Mining royalties of 7.5 billion shillings blocked in the Treasury due to rules
The government continues to collect and retain mining royalties which have reached 7.5 billion shillings, but are unable to distribute the money due to the inability of the Treasury to enter into a legal instrument necessary to release the funds.
The cash pile includes 2.3 billion shillings to be paid to county governments and communities. The billions of shillings that rest in the Treasury have accumulated over the past five years.
The Mining Act 2016 requires royalties paid by a mining rights holder to be shared by national and county governments and communities on a 70-20-10 percentage respectively.
This means that of the 7.5 billion shillings, the Treasury holds 1.5 billion shillings for the counties and 750.39 million shillings for the communities where the minerals were mined. The remaining 5.25 billion shillings (70%) is the national government’s share.
Auditor General Nancy Gathungu said the 2.3 billion shillings owed to communities and counties piled up because of the Treasury’s failure to put in place a royalty-sharing mechanism.
The Treasury has not yet concluded the Public Financial Management (Fee Fund Sharing) Regulations to release disbursements.
“In the five years following the enactment of the Mining Act 2016, a total of 7,503,885,961 shillings in royalties has been collected from various mining rights holders, translating to 750,388,596 shillings that the National Treasury should have paid to the communities and 1,500,777,192 shillings to the communities. decentralized units,” Ms. Gathungu said.
Ms. Gathungu said all revenue collected by the Ministry of Petroleum and Mines in the five years to June 2021 was transferred to the state treasury account and was not shared with county governments or communities.
She said the Ministry of Petroleum and Mines blamed the situation on the lack of a framework for handing over the royalty share to communities and county governments.
She said the ministry and the National Treasury have yet to put in place a mechanism to ensure that the share of county governments and communities is preserved until structures are in place for the sharing of royalties collected.
“Furthermore, if the county governments and communities’ share amounting to 2,251,165,788 shillings is not set aside, citizens in areas where mining activities are taking place may not benefit from royalties because the minerals extracts are finished and could be exhausted by the time structures for revenue sharing are established,” Ms. Gathungu said.
“Therefore, management broke the law.”
Ms. Gathungu pointed to the failure of the Ministry of Petroleum and Mines to carry out inspections and audits of mining rights holders as required by the Mining Act 2016, which led to the non collection of 2 .1 billion shillings of mining revenue.
“According to records and reports available at the ministry, the last inspections were conducted in 2017,” Ms Gathungu said.
Ms Gathungu singled out the ministry for failing to report cement tax arrears of 404,759,572 shillings owed by East Africa Portland Cement Company (EAPCC) which accrued over the financial years 2014/15 to 2020/2021 .
She said the arrears of 370,862,635 shillings owed by Savannah Cement Company under cement mineral tax as of June 30, 2021 had not been collected.
The ministry has failed to recover royalty arrears of Shs 675,023,295 owed by Tata Chemicals Magadi Limited which have accrued since the 2015/16 financial year.
Revenue of Sh78,490,587 due to Carbacid (CO2) Limited was not received from the financial years 2017/18 to 2020/21.
The Ministry has also failed to collect royalty arrears of Sh30,196,739 and Sh17,520,857 from Kilimapesa Gold Pty Limited and Africa Diatomite Industries Limited respectively.