Why Kulundu Ignored Pleas on Tiomin

Why Kulundu Ignored Pleas on Tiomin

Analysts say the apparent rush to license Tiomin could lead to the loss of hundreds of millions of dollars of investment

by John Mbaria, The East African, Nairobi, Kenya

Monday, June 30, 2003

Prior to announcing the licensing of a Canadian Company, Tiomin Resources Inc, to mine titanium in Kenya's Coast Province last week, The EastAfrican has established that there was intense behind-the-scenes manoevering to end the eight-year titanium-mining controversy.

Apart from disowning a public forum called to discuss the mining proposal, elements in the government had pressurised Minister for Environment, Natural Resources and Wildlife Dr Newton Kulundu to speed up the licensing of Tiomin. The government had also shown unwillingness to comprehensively address controversial issues raised around the proposed mining venture. In a letter written on May 30 by the Head of the Public Service, Francis Muthaura, to Dr Kulundu, the latter was directed "to speed up the licensing of Tiomin (in order) to start mining titanium in Kwale."

Mr Muthaura complained in the letter that the project had "taken unduly long to commence" and asserted that "the mining should start with areas where land issues have been resolved," saying that "the rest will be sorted out as the mining expands."

Apparently, the same sentiments had been expressed by the Minister for Housing, Roads and Public Works, Raila Odinga, when he visited the Coast three weeks ago. Addressing a meeting in Bahari Constituency of Kilifi District, Mr Odinga had urged his environmental counterpart to speed up the process.

The government's rush to license Tiomin appears to have been an attempt to prove to potential investors that it has got its act together. This was confirmed by Dr Kulundu, who said last week that several investors who had expressed interest in mining gold in West Pokot, Turkana and Migori districts and coal in Kitui, Makueni and parts of Taveta have been watching closely how the government handled the titanium issue.

But analysts say the hasty decision could lead to the loss of hundreds of millions of dollars of investment. Although Dr Kulundu said that the government had been talking to two South African companies - Richards Bay Mining Ltd and Group Five Company - with a view to their setting up a processing operation in Kenya that would buy the mined minerals from Tiomin, he conceded that it had not put in place measures that would ensure upgrading of the titanium locally to actually took place.

"The agreement (between the government and Tiomin) has not been worked out," Dr Kulundu said, adding, "All other issues of concern will be addressed through the mining agreement."

It is curious that the government should have approached Richards Bay Mining Ltd. The company refused to host the Kenyan delegation sent to study the processing of titanium in South Africa in March, saying that doing so would not be in its "best business interests."

By licensing Tiomin, Dr Kulundu said that the country would be getting Ksh50 billion ($670 million) would be benefiting from investments, while the government would be earning Ksh460 million ($6.1 million) in taxes and royalties each year for the first five years and Ksh810 million ($10.8 million) in the next 16 years.

But the country may have to forgo hundreds of millions of dollars in investments. In an exclusive interview with The EastAfrican a month ago, Tiomin's Kenya representative Colin Forbes had categorically ruled out engaging in any upgrading of the titanium ores beyond cleaning them for export. "Putting up the (smelting and roasting) plants would be uneconomical," he said, adding that the quantity of titanium in Kwale was "too small to allow for the realisation of costs."

By its own assessment, the Canadian company puts the gross value of the entire Kwale mineral deposit at $922 million when upgrading is not taken into account. But a subsequent study, Alternative Approaches to the Mining of Heavy Minerals, commissioned by the International Fund for Animal Welfare (IFAW) in 2001 - and which actually applied Tiomin's findings in its analysis - says that upgrading of one of the constituent minerals, rutile, would raise this value to about $1.5 billion, besides generating between $2 and $3 billion in multiplier benefits.

A materials engineer with the University of Nairobi, Dr Kamau Gachigi, said, "How this money circulates in the local economy would depend on the structure the government puts in places."

Meanwhile, the government's dissociation from the public forum last week is seen as an about-turn on its earlier pledge to peg its decision on whether to licence Tiomin on the views of stakeholders. Before he dissociated the government from advertisements placed in the Kenyan press last week, Dr Kulundu had earlier said that his ministry would be hosting the forum before the mining lease is issued.

But the forum, which was called to discus the topic: The Titanium Question: Prosperity or Slavery? went on as planned. It was held at the Ufungamano Hall in Nairobi and was sponsored by local NGOs Environmental Liaison International and ActionAid.

Following the government's about-turn, various civil society groups have expressed suspicion that many of the most contentious issues in the long-running saga will be ignored and clamour for the processing of the minerals locally hushed through promises that later prove difficult to implement.

In his May 30 letter to Dr Kulundu, Mr Muthaura had written that "the mining licence should include conditions which will encourage processing of the titanium in the country as soon as conditions are favourable." But a commentator from civil society expressed disappointment, saying that merely "encouraging" the processing does not make it "mandatory" for Tiomin to upgrade the minerals.

The government's action deals a blow to a long-running campaign by civil society groups to have Tiomin commit itself to environmentally-sound mining. By sending a delegation to South Africa, the government seemed to have agreed with the civil society argument on these issues.

Although Dr Kulundu did not reveal the actual nature of the government's negotiation with the two South African companies, Mr Muthaura's letter had said, "The license should provide that both the company and the government encourage, welcome, (and) co-operate with an investor interested in processing the ore in the country."

Analysts believe that it will prove difficult to bring in an investor once Tiomin embarks on the mining. "Now that Tiomin has received the lease, it will definitely go ahead and make supply agreements with overseas companies ... agreements that it will find difficult to break away from in order to start supplying a Kenyan-based processing company," said an economist in the Ministry of Finance.

Last week's issuance of the lease calls into question the government's commitment to bringing about meaningful changes in the management of the economy.

Even with claims of likely environmental consequences dominating debate on the mining proposal, the government had not done its own environmental impact assessment, neither had the geology department made an independent analysis of the titanium ores to ascertain their actual quantity and composition.

"Like its predecessor, the current government does not want to soil its hands and do an independent analysis even though the country has the necessary equipment," said an official with IFAW, adding that before issuing the permit, the government should have ascertained whether the ores contained as much iron ore and radioactive elements as had been claimed in an environmental impact assessment by experts from Kenyatta University.