Annual operating expenditure of close to US$60 million provides a significant multiplier impact across various sectors of the economy.
The Kwale Mine is having a significant impact on the country's economy. Kenya has traditionally relied on agriculture, floriculture and tourism to drive economic activity and exports. As the first globally significant, large-scale mining project in Kenya, it has opened up a new sector of the economy, propelling minerals into the top four export earners. The Kwale Mine is the flagship for Kenya’s mining sector. Perhaps its most important impact, however, is in the stimulus effect it has in awakening international investor interest in Kenya's mineral potential.
Ernst and Young undertook an assessment of the direct, indirect and induced economic and tax contribution of the mine in financial year 2015/16.
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Direct economic contribution
|Capital investment||The total invested in the development of the Project was US$350 million. Of this, the direct spend in Kenya was about US$100 million on contractors, machinery and equipment, goods, support services and employment during the construction phase.|
|Export value||At current mineral prices the export value from the Kwale Mine is US$120 million per annum. Kwale’s contribution doubles the value of Kenya's other mineral exports and elevates the sector to the fourth most important export commodity above coffee.|
|GDP contribution||The Project adds an estimated US$108 million to Kenya’s GDP annually and generates a total of US$186 million in economic output per year. Over the life of the mine the contribution to GDP will be close to US$1 billion.|
|Direct taxation contribution||Through royalties and direct taxation the estimated tax revenues to the government over the mine life is around US$225 million.|
|Employment||Over 900 people are currently employed by Base and its contractors. Of these 63% are from Kwale County and 96% are Kenyan. The Project supports an additional 2,800 jobs through indirect (supply chain) and induced (consumer spending) activity.|
Indirect and induced economic contribution
|Indirect tax contributions||Employees’ income tax contributions amounted to approximately US$5 million in financial year 2015/16, while indirect and induced tax revenue contributed a further US$5 million.|
|Local content||The mine depends heavily on local inputs, including spare parts, maintenance and operating consumables, transport, security and other outsourced supplies and services. This amounts to an estimated US$375 million over the life of mine or US$35 million per annum and represents 85% of non-labour operating costs. This supports the additional 2,800 indirect and induced jobs paying over US$14 million in wages annually.|
|Legacy projects||Longer term benefits derived from the mine will have a significant influence on the socio-economic environment in the region. On ultimate closure of the mine, infrastructure to be handed over to local authorities, valued at US$60 million, includes:
• The Mukurumudzi Dam and Msambweni boreholes will contribute enormously to the regions irrigation and water supply requirements.
• The 132kV transmission line and substation are a further step to realising the targets to establish the East Africa Power Pool.
• The mine access road will assist with links from the current Mombasa – Tanzania highway to roads planned in the future further inland.
• The port facility will be an important contributor to the industrial development of Likoni and the South Coast region.
|Community Development||Base Titanium’s Community Development Management Plan has been developed in consultation with affected communities through a process of identification and prioritisation and is aligned with the Kwale County Integrated Development Plan. By the end of financial year 2015/16 the company had invested over US$9 million in the local community.|
|Post-mining land use||The Special Mining Lease specifies that, on completion of mining, the land will be rehabilitated for the benefit of the community. The Mine Closure Plan is the driver for identifying post-mining land use (small-scale farming, commercial farming, forestry, community wildlife sanctuary, etc.) with affected communities and other stakeholders. Consultation will be undertaken to inform our rehabilitation strategy in a timely manner.|
Wider developmental and investment impact
However, a larger and wider impact will be felt with the successful development and operation of the Kwale Mine serving as an example of what can be achieved through serious and responsible investment in what is currently a relatively unexplored minerals province, because Kwale:
- has high international visibility;
- serves as a positive example for successful mining investment in Kenya; and
- establishes a model for effective development of the mining industry in Kenya.
If well regulated by an equitable policy framework and legislative regime that provides competitiveness, guarantees stability and security of tenure, Kenya’s extractives sector represents the biggest opportunity for substantial foreign direct and export driven investment over the next decade.