Workshop Magazine Conflict Sensitive Journalism, Mombasa and Nairobi, Kenya

Treasures Troubles A DW Akademie Workshop Magazine

In Eastern Africa

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Treasures and Troubles in Eastern Africa

A DW Akademie Workshop Magazine 1-13 December 2013 With financial support from the Federal Ministry for Economic Cooperation and Development (BMZ)

Table of Contents Growing international interest in East African Resources

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The struggles of small-scale mining in Kenya

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Rehabilitating mining areas 6 Oil discovery triggers mineral development in East Africa

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Names of reporters

Sharing the mineral spoils 10

Tobias Chanji

Myths on mining in Africa 12

Kenya

George Omondi Kenya

Deng John Atem South Sudan

Involving women in mining ‌ But how?

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Different beneficiaries as mining takes center stage in Kwale

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Corruption and irregularities in mining contracts

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Mineral certification as a double-edged sword

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Dorothy Nakaweesi Uganda

Agathonique Barukukuza Burundi

Scola Kamau Kenya

Kilasa Mtambalike Tanzania

Collins Odhiambo Kenya

Joe Nam Uganda

Editors Sheila Mysorekar Annedore Smith Dr. Dirk Asendorpf Germany

Design and Layout Tedd Murimi | Ideal Outcomes Ltd.

The Team

Treasures and troubles in Eastern Africa

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Growing international interests in Eastern African resources As more and more minerals as well as gas and oil reserves are being discovered in East Africa, multinationals move in to extract these resources.

Regional governments have to make sure that the local people don’t lose out on the benefits.

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HEN I was assigned to write about international Kilasa interests in Mtambalike East African resources, I was momentarily lost for words and los and Karin Alexander. Access to the oil fields meant signifididn’t have a clue where to start. cant economic benefit to whoever controlled them.

The story of the Seven Sisters may resonate today in East Then the story of the “Seven Sisters” came to mind.

Africa, albeit at a lesser level and with new players as their These are – or were – the biggest oil companies in the world, influence keeps waning. And one of the newest players is which at one point sought to control the balance of power. The China.

China’s entrance into the race for resources of East companies included Shell, BP, Gulf Oil, Standard Oil of California Africa has not been well received by the traditional actors, (SoCal) and Texaco (now Chevron), Standard Oil of New Jersey mainly because China provides soft loans to African govern(Esso) and Standard Oil Company of New York (Socony – now Exxments which give them an upper hand in securing lucrative onMobil). They supported monarchies in Iran and Saudi Arabia, contracts and deals in the extractive industry. opposed the creation of the Organization of Petroleum Exporting Countries (OPEC) and profited from the Iran-Iraq war.

Minerals and gas in Tanzania attract Chinese involvement In Tanzania, it is estimated that there are 42 trillion cubic In a documentary about the ‘Secrets of the Seven Sisters’ aired feet of recoverable natural gas reserves in the southern in April by Al Jazeera, oil trader Xavier Houzel said: “We waged the Iran-Iraq war and I say we waged it, because one country had regions. Discoveries offshore of Tanzania and Mozambique waters have led to predictions that the region could become to be used to destroy the other. As they already benefit from the oil bonanza, and they’re building up financial reserves, from time the world’s third largest exporter of natural gas and, naturally, investments are pouring in. The Chinese government to time they have to be bled.” was quick to dish out a loan worth 1.2 billion US In the 60s, these seven companies controlled dollars to Tanzania to construct a 532-kilometre 85 per cent of the world’s oil reserves. Today, pipeline that links Mtwara gas fields to Dar es they control just 10 per cent. New hunting Salaam. grounds were therefore inevitable and Africa Loan from the Chinese Govt. to became the natural prey.

However, in May 2013, the construction of Tanzania to construct a 532km gas pipeline the pipeline led to major protests in Mtwara Civil war over oil in South Sudan where 18 people were injured and 91 arrestThe historian Gerard Prunier stated in the ed, and the government called in the army to Al Jazeera documentary that everybody thought there could be oil in Sudan but nobody knew anything. The existence of oil reserves quell the unrest. Politicians in Tanzania had even suggested that foreign elements could be at play in the upheaval over was revealed through exploration by the American company who gets to control the gas supplies. One MP from the ruling Chevron, towards the end of the 70s. “And that was the beginning party, Aden Rage, said: “It could be China that is being fought of the second civil war in Sudan, which went on until 2002. It lasted for 19 years and cost a million and a half of lives, and the oil in the Mtwara saga as some global powers are out to show China that they can thwart any project that is not in their business was at the heart of it”, Prunier said. interest.”

The second civil war in Sudan was precipitated by President That only goes to show the far-reaching consequences Gaafar Nimeiry attempting to take control of oil fields straddling of international interests to local the north-south border, according to the authors Brian RaftopouContinues on Page 3 host communities. In both the gas

$1.2 bn

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Treasures and Troubles in Eastern Africa

Growing international interests in Eastern African resources Continued from Page 3

and oil and mining sector, international firms have had massive influence in the decision making processes of host nations.

The extractive industry is an expensive area to invest in, thus governments in the region largely depend on companies with the necessary capital in terms of finances, human resources and technology for large scale investments. In turn, multinational investors in the extractive industry use that as a bargaining chip and exert influence on how policies are shaped in host nations, mostly to their favour. Furthermore, minerals and gemstones extracted in East Africa are always exported. It is thus multinational firms, which are out to do business, that determine the prices.

New policies for local benefits and participation The Tanzanian government, as a way of mitigating the effects of bad policies in the mining sector and avoiding to repeat similar past mistakes, enacted the National Gas Policy 2013. This policy, among other things, established the National Gas Reserve Fund which is expected to act as a state-owned investment vehicle to ensure that citizens benefit directly from the profits of natural gas.

“We don’t want to take all the money from the gas sector to the Treasury as was the case with the mining sector, which led to the public belief that mining had contributed nothing to their lives,” said the Tanzanian Deputy Minister for Energy and Minerals, George Simbachawene. The new policy also seeks to create a national oil and gas company and encourage local participation by ensuring that Tanzanian companies and citizens get contracts from the industry. It also seeks to promote joint ventures between Tanzanian and international investors and encourage ownership of oil and gas companies through issued shares.

On paper, the touted benefits of the new policy are promising. But the management and oversight of the fund and implementation of the policy in general is yet to be put to the test.

The struggles of small-scale miners in Kenya Gemstones mining in Kenya largely involves artisanal miners. Their working conditions are often atrocious, and their low incomes keep them below the poverty line. Analysts say the informal sector needs to become more organised and at the same time more profitable for small-scale miners.

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ear the Coastal Kenyan town of Mwatate, there are vast dusty pits hewn by hands with rudimentary tools, where miners earn US$ 90 a month “cropping” a myriad of gemstones. The task lasts from dawn until dusk, twelve hours of excruciating labour.

They live for months at a time in makeshift camps built from tree branches and plastic sheeting, where water is drawn from the bottom of the open caste pit and there is no sanitation. Yet this mine is seen by many locals as an example of the kind of venture that can help elevate Kenyans from poverty.

Juma Marjani, 49, has been a small scale miner for 30 years and has spent 20 years at the Kamtonga mines where he has dug out innumerous kilograms of Tourmaline and Tsavorite—much of it of gem quality. It can take up to six months for his team of five miners to extract about 25 tons of Tourmaline, which is sold for about US$ 100 to US$ 150 per kilogram (depending on its quality). Marjani told a group of journalists from Uganda, Kenya, South Sudan, Burundi and Tanzania, who were on a field visit to Kamtonga mines in Mwatate district: “We

Collins Odhiambo

know it is worth much more but with no other market or source of income, we have no option but to sell it to the brokers.”

A US-based website offers less than half a kilogram of Tourmaline for $8.95, excluding freight costs; at that rate, a ton would cost $19,725. Asia is becoming an increasingly popular export destination for the semi-precious stone, where it is fashioned into jewellery and ornaments by designers.

Despite gemstones mining being a multi-billion dollar global industry that conjures up images of glitz, glamour and wealth, it is also exploitative and causes environmental damage. For example, the small-scale miners use chisels and 4.5 kg hammers to mine the stones, they are subject to abysmal working conditions, the environmental degradation is rampant, the wages are low and intermittent, leaving workers in poverty and undernourished.

Hussein Bege started mining at the age of 15, he is now 30 years old.

During a meeting between Mwamtonga miners and journalists, Baraka Mwakio and Paul Mkasa (both mining plot owners), vehemently denied the presence of, or any use of child miners. But the reality is that small boys aged between 13 and 17 are a common sight at the gemstones mines. They are, however, very elusive and quickly run into the ramshackle iron shelters where they sleep or shield behind the older min-

This sector has received minimum attention from the government. The refineries are not regulated.”

Treasures and troubles in Eastern Africa

David Wandago, Programmes Coordinator for Kwacha Africa

ABOVE: Kamtonga mine in Mwatate district, Taita Taveta County.

ers at the presence of strangers.

Despite their struggles, smallscale miners play a vital role in the Kenyan mineral industry that employs thousands of people and contributes to Kenya’s economy.

Analysts say the industry is poised for significant expansion, and mining companies are jockeying for an opportunity to exploit the significant deposits of minerals that have been discovered in various parts of the country recently.

MIDDLE: The informal sector currently A ruby. controls more than 90 per cent of the gemstones mining in Kenya.

“This sector has received minimum attention from the government. The refineries are not regulated”, said David Wandago, Programmes Coordinator for Kwacha Africa, an organisation dealing with the rights of mine workers in Kenyan’s coastal areas.

“In other countries, there are laws governing artisanal mining. Here, we don’t have any.”

BELOW: Miners Wandago added that while the underground government pampers foreign and at the large-scale companies, including Kamtonga offering them tax holidays of up mine.

to 10 years, it was also exerting efforts to kill the small-scale mining industry. He cited government orders shutting down some small-scale mining areas in parts of the county while encouraging large-scale investments in the same area.

Artisanal mining is Taita-Taveta County’s backbone of economy.

The area sits on the mineral-rich Mozambique Belt and has one of the richest mineral deposits in East Africa. It has over 40 high value gemstones. “The artisanal and small-scale mining sector is a paradox — productive but undervalued, conspicuous yet overlooked, and ‘small-scale’ but economically and socially significant”, said Mwangi Kigo, a miner and gemstone dealer from Taita-Taveta.

The International Labour Organization (ILO) estimates that artisanal and small-scale mining produces about 85 per cent of the world’s gemstones and 20 to 25 per cent of all gold. Its mines provide jobs and income for 20 to

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30 million of the world’s poorest people and support the livelihoods of five times that number. “It employs today more people than the large-scale mining industry”, the ILO writes. Globally, artisanal and small-scale mining employs ten times more people than large-scale mining. But it takes place in very remote areas and usually involves poor and vulnerable people, including women and children.

Development agencies and national authorities have historically given little attention to the sector and how to make it sustainable, instead focusing on large-scale mining. Rather than supporting small-scale mining, governments’ policies are often poorly designed or implemented, or even repressive. The miners themselves lack access to the rights, financial services, market information and technology they need to make this is a prosperous economic activity with reduced environmental impacts. As a result, many are often driven to operate illegally.

“We need an integrated, longterm solution, and that takes political will”, says Desta Mebratu, the Deputy Regional Director for Africa at the Nairobi headquarters of the United Nations Environment Programme (UNEP). “We need joint ventures between small and large-scale miners. That way the larger companies provide learning, mentoring, financing and market access for the smaller partners.” Mebratu explained: “The process involves cultural change and education over the long term.”

Bringing artisanal and smallscale mining into the 21st century won’t happen overnight, but Mebratu said that steps are being taken towards improving it. He proposes that artisanal and smallscale mining becomes formalised, organised and profitable within the next 10 years; that it adopts efficient technologies; that it be socially and environmentally responsible; and that it develops within a framework of governance, legality, participation and respect for cultural diversity.

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Treasures and Troubles in Eastern Africa

Deng John Atem

Mining implies only a temporary use of land, so it is vital that rehabilitation of land takes place once mining operations have stopped. In best practice, a detailed rehabilitation or reclamation plan should be designed for each mine. This is important to mitigate or avoid the impact of mining on surface and underground water, soil, local land use, vegetation and wildlife.

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he science and technologies of environmental rehabilitation have advanced to a high level, allowing it to meet complex and multiple environmental objectives. However, in the light of all these achievements, the environment has often been challenged by inappropriate management in the mining sector.

As many media have demonstrated, mine areas have always been cleared of vegetation with the landscape drastically altered and the ecosystem totally disrupted.

During mining or quarrying, vegetation and soil covers are removed to facilitate the extraction of minerals or rocks by digging pits and trenches. Explosives may be used to blast the rocks. This leads to a scarred and disfigured landscape, very different from the original state.

Hazards caused by explosives and toxic waste “We use black powder in the separation of the soil layers. This makes it easier for us to carry out mining,� says Juma Majar, a miner from Mwatate County in Kenya. This explosive powder is sensitive to water and produces lots of dark smoke. It poses a serious environmental and

Group of journalists attending press briefing by Base Titanium External Affairs Manager, Mr. Si

Rehabilitating min health hazard to both animals and humans. As a result of the explosions, soil erosion can follow which leaves the rocks out-crop bare.

Unfilled pits and trenches of varying sizes and depths may act as reservoirs for contaminated water during the rainy seasons, which may become dangerous death traps for human and animal populations. They may also become breeding areas for harmful insects such as mosquitoes and other microorganisms. Excavations and use of explosives near roads or pipelines can trigger off localised earth movement such as mudflows and landslides that cause damage to the environment.

For mining certain minerals, such as gold, great quantities of chemicals are used. This chemical waste is toxic and has a direct or indirect effect on the environment. Chemicals used in mining include sulphur dioxide, cyanide, arsenic and mercury vapours, which are known to be environmental hazards at even very low concentration levels.

For example, during the mining of gold either cyanide or mercury is used. Both of these chemicals are highly toxic, and if not properly

handled, may enter into waste waters and into the water cycle, causing adverse effects on life. Mining equipment, such as diesel engines used in the underground mines, give out soot and poisonous gas emissions that pose serious safety hazards to workers and life in general.

Investments into the environment crucial Base Titanium Limited is a subsidiary of an Australian enterprise developing mineral sands in Kenya, with first bulk shipments of finished product scheduled for 2014. The company operates in two areas in Kwale, separated by the Mukurumudzi Dam. The mineralisation in these areas consists mainly of ilmenite ore, rutile ore and zircon. The chemical element titanium is mainly extracted from these ores. Titanium is used in aircraft engines and frames or pipes for nuclear plants. It can also be used in toothpaste and white paint in order to have bright white colour.

According to Simon Wall, External Affairs Manager at Base Titanium, comprehensive environmental studies were carried out which also

Treasures and Troubles in Eastern Africa

region of Kenya suffer from poor environmental management after mining activities. Some mining areas have been abandoned in highly disturbed conditions, with limited or no rehabilitation treatment.

imon Wall.

ning areas involved local stakeholders. “Our environment is safe, we are recycling water, and this water can even be used for agricultural activities and for domestic animals’ consumption”, he stresses.

As the first mining county of Kenya, Kwale attracts foreign direct investment in Kenya’s fledging mining sector. This provides a strong foundation for Base Titanium to emerge as a global resources company, and also for Kenya as a new frontier for international mining investment.

However, many areas of Kwale and Mwatate Counties in the coastal

Polluters must take charge of their actions During a journalists’ media briefing at the United Nations Environment Programme (UNEP) in Nairobi, Nick Nohall, UNEP Communication Director and Spokesperson, said: “We inform all governments, countries and regions about environmental challenges, but often they do nothing.” Nohall reiterated that UNEP needs a global treaty to curtail environmental challenges in different countries: “As treaties are still being worked out, we also want polluters to take charge of their actions on the environment.”

Desta Mebratu, Deputy Regional Director of the Regional Office for Africa at UNEP, affirmed on the same occasion that the value of land can be measured in economic, social as well as ecological terms. “Focusing on sustainable economic systems is the only way we can achieve sustainable environment”, he maintains.

Mebratu pointed out that there are many examples in which mining areas have been effectively rehabilitated to agriculture, forestry or nature conservation. In some of these instances, the pre-mining land use was restored, while in others the land use was changed. Some

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of these changes were carefully planned and implemented, while others have evolved, sometimes after the land had undergone a lengthy period as abandoned or wasteland.

For instance, Mongolia has banned mercury use in small-scale mining in 2008 to help protect its population and environment, though it is still being used illegally in the country, Mebratu added.

Meanwhile, UNEP recently released the first global assessment of the level of mercury in rivers and lakes.

The report says an estimated 260 tonnes of mercury – previously held in soils – are being released into rivers and lakes. Mebratu explains that “much human exposure to mercury is through the consumption of contaminated fish, making aquatic environments the critical link to human health”.

However, according to the Environmental Protection Agency (EPA) of the United States of America, continuous improvements are coming from better topsoil handling methods, seed collection, treatment and application methods and the planting of plants that function as windbreakers, in order to stop erosion. “By and large, all monitoring indicates that the rehabilitated areas are developing towards the stated objective”, Mebratu said. Africa still has many dense forests. However, it takes only a few weeks to clear an entire forest in order to do mining, but it takes decades to grow this forest back.

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Treasures and Troubles in Eastern Africa

Oil discovery tri development in

Given the mineral wealth, the region has the potential to grow very fast and therefore become a geographical zone for high demand and other economic activities.

Dorothy Nakaweesi

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66 oil wells out of the 79 were found in Uganda’s Lake Albert Rift Basin

UGANDA

First oil discovery in Kenya was at the Ngamia-1 exploration well

KENYA

TANZANIA

decade ago, the majority of oil reserves and production in Africa came from Libya, Nigeria, Algeria, Angola, the Sudan and now South Sudan.

Together, these countries produced more than 90 per cent of the total output. However, the tide is drifting to other regions as significant oil deposits have been found in East Africa.

Oil in Uganda and Kenya, gas in Tanzania and Rwanda, and minerals like Nickel in Rwanda. Currently, Tanzania’s gold exports comprise about 50 per cent of its total exports. Experts point out that the region has been depending upon

agriculture as its major economic activity in the last 50 years, but now oil and gas discoveries have triggered attention and development of the mineral sector which has been dormant.

Dr Adam Mugume, Policy Researcher at Bank of Uganda, agrees to this saying; “the mineral wealth has the potential to attract Foreign Direct Investments into the region which could make it cheaper to exploit some of the mineral wealth”.

World Bank’s Kenya Country Director Diarietou Gaye, quoted recently in the local media, believes that the oil and gas sector is anticipated to spur Kenya’s journey to achieving its national economic goals.

“Commercially viable oil has the potential to substantially transform Kenya’s economy as well as the livelihoods of its people”, Gaye said.

Because of these discoveries, the World Bank says that the economies of the East African Community (EAC) are projected to grow in 2013 – by 5.7 in Kenya and 6.2 per cent in Uganda while Tanzania’s growth is rated at 7 per cent. This is a good signal for investment.

Status of discoveries Last year, Tullow Oil - a British company - an-

Nickel is also mined in Rwanda

532-kilometre long natural gas pipeline to be built from Mtwara to Dar es Salaam

Mineral wealth has the potential to attract Foreign Direct Investments into the region which could make it cheaper to exp loit some of the mineral wealth Dr Adam Mugume, Policy Researcher at Bank of Uganda

Treasures and troubles in Eastern Africa

iggers mineral n East Africa nounced the first oil discovery in Kenya at the Ngamia-1 exploration well. This has since been followed by further success in the South Lokichar Basin at Twiga South-1 and Etuko-1 and most recently at Ekales-1.

In its half-year report released in mid-2013, Tullow estimated the Kenyan oil resources to run in excess of 300 million barrels. The company hinted that the discoveries made so far have hit the threshold for exploitation.

In Uganda the same company has already discovered oil in commercial quantities and is waiting to commence production. In their latest report released in November 2013, Tullow indicates an 84 per cent success rate since 2004, with 66 wells out of the 79 found in Uganda’s Lake Albert Rift Basin. The company has discovered 1.7 billion barrels of oil and has established Uganda as an important oil nation, having invested over $2.8 billion to date in exploration.

Speaking about their achievement so far, Tullow Oil Uganda’s General Manager Jimmy Mugerwa said: “Uganda’s time has come, and it currently has a first mover advantage in East Africa to compete for the investment and technical expertise that will be required to develop the region, which is fast becoming a prominent potential player in the world’s energy market”.

Tullow says that Uganda shares a similar geological structure as Kenya, an indication that Kenya’s oil

oil and gas.

Within the EAC, we have seen this starting to happen, especially with member states of Kenya, Uganda and South Sudan, in infrastructure development deposits could be viable such as the integrated $23 for commercial exploitabillion Lamu Port-Southern tion, too. The company is Sudan-Ethiopia-Transport planning to start drilling Corridor (LAPSET). Reportthe Amosing-1 well in Block ed recently in the bi-weekly 10BB before the end of magazine “The East Af2013. rican”, oil and gas firms supported by Chinese banks Working together as a Bloc have increased investments of crucial importance in large infrastructure Experts point out that for projects.

EAC to advance the new disTanzania, for example, coveries, working together is currently building a as a bloc will play a key sup532-kilometre long natural porting and coordinating gas pipeline from Mtwara role. “For instance, instead to Dar es Salaam, of Uganda and Kenusing a $1.2 ya each building its mn billion loan from own oil refinery, China, to enathey could build The number in ble the country millions, of barone large one to exrels of oil Kenya to increase its ploit the economies is expected to power generation of scale”, Bank of produce. capacity to 3,000 Uganda’s Mugume megawatts.

Upon advices. He says completion in this would make 2015, the pipethe refined oil line will allow much cheaper. the involved Another aspect partners to supply is that, given the gas to large-scale mineral wealth, the electricity producers, indusregion has the potential to trial users and major towns grow very fast and therein Tanzania. fore become a geographical

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zone for high demand and other economic activities.

Mugume said this alone was a driver of further private sector investments, for instance in the housing sector.

Overall, the mineral discoveries have made the region a potential zone for growth, especially with harmonised systems and laws as per the EAC monetary union requirement. Once this is done, it can be instrumental in advancing the regional integration in oil and gas exploitation and building regional infrastructure for sustainable exploitation of

The potential of other mineral resources The presence of oil and gas has triggered mineral development as international investors are rushing to have a taste of the cake while it is still hot. According to records Kenya has a huge mineral potential, but its exploration efforts have only peaked in the last five years with the awarding of commercial licenses in prospecting for oil, gold, coal, geothermal, titanium and not forgetting smallscale miners cashing in on the share.

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Meanwhile in Uganda, the geological surveys released in 2012 indicate that the mining sector has grown by about 12.8 per cent in the last ten years. By 2010, a total of 517 licenses had been issued to commercial investors indicating an upward trend from 66 licenses that were last issued in 1999. What is more promising is that new investors are showing interest as per the Uganda Investment Authority quarterly report released early this month.

In terms of output value, the most produced minerals as of 2010 were: limestone, cobalt, wolfram, tin, kaolin and pozzolana, but other minerals existing in Uganda include gold, diamond, and iron ore, tin, manganese and vermiculite, among others.

Investments for the future crucial However, the danger is that countries have to use the revenues from the non-renewable mineral wealth to generate income long after the minerals have been exhausted. Mugumes advice: “This requires investing for the future using the mineral wealth for this rather than for funding the recurrent government expenditures.”

Experts further advise the countries to use the mineral wealth to enhance labour productivity and build infrastructure, but not bridges that cross to nowhere or the white elephant projects of the 1960s and 1970s following the commodity booms. As Mugume points out: “It’s very critical for the region to learn from the failures of the past and design strategies that fully maximise the benefits of the new oil and gas discoveries.”

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Treasures and Troubles in Eastern Africa

Differe Kwale

PHOTO

Sharing the mineral spoils George Omondi

The old question of revenue sharing lingers on, even as mining firms increase largesse to locals. Loopholes in taxation may lead to the Kenyan Government losing billions of shillings which are badly needed for development.

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t the lower fringes of Kwale County, 50 kilometers south of Mombasa, Simon Wall passionately talks of millions of dollars that Base Titanium has pumped into the Kenyan economy. The external affairs manager of this Australian firm that has been mining in the area since 2010 tries to sell the positive effects to the public.

“This project is set to change the structure of Kenya’s economy for good”, he told a group of East African journalists during a site visit. “An additional one per cent of Kenya’s GDP will be generated from Kwale County.” Over the project’s

ent areas of the Base Titanium plant in e County.

OS | SHEILA MYSOREKAR

Treasures and troubles in Eastern Africa

13-year mine life, he added, Base Titanium will pay taxes and royalties worth $230 million, double annual earnings from minerals to $400 million and inject $900 million in procurement from local vendors.

The base for this bounty is Kenya’s newly-found mineral sands – ilmenite, rutile and zircon – collectively mined at the coast as titanium ore. They have been billed as Kenya’s next big bet on large scale mining after a dull century of extracting limestone, soda ash and fluorspar. The Australian firm expects to produce 330,000 tons of ilmenite, 80,000 tons of rutile (14 per cent of the global output) and 25,000 tons of zircon annually, making Kenya a major producer of highgrade mineral sands. “This is Kenya’s first major mining project in 100 years,” Mr. Wall says.

At an estimated export value of $178 per ton, a price already secured in future contracts covering 85 per cent of estimated production with buyers in Asia and Europe, the firm is projecting pre-tax profits of $159 million annually over the mine life. And it is very difficult to doubt Mr. Wall’s sincerity. Just three years after buying the mining rights, Base Titanium has paid $120 million in taxes and royalties to the Kenyan State and put a total of $1 million into schools, health facilities and community water supply. Another $100 million more have found their way from the firm’s coffers into the local economy through procurement of goods and services from vendors, according to the company.

Yet the math begins to disappoint at the thought of a notoriously low price of $3 million at which Base Titanium bought the mining rights.

Surprise tax breaks for Base Titanium At the mining ministry headquarters, there is a general unease over the low royalty rates and magnanimous tax incentives

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that some influential mining companies enjoy. While some industry players - such as diamond miners - face rates of up to 12 per cent, Base Titanium has been able to negotiate a royalty of 2.5 per cent for the first five years of the production, 50 per cent lower than the average regular rate.

The Base Titanium mining site has a potential for three billion tons of titanium ore.

“In the first six years of Base Titanium’s operations, it could extract a total of 2.9 billion tons,” says James Ochieng, a geological engineer at the state-owned Taita-Taveta University. Therefore, it is estimated that more than 96 per cent of the titanium deposits will have been hauled out of the country by the time the company reverts to effective royalties in the sixth year.

“The government’s revenue from the mining sector does not reflect current growth because established miners have been allowed royalties at ridiculously low rates”, Mining Cabinet Secretary Najib Balala said when he revised the more than two decades old rates in August. As a start, the Ministry announced a revocation of the so-called Export Processing Zone (EPZ) status for all mining establishments. The EPZ status gives companies a ten-year tax holiday, among other incentives.

The Kenya Fluorspar Company (KFL) and a number of cement firms – which like Base Titanium have splashed millions of dollars into community projects – were the immediate casualties of this directive. The KFL management has since issued statements saying the EPZ status did not extend to their mining operations.

With the current mineral bonanza in the country, the hidden revenue loopholes are once again emerging as matters of serious concerns. The Kenyan Government may be losing an opportunity to collect billions of shillings that it badly needs for its development agenda.

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Treasures and Troubles in Eastern Africa

On the left are the mining site owners and on the right, journalists interacting at a media briefing.

Myths on Mining in Africa

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hen it comes to mining in Africa, superstition and myths abound. These beliefs vary from place to place. Take for instance Taita Taveta in Kenya where rich gemstone mines are located. In some places of Taita and indeed some other parts of Kenya, women used to be strictly prohibited from coming to mining pits. The men believed the minerals, especially gold, will disappear when a woman comes near the mine.

In South Sudan, stories

abound of big snakes swallowing up gold. According to this myth, these snakes then vomit out large and glowing gold nuggets at night to attract insects so that they can feast on them. In what would be the most daring of adventures, treasure hunters have been reported to make attempts at snatching the glowing gold from the large snakes. Attempts to do so is said to be a life or death encounter with either the snake or the treasure hunter losing their lives. It is said that these gold swallowing

snakes are usually very old and have overgrown grey beards and eye brows and would not survive a day without the glowing gold.

In Uganda, it is well known among miners that you should not quarrel with your wife or neighbour when going to work in a mine. Miners believe that a quarrel will minimise the chances of getting gold or gemstone and at worst could even cause the mine walls to fall on miners, trapping them underground.

Meanwhile in the Democratic Republic of Congo, finding

a huge nugget of gold is not always good news. Miners believe a sudden huge find of gold is a bad omen, a sure sign of sudden death in the near future. And you would not want to steal any one’s gold in the Congo. Depending on the whims of the aggrieved party, sanctions for stealing gold or gemstones could range from simple punishment like making the thief moo like a cow to serious punishment like insanity. But the thief can always be forgiven when he brings back the stolen minerals.

Treasures and troubles in Eastern Africa

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ining generates many jobs and incomes. As a matter of fact, it also causes conflicts, not only in terms of compensation and environmental restoration issues, but also in terms of sharing such benefits between different groups of community members, including women. Therefore, getting women involved in the mining process is a way to avoid conflicts, but also to implement the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) that stands for including women in all business sectors and at all levels of society.

Karimi Ellyjoy, a women’s rights activist and technical advisor of Action Aid/Kenya, says it is important for women to get more involved in the mining sector, despite the challenges they are facing. “This is because not only do they use the same piece of land as men do and should be equally compensated if they lose it, but also women and children are the most affected by environmental hazards”, she says.

According to Karimi Ellyjoy, the number of women working in the mining sector is increasing, since this sector is gaining a lot of attention. Yet this category of workers has specific challenges such as being harassed or being paid less than men for the same work, while the government doesn’t seem to take any action. Women are abused when men insist to have sex with them in order to give them a job. They are harassed when men ask them to take off their clothes, pretending to check if they hide minerals

Involving women in mining …

13

do mining, I had to take over after my husband’s death”, she said.

Qualifying more women for the mining sector “We encourage girls in secondary school to choose sciences so that they can apply for mining engineering courses at university level”, said Taita Taveta University College Deputy Chair, Professor Christine Onyango, talking about how this educational institution is tackling the gender balance challenge. According to Christine Onyango, not many girls apply for mining studies at the university. 45 engineering students have finished their studies at Taita Taveta University College up to now. Among them, women represent less than 10 per cent.

As far as gender balance is concerned amongst her university staff, the Deputy said that the Kenyan constitution requires a gender balance of 30 per cent in state institutions, including people with disability. To meet this requirement, Taita Taveta University emphasises its equal opportunity stance in every job advertisement. “If we have five candidates with equal qualifications, the one to be chosen will be a woman, even if she came fifth, until we meet the gender balance”, she added.

In order to help women to get involved in the mining sector, the International Finance Corporation (IFC), a World Bank group member, is helping to break barriers for women in mining by running programmes across Africa. These programmes help women succeed in the private sector. Amongst other things, they support the efforts of major mining companies

BUT HOW? Women in the mining sector of Kenya often suffer discrimination and abuse

Agathonique Barakukuza when leaving the mine.

But women are starting to fight back. In Kishushe, a mining place in Taita Taveta County in Kenya, where women were being abused, they mobilised the local community and made a petition to the executive committee in charge of the local mine. Women activists are at present working out a strategy to mitigate gender based violence against female mining workers.

This includes an investigation to be carried out in 2014.

Mining has been considered as a men’s job for a long time. A woman owning a mining pool in Taita County said it had been handed over to her by her late husband. “I didn’t use to

“Behind the mineworkers is another group of people. The wives, the mothers, the daughters, the sisters - these are the women behind the mineworkers. These are the women that live in mining communities.”

Fazila Farouk , women’s rights activist from South Africa.

We encourage girls in secondary school to choose sciences so that they can apply for mining engineering courses at university level”, Christine Onyango, Taita Taveta University College Deputy Chair, Professor,

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Treasures and Troubles in Eastern Africa

Different beneficiaries as minin The new mining boom in Kenya brings new revenues and incomes as well as new social amenities. However, it is also feared that the displacement of local people and increasing prostitution might lead to social ills.

Tobias Chanji

K

wale County in Kenya is destined for a rosy future if the massive mineral deposits that include rare earths, niobium and titanium are being extracted in a big way. The Australian company Base Titanium, for example, that has already started mining titanium in Kwale, is expected to be handsomely profitable, generating pretax earnings of around 159 million US dollars annually. This is the first major Kenyan mining activity and will be the fourth most important source of export income.

Simon Wall, the Base Titanium external affairs manager, says the company has already injected 100 million dollars into the local economy through procurement of goods and services from Kenyan vendors. “We have been buying from local enterprises, small, medium and large,” noted Wall. He also adds that the livelihood of locals is to improve due to the social amenities established.

These include an eight-kilometer road from the Mombasa-Lungalunga highway to the company, and a 14-kilometer long transmission line from Galu to mine site.“At the Mrima Bwiti host resettlement site we have built the Bwiti Primary School and a dispensary, the Kiruku Secondary School, and the Bwiti Community Hall,” adds the Base Titanium external affairs manager.

However, Kwale Governor Salim

Mwatate town in Taita Taveta.

PHOTOS | SHEILA MYSOREKAR

At the Mrima Bwiti host resettlement site we have built the Bwiti Primary School and a dispensary, the Kiruku Secondary School, and the Bwiti Community Hall Simon Wall, Base Titanium external affairs manager.

Mvurya wants the local community to be consulted and the County Government to be involved in the planning of infrastructure: “It is the responsibility

of the County Government to put up schools and also health facilities. There is no need for private companies to keep on establishing schools which in the long run will not be used due to lack of pupils and teachers”, said Mvurya.

Other amenities built in Kwale by Base Titanium mining company are the Magaoni Secondary School which is under construction as well as the Magaoni Health Centre and the Fingirika Primary School.

There have not only been positive effects for the local population like improved infrastructure, but the mining activities have also caused relocation of families. 381 households had to leave the area of the Special Mining Lease, 112 households had to make way for the Mukurumudzi Dam and 86 for the access road and water pipeline routes.

In total, 486 households from Kwale were relocated due to Base Titanium moving in.

New infrastructure leads to an influx of immigrants There are not only locals being moved to new places, but there is also

Treasures and troubles in Eastern Africa

15

ng takes center stage in Kwale an influx of immigrants to Kwale – people looking for work in mining, and also because there is a better infrastructure than in nearby villages, like paved roads, schools, health facilities and electricity. Once a sleepy place, Diani town in Kwale County, which is closest to the Base Titanium mining site, sees continuous business activity, even in the low season for tourism.

“We hope this will bridge the gap between the two tourist seasons,” says Abdalla Boga, an elder from Diani.

Available work opportunities seem to be attracting a sizeable number of people. Up to now, Base Titanium mine has employed 1,200 people, 400 of them are from Kwale. Though locals have been complaining of missing out on jobs, there is no proof of this.

The population in the town of Diani has risen from 62,529 (according to 2009 census) to 75,357 currently. There is a projection of hitting 80,193 persons by 2017, according to the Kwale County Development profile. The 2009 census also states that 40 per cent of the population at that time was born outside Kwale.

Base Titanium mining site at Msambweni in Kwale County.

The private health sector is another large business that is booming. New hospitals are coming up while the established ones are putting up an improved, competitive structure. For example, Palm Beach Hospital in Diani has already entered into a contract with Base Titanium to exclusively treat their staff.

“We now have a well equipped ambulance with trained staff available 24 hours for emergency evacuation”, says the proprietor Dr. Lalit Kotak. He notes that the hospital is now serving 600,000 locals and 200,000 tourists up from a total of 400,000 of the entire Kwale County. “We deal in all medical, surgical, gynecological, trauma and orthopedic emergencies including heart attacks, drowning, road traffic accidents, fractures and dislocations, as the casualty ward is well equipped with latest equipments,” adds the proprietor.

Increasing demand for condoms Apart from health facilities, social places that include clubs are also on the rise to cater for the increasing population. For instance, it is noticeable

that there are more women than used to be near mining sites, working as prostitutes as they try to fend for their children.

Cosmas Maina, who is a coordinator with Teens Watch rehabilitation center in Diani, has been dealing with both male and female sex workers. He says not only prostitution, even the demand of condoms has gone up. “The number of women we are dealing with has gone up by 10 per cent in the last three months. In that period we have issued 35,200 condoms, which at the start of the year was below 20,000 per quarter,” says Maina.

One of these women is Nancy (not her real name) who says that she has been forced to engage in sex work so as to make ends meet. “My family back home depends on the money I send,” says Nancy.

While more jobs and improved infrastructure brought in by a big mining company are having a positive bearing on the Kwale economy, it is also feared that displacement and prostitution might lead to social ills.

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Treasures and Troubles in Eastern Africa

Scola Kamau

The Kenyan government has revoked mining licences with claims of improper awarding procedures. Neighboring Uganda and Tanzania have threatened to revoke licences amidst corruption allegations. A lack of fairness and transparency in awarding mining contracts poses a big challenge on the growing gas and oil industry across the East African region.

I

Corruption and irreg in mining contr

n August 2013, the Kenya government revoked 43 licences – among them the one for Dangote Kenya Ltd, a firm associated with Africa’s richest man, Aliko Dangote of Nigeria. A special task force formed to look into the matter set 21 companies free under unclear circumstances, including the Dangote firm.

“He (Dangote) has cooperated and issued us with necessary documents, we are soon setting his company free,” Najib Balala, the Kenyan Cabinet Secretary for Mining, told journalists. This was a few weeks before the task force declared the company as freed and prior to a visit of Dangote to Kenya. The firm Cortec, on the other hand, had its license revoked and not reviewed. It subsequently claimed government officials had solicited for a bribe. Cortec’s managing director David Anderson, in a letter dated July 29, 2013, claims that the minister demanded to be paid Ksh80 million (nearly one million US dollars) from the company between July 6 and 18, failing which its mining licences would be cancelled.

Balala denied these allegations.

Cortec had, in July 2013, announced its discovery of deposits worth $62.4 billion at Mrima Hill, in the coastal county of Kwale, Its mine was said to hold one of the top five rare

earth deposits in the world, including niobium deposits estimated to be worth $35 billion. The company’s licence was revoked a few weeks after the announcement.

The Kenyan government was to earn three per cent royalties from the niobium project and five per cent from the rare earths mining, according to Cortec’s press release. Under the Kenyan Constitution, 80 per cent of these earnings would go to the central government, 15 per cent to Kwale County and five per cent to local residents.

Base Titanium Limited, an Australian based company in Kwale, had a titanium project estimated at $300 million revoked in August 2013. The company was blamed for having provided only insufficient information about the project. Company officials admitted there was an error in the submitted forms, but critics say for such an error to be discovered after the submission of licences, there must be loopholes in the whole licensing process.

Clear government policies demanded In Tanzania, the country’s Deputy Minister for Energy and Minerals, George Simbachawene, said in Parliament that thorough investigations should be conducted to expose alleged corrupt elements in the mining industry. Parliamentarians have in the past raised

Treasures and troubles in Eastern Africa

$

gularities racts

50m

The amount in millions almost paid by Tullow Oil as an alleged to reduce the $313 million Capital Gains tax to be paid to the Ugandan Revenue Authority

concerns on the criteria used to award licences which seemed to favour international companies.

A 2013 survey by the African Union backed African Progress Panel paints a worrying scenario: International mineral extraction companies, mainly from Australia, Canada and China, are using complex ownership models to avoid taxation in East African countries. Corruption and failure by governments to scrutinise such companies fuel the challenge.

Experts say governments should have clear policies that should enable them to rule out corruption in awarding licences. “Limitations on governmental access to the mining companies’ profiles limit them (governments) from making informed decisions”, said Desta Mebratu, Deputy Regional Director of the United Nations Environment Programme (UNEP).

However, efforts by newly elected governments to establish their own laws put the mining business at stake as well. Miners often decry a lack of continuity in regulating the industry. Kenya in 2013 issued a new law that requires foreign-owned mining companies to surrender 35 per cent of their local operations to Kenyans. In Tanzania, the government raised the amount of revenue mining firms should pay to at least 0.3 per cent of their annual turnover, up from the previous ceiling of $200,000. There has been an ongoing debate in the country’s parliament where local miners are said

17

to face difficulties in getting licences, compared to their international competitors.

African governments also stand accused of colluding with the international mineral extraction companies. In April 2013, a director for tax policy in the Ugandan Ministry of Finance was named a complicit in a proposed undocumented $50 million from Tullow Oil. According to court documents, this alleged bribe was meant to reduce the $313 million Tullow had to pay as Capital Gains Tax to the Uganda Revenue Authority.

Proper auditing procedures crucial “The challenge is that the money to spend in oil exploration is not available in Africa and, therefore, we need to ensure that foreign companies invited to undertake explorations are properly audited. It is also possible for governments to facilitate local fundraising for oil activities by having models that enable even low income people to invest in the oil business through the stock market,” said Eric Kimani, a Kenyan entrepreneur and district governor of Rotary International in Kenya, Tanzania, Uganda, Ethiopia and Eritrea.

Commentators also blame African governments for failure to make proper scrutiny of the companies to which they award exploration contracts as well as an absence of national policies on oil and gas. According to officials from the Ugandan Ministry of Energy, most of the illegal licences had ended up in the hands of speculators who lacked the financial or technical ability to deliver, delaying the anticipated outcome.

Israel Kamuzora, chairman of Africa Trade Insurance, a firm working with regional insurers to improve their capacity to underwrite oil and gas risks, points out: “We should blame ourselves because before these companies are invited here, we should already have the right policies. That’s the way the Gulf countries did it. In the absence of policies on oil and gas, these issues will continue to arise, and the continent will continue losing money.”

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Treasures and Troubles in Eastern Africa

Mineral certification as a double-edged sword

A

Joe Nam

Is certification limiting or rewarding mining in the Great Lakes Region? While it seems important to cut insurgents off from revenue streams, the related costs might stifle the fledgling local mining industry.

frica is an immensely mineral rich continent.

The Democratic Republic of Congo (DRC) alone has an estimated mineral deposit worth 24 trillion dollars. To realise national development goals, the DRC has to develop the country’s mining sector and earn income from exports of raw or semi-processed minerals. This income, the country can then use to finance the national development.

Unfortunately, this is not the case. The DR Congo (formerly Zaire) was ill-governed under President SeseSeko for most part of the post-independence years. After the ouster of Mobutu in the late 1990s, the country fell into a chronic spiral of insurgency, which witnessed the rise of multiple armed groups controlling sizeable territory in the Eastern parts of the country.

The warlords also controlled the mines in these territories.

These mines produce valuable minerals such as diamonds, gold and tantalum, which are lucrative minerals in the global trade, especially in the fast-growing electronic and mobile communication devices industry. Tantalum – also called Coltan – is an important metal component in mobile phones.

Without effective state presence in Eastern DRC, armed groups act as defacto governments in these areas. They have amassed considerable wealth from mineral trade. This went on side by side with gross human rights abuses by the

armed groups who committed rape, abductions and recruitment of children as fighters, all with impunity. With harrowing lessons learnt from the civil wars in Sierra Leone and Liberia about the role of minerals in financing insurgencies and related human rights abuses, the international community got worried about a repeat of the same atrocities in the Great Lakes Region of Eastern Africa.

Discussions began about ways of bringing transparency to the minerals value chain in Eastern DRC, especially concerning diamonds and the so-called 3 T and G minerals – Tungsten, Tantalum, Tin and Gold. A United Nations investigation showed that minerals were used to finance rebellion. That was the start of the certification movement.

New instruments for mineral certification in place The Dodd-Frank-Act passed by the United States Congress in 2010 is a certification law with far reaching impact. It requires companies listed at the US Stock Exchange to declare the source of their raw mineral materials. This is meant to ascertain whether they are ‘conflict free’, meaning not produced in areas of armed insurgencies or under conditions of human rights abuses such as forced labor.

The International Conference on the Great Lakes Region (ICGLR) Mineral Certification Scheme is another initiative which seeks to establish sustainable ‘conflict free’ mineral chains. There is also the Conflict Free Tin Initiative (CFTI) which

Kamtonga mine in Mwatate district, Taita Taveta County.

PHOTOS | SHEILA MYSOREKAR

is piloting a new tracking and tracing system to ensure the conflict free status of mineral supply chains from Eastern DR Congo. In addition, a number of non-governmental organizations are also working to put in a place a system in which traded minerals can be traced to the source and certified to be ‘conflict free’.

The impact of certification Ideally, certification procedures are meant to bring transparency to the mineral trade value chain, to cut-off mineral revenues from armed groups, create predictable sources of tax revenue for governments and modernize the mining sector through the creation of best practices in responsible mining.

Varying audits show, however,

Treasures and troubles in Eastern Africa

2010

The year the Dodd-Frank Act was passed by the US Congress

that the different schemes and initiatives have so far scored a mixture of successes and failures.

Experts have warned that if DR Congo and neighboring countries do not take urgent steps to establish the mineral certification mechanism ahead of the May 2014 deadline under the Dodd-Frank-Act, US companies may stop buying minerals from the region. So far, none of the Eastern African governments have created a mechanism on mineral certification.

But there is ambivalence about certification in the United States as well. According to Republican Congressman Marlin Stutzman, mineral certification schemes are weighing heavily on international companies and local miners in the DRC. “Well, we’re making sure we’re not using their minerals, but we’re only hurting the people of Congo,” Stutzman

said.

During a recent visit by this writer to mines in Eastern DRC, smallscale miners complained about an ever increasing difficulty in finding buyers for their gold, because it was not certified. Major business lobby

We don’t want to take all the money from the gas sector to the Treasury as was the case with the mining sector, which led to the public belief that mining had contributed nothing to their lives George Simbachawene. Tanzanian Deputy Minister for Energy and

groups worldwide claim that regulations on ‘conflict minerals’ impose undue costs on corporations without bringing enough tangible results in minimising conflicts in Africa.

However, non-governmental organisations, notably Global Witness and the Enough Project, say that conflict free minerals initiatives have led to a decline in exports of minerals from conflict prone areas, cutting off revenue streams that would have ended in the pockets of insurgents.

United Nations Environment Programme (UNEP) Deputy Regional Director for Africa, Desta Mebratu, says certification of minerals is important. Therefore, UNEP is providing policy recommendations for governments and the mining industry in sustainable mining practices.

In sum, certification appears to be both a necessity and a hindrance in Eastern Africa’s mining sector.

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Treasures and Troubles in Eastern Africa

Visit to the UNEP HQ