Mining royalties: Mining department costs State mi*lions in royalties
The government could be losing billions of shillings in mining royalties and annual ground fees due to the laxity of the State Department of Mining (SDOM), a report by the Auditor General shows.
According to the Auditor General Edward Ouko, in a report tabled in the National Assembly on Wednesday, SDOM “is not in a position to advise the government on how much revenue is expected from the mining sector.” This is despite the fact that the extractive industry is a key priority for the government in economic growth and job creation.
Inadequate staff facilities to monitor mining operations, Ouko said, contributed to SDOM’s underperformance.
According to the AG, SDOM had 11 mine inspectors instead of the required 132 “which made it very difficult to effectively perform its duties.”
Reporting framework
In addition, the department lacks a monitoring and reporting framework with timelines for mining activities, leading to laxities in companies in implementing licensing conditions.
The AG further added that SDOM did not have the required equipment to determine the quality and quantity of minerals mined in the country, instead it relies on values declared by the mining companies to compute royalties.
Ouko said that although the sector is meant to contribute 10 per cent to the country’s Gross Domestic Product, it only injects one per cent.
The performance audit shows there is a low level of involvement of SDOM in ensuring that mining companies adhere to provisions in the Mining Act and fulfil licensing conditions. It derived its report from Base Titanium, Karebe Gold, Kilimapesa Gold and Tata Chemicals Ltd.
Annual fees
Contentious issues raised include inadequate monitoring of payment of royalties, inconsistency in the administration of royalties payments and annual fees and inadequate transfer of skills in the mining industry.
The report shows that mining firms have minimal collaboration with training institutions, carry out haphazard corporate responsibility initiatives and do not comply with environmental regulations.
Ouko pointed out discrepancies in the amount of royalties paid by mining companies and the data maintained by SDOM, attributing the inconsistencies to poor record management.
The report showed inconsistencies in the administration of royalty payments, contrary to section 183 (1) of the Mining Act which requires a holder of a mineral right to pay royalties to the State.
According to the AG, documentary review revealed that Tata Chemicals was paying royalties to both the National and County governments.
The report revealed that out of the four companies sampled only Base Titanium had a training plan for transfer of skills to locals
“For the period under review, Base Titanium had replaced 20 expatriates. The succession plan indicated that the remaining 32 expatriates will be replaced by the end of 2025,” said the AG.
