Kenya’s long-held dreams of producing cheap industrial power are being revived after President William Ruto signalled that coal deposits in Kitui County will be exploited.
In a major policy announcement informed by pressing energy needs, the President said Kenya was losing billions of shillings in foreign exchange every month to import coal for various uses when the resource is abundant locally.
President Ruto said it was not logical to import coal when we can exploit the deposits in the Mui basin for the economic benefits of the country and the people of Kitui.
“We need to ask ourselves the rationale of importing coal from other countries when we have our own, and we can make sure the people of Kitui benefit from the foreign exchange that is currently going to South Africa and other parts of the world,’’ he said.
Dr Ruto said he will lead discussions on the coal mining project so that Kenya can balance its ambitions on green energy to combat climate change and the economic benefits that the resource provides.
Manufacturing costs
He said: “Kenya’s natural resources will be used to grow our economy in a manner that supports local manufacturers to create jobs for our unemployed youths while boosting tax revenues in our country.’’
The President, who announced the new policy when he launched a steel plant built by Devki Steel Mills in the Samburu area of Kwale County, said he wants to bring down the cost of manufacturing so that Kenyan-made products can compete favourably with imported goods.
Kenya spends a large amount of her foreign exchange earnings to import coal and crude oil, he said, and reviving the coal mining project will provide a new driving force for industrial development in the region.
The coal deposits are billed as the best alternative source of cheaper energy as Kenya needs affordable power to drive its Vision 2030, the economic blueprint that aims to it an industrialised country in eight years.
Earlier, Trade and Industry Cabinet Secretary Moses Kuria said Devki Steel alone was importing coal worth Sh1 billion every month and that importing the resource should be banned to fast-track the exploitation of the Kitui deposits.
“Time has come to mine the coal for obvious benefits to the country because we have been building the economies of other countries for too long,’’ Mr Kuria said, urging the President to swiftly engage Kitui leaders to jump-start the mining project.
Turning to coal, Dr Ruto said, was part of a broad shift in government policy that favours production, value addition and supporting Kenyan industries to operate at the optimum level by saving on foreign exchange.
“Government policy is going to be informed by how it benefits the ordinary people and investors creating jobs for Kenyans or contributing to tax revenues to develop our country,” said Dr Ruto.
In the past five years, he said, brokers and middlemen had ensured government policy was twisted to favour imported products at the expense of local manufacturers thereby frustrating the industrialisation agenda.
Regret
As a result, the President regretted that 16 steel plants had closed because the investment environment was not conducive enough, but he assured foreign investors that the government will adopt robust policies to ensure doing business in Kenya is cheaper and guarantees returns on their investment.
“We have agreed with the Kenya Association of Manufacturers that we’re going to increase manufacturing contribution to GDP from the current seven per cent to 20 per cent by the year 2030,’’ he said.
The announcement came as the 27th UN Climate Change Conference (COP27) ended in Sharm el-Sheikh, Egypt, where President Ruto urged UN member states to stop procrastination and act with the urgency needed to address the worsening climate crisis.
However, aware of the mixed reactions the plans are bound to elicit, he said Kenya will balance between the green agenda and its obligations in combating climate change while exploiting coal.
Kenya’s plan comes as the global coal trade has steadily improved this year, with several European countries reportedly shifting back to firing coal plants as the world scrambles to secure energy sources because of the Russia-Ukraine war.
According to export data from South Africa, the country’s coal exports to Europe grew more than five times between January and September this year, with global seaborne coal loadings recording an unprecedented high of 957 million tonnes, up from 258 million tonnes the same period last year.
In January, Ethiopia announced that it had licensed eight mining firms to exploit and establish coal-fired plants in different parts of the country.
The coal mining project stalled in 2014 after the signing of the Benefits Sharing Agreement (BSA) between the government and a consortium of Chinese and Kenyan investors – Fenxi mining company and Great Lakes Corporation – who won the mining contract.
The public ceremony, held at the Musila Gardens in Mwingi, was the culmination of a 15-year coal exploration campaign that involved drilling 100 wells in the Mui basin.
Energy and Petroleum Cabinet Secretary Davies Chirchir, who held the same docket between 2013 and 2015, signed the concession on behalf of the government, allowing the Chinese investors to begin actual mining works.
Former President Uhuru Kenyatta appointed a Cabinet committee on the coal project comprising Mr Chirchir and the Treasury; Mining; Lands and Housing; and Water and Environment ministers.
The committee was to oversee the development of a road map for Kenya to increase its electricity generation capacity by 5,000MW, from 1,644MW in 2013 to 6,700MW in 40 months.
According to the BSA documents, Kenya was to get 23.6 per cent of revenue generated from the mining project in coal blocks C and D, among a raft of other benefits negotiated by the government.
The government was to acquire an 11 per cent stake in Fenxi Mining Company, meaning it was to be represented on the firm’s board and be part of all decision-making processes related to the project in order to protect the public interest.
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