Mining firms starve State of billions in unpaid royalties

Mining firms starve State of billions in unpaid royalties

Workers clean outside the Athi River Mining (ARM Cement factory in Kaloleni within Kilifi County, December 11, 2013. Cement producers and mining companies have for years failed to pay levies and royalties running into billions of shillings.

Some of the companies have disputed the amount the Mining Ministry is demanding, while others are in dire financial straits, casting doubt whether the government will ever get its dues.

According to Auditor General Nancy Gathungu, cement manufacturers owe the State Sh1.72 billion in cement levy. READ MORE

Another Sh1 billion is owed by miners, who have not been remitting mining royalties to the government.

In the audit report on the National Government for the year to June 2020, the Auditor General paints a picture of an industry where players appear to flatly refuse to pay their dues to the government. Gathungu also alludes to a general laxity by the government in collecting outstanding arrears.

Savannah Cement, according to the audit report, owes Sh375.86 million followed by the State-owned East Africa Portland Cement Company (EAPCC), which owes the government Sh280.33 million. Others include Athi River Mining, which has been taken over by National Cement (Sh255.53 million) and Rai Cement (Sh25.78 million).

The Auditor-General expressed doubt as to whether the government would be able to recover much of the money going by unfolding scenarios among the different players.

No evidence

For instance, Savanna Cement has gone to court challenging the amount that the government is demanding.

For its part, EAPCC – which had not remitted cement levy between the financial year to June 2015 and June 2018 – has been experiencing financial difficulties, reporting a net loss of Sh2.77 billion for the year to June 2020.

Athi River Mining has since been taken over by Devki’s National Cement. While ARM’s receiver-manager paid the firm’s creditors, it appears that the government was not on the list of those owed by the firm.“ARM Cement Plc was acquired by the National Cement Company Ltd as a going concern for a purchase price of $50 million (Sh5.2 billion), and a distribution was made to all creditors in April 2020 as per the administrator records,” noted the Auditor-General.“However, the outstanding cement levy arrears of Sh255.53 million at the time of acquisition was not settled from net proceeds realised from the sale. Management did not explain why the outstanding levies were not settled after the sale of the ARM assets, and no evidence was provided to […]

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