31 October 2012

Kenya: Don't Give Mining Shares to Big Shots

A gazette notice has made it mandatory to have a minimum of 35 per cent local shareholding for a mining license. The Commissioner of Mining has said that the new rule is intended to assist local communities.

But this sounds more like 'black empowerment' in South Africa which enriched a tiny few and left the majority worse off than before. There is nothing wrong in Kenyans owning 100 per cent of a mining company. But why should a small clique be allowed to get shares by the force of law?

A much better system is to charge fixed fees and royalties depending on the type of mineral. For instance, Kenya could charge 10 per cent of the exported value of the minerals from the Kwale sands.

This would help balance the government budget and supplement the other taxes paid by mining companies. That extra revenue could fund schools, hospitals and infrastructure.

If foreign companies have to give out 35 per cent of their shares, inevitably they will be taken by big shots. The poor ordinary citizen will not benefit. If Kenya wants more from mining companies, it should tax them more heavily. It should not grab their shares for a few individuals.

Quote of the day: "Fascism should rightly be called Corporatism, as it is the merger of corporate and government power." - Benito Mussolini became dictator of Italy on October 31, 1922

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