NAIROBI, Kenya, Sep 16 – Following reports that Kenya has commercial deposits of various minerals, economists are now advising the government to invest the proceeds from mining in the services sector.
Standard Bank Group Chief Economist Goolam Ballim argued that doing so would ensure longevity and sustainability of the economy.
"Any political and economic leadership needs to recognise that discoveries of gold or iron ore deposits should be used to fund developments in secondary and tertiary sectors," he told Capital Business.
The country has in the last few weeks been awash with news that not only are there huge coal and iron deposits in parts of Meru but unconfirmed reports indicate that there is gold available in commercial quantities in Western Kenya as well.
Although senior government officials have remained mum on whether or not Kenya has hit the jackpot in terms of gold availability, Energy Minister Kiraitu Murungi has confirmed the iron ore and coal findings adding that they are keen on setting up steel mills to begin production.
And while it might be a few years before commercial mining can commence, Mr Ballim argued that the economy could begin to benefit both in the short and long term from the find.
This is because news of the resource availability is likely to attract Foreign Direct Investments into the country in the exploration and extraction areas.
"The very idea of the deposits being found and the commitment to extract them will invite foreign investment. So the early stage-investment will be positive for economic growth while over the long term the revenues from the minerals will also have its economic benefits," the economist added.
Although the minerals are a welcome find particularly at a time when their demand in the international market is so high, Mr Ballim cautioned authorities to be careful how they spend the funds generated from these resources.
Doing so would escape the curse associated with the discovery of mineral resources in Africa which is as a result of what the economist termed as a \’policy mistake\’.
These views seem to support those of former Kenya Shell Managing Director Eng Patrick Obath who argues for an urgent implementation of the Extractive Industries Transparency Initiative, which clearly outlines how and where revenues from the country\’s (extractive) industries will be utilised.
These remarks were made at a time when there was speculation that Kenya might discover oil and gas from which the government responded by pledging to review the Petroleum Exploration and Production Act.
But with recent developments, it is important for the government to come up with an inclusive policy framework that will cover all aspects of natural resources.