 2015.