The Mining (Local Equity Participations) Regulation, 2012 (L.N. No.118 of 2012) of 27 September 2012 (the “Mining Regulation”) introduced a major and eagerly awaited change in the Mining Act. (Cap.306) of 1 October 1940 (the “Mining Act”), which has only been reviewed twice since 1940.

Henceforth, according to the Mining Regulation, “it shall be a condition of every mining licence [issued in Kenya] that the mineral right in respect of which the licence is issued shall have a component of local equity participation amounting to at least thirty-five per cent (35%) of the mineral right”.

However, the drafting of the Mining Regulation has some loopholes that may cause interpretation and implementation issues.

For instance, the Mining Regulation does not mention whether it applies to existing mining licenses and licenses obtained before it came into force (it does not contain any transition provisions).  Moreover, the Mining Regulation is silent as to the implementation methods for local equity participation and contains new terms that have not yet been defined by the existing Mining Act.

Attorney General Githu Muigai has recently clarified the scope of the Mining Regulation.  He stated that the Mining Regulation only applies to licenses obtained after the regulation was published, and cannot be applied retroactively.

Also, from a practical point of view, there is a pending question regarding the binding nature of the Mining Regulation.  Foreign companies are not just encouraged to let local investors participate,  but are under an obligation to do so.  What if the local investors do not have the necessary financial capacities to participate?  That question remains unanswered.