Nairobi, Kenya — 11 July 2013 – The government of Kenya is to form a state-owned company that will hold stakes in mines and establish a sovereign wealth fund to manage revenue from the industry.

Bloomberg News quotes mining secretary Najib Balala as saying that the government is repealing a law that required at least 35% domestic ownership, reducing it to 10% that will be held by the government. The new legislation, creating what will be known as the National Mining Corporation, is expected to be enacted by November, he added.

“We are waiting for the new bill to be approved by cabinet and parliament,” he said.

Kenya is the world’s third-biggest producer of soda ash, used in the manufacture of glass, and ranks seventh globally in output of fluorspar, used to make steel, according to the U.S. Geological Survey. The country also has deposits of gold, rubies and sapphires, though the industry represents less than 1% of its gross domestic product, according to the African Development Bank.

Investment in natural-resource development trails other countries in East Africa including Tanzania, which is Africa’s fourth-largest gold producer, and Uganda, which found oil in 2006 and may start producing the fuel next year.

Tata Chemicals Limited, based in Mumbai, India, produces soda ash at Lake Magadi in Kenya, while Australian-based Base Resources Limited owns the Kwale mineral-sands project in south-eastern Kenya and Goldplat plc operates a gold mine in western Kenya. Cortec Mining Kenya Limited, a Nairobi-based exploration company, plans to start production at its niobium project in south-eastern Kenya by 2016.

Balala, who was appointed as head of the newly created Mines Ministry in May, said his priorities as cabinet secretary include conducting an airborne survey to determine the number of mineral deposits in the East African country.

The government estimates there’s as much as 1.5 billion metric tonnes of coal in four of 31 exploration blocks in Kitui, eastern Kenya, he said.

Kenya also envisages becoming a minerals-trading and processing hub, Balala added.

“My plan is to have a metal and minerals exchange, to have a gold refinery and exchange in Kenya and also to be a value-addition centre for gemstones, iron ore, manganese and the heavy metals,” he said.

The proposed new law calls for the creation of a Mineral Sovereign Fund into which a quarter of mining royalties received by the government will be held for future investment, Balala explained. The state is proposing that three-quarters of total royalties go to the national government, 20% to county administrations and 5% to local communities, he said.

Source: Bloomberg News. For more information, click here.