Wednesday, December 13, 2006

Tiomin Delay

Tiomin has sent notice that it will “delay construction of the
Kwale Project until the Government of Kenya resolves all land related issues” – i.e. some farmers have objected to the price they are being forced to give up their land to the project.

I think it is okay to ask it Tiomin will add value to Kenya: Are mining companies the right kind of investors for Africa anymore? Their legacy in most countries is not good and the Tiomin parent group has a history in South Africa. And when you look at the Fluorspar mines and companies like Magadi Soda that have been in Kenya for a hundred years, what is their contribution to the employment, the economy, citizens, and the government in form of taxes compared to five year old Safaricom and Celtel?

32 comments:

Outfoxed said...

Banks
Tiomin (k) should just play ball and reach an out of court settlement with the 4 farmers who are still holding out.

Afterall, the amount they will compensate these peasant farmers is peanuts in comparison to the billions they intend to invest and reap from their operations.

coldtusker said...

I disagree with your assessment on TAXES...

The TAXES that Safaricom & Celtel pay are actually paid for by us aka CUSTOMERS... lower taxes means lower cost of phonecalls.

Taxes are a high & hidden cost to consumers especially for services like telephone charges!

If the government charged lower taxes on beer, we could drink more! EABL does a great graphic that shows almost 75% of a cost of ex-factory beer is taxes!
Same for cigarettes!

The idiots in government charge 35/- in taxes on petrol (untaxed cost of petrol AFTER shipping, refining, faincing & delivery to the petrol station is 40/-) then complain about "high" petrol costs!

Magadi Soda mines a renewable resource. Soda Ash is a low value item & used in the industrial process for glass & chemicals. Kenya's nascent industries can't use it all...

Magadi has built a great railway from Magadi to Konza. I wish Magadi had run KR like KLM runs KQ. BTW, Naikuni was MD of Magadi Soda.

The port of Mombasa has been an impediment for Magadi to expand. They are expanding production now that the port's efficiency has increased.

Magadi Soda has been consistently profitable even while competing in a GLOBAL economy while Safaricom & Celtel have a duopoly. Furthermore, Celtel made losses (thus no income taxes) until recently.

Taxes are NOT the best way to look at a company's contribution. If the idiots in the government double beer taxes, that will NOT translate into double the economic benefit for Kenyans.

BTW, Magadi Soda employees have some of the best benefits (housing & education) among Kenyan companies.

Gathunuku said...

Tiomin playing hard ball? Call things off and invite the Chinese over.

propaganda said...

Tiomin wants Kimunya to give them: special tariffs for use of Msa port; tax exemptions (stamp duty, withholding etc); a lease modification to cover more land than was mentioned in 2004 deal; and gazettement of a "fiscal agreement".

The 8 farmers' issue will sort itself out before Christmas. And TMK don't get money to really start the project until Feb, so this is just more sabre-rattling.

bankelele said...

Outfoxed: They are not realy asking for much, when you look at the big picture.

coldtusker: The government raises money from sin taxes.

Thanks for the info about Magadi Soda.

Gathunuku: The Chinese would happily accept I think

propaganda: Some of those are typically granted to new investors, but not so much anymore

Anonymous said...

Coldtusker: I agree with you on Magadi soda's contribution to the local community and its development of the rail network.

Banks: I am gonna learn Chinese.
These guys if they get a better use for Titanium they will possibly takeover Tiomin or even better, the could buy Kwale District.

propaganda said...

Kimunya meets Tiomin tomorrow. And he may be asking about their Mobitelea...

coldtusker said...

Gathunuku -
Tiomin - Canadian firm - but I think is majority owned by the Chinese.

The China craze will bite us in the arse. They dont care about Human Rights let alone Kenya's environment!

Look at Sudan & Darfur.

Chinese projects use Chinese labour instead of imparting knowledge & skills to Kenyans.

The Chinese want Africa's raw materials & sell finished goods. They even open their own shops thus taking over the entire gamut of commerce.

The USA & UK are changing the way they deal with Africa e.g. anti-corruption laws... The Chinese don't give 2 hoots about governance. IMHO, kibaki (& narc-k) got financial support from the Chinese in return for favourable concessions from Kenya.

For those who think Chinese aid is a panacaea are thinking VERY short-term.

Anonymous said...

Tiomin on google finance:
http://finance.google.com/finance?q=TSE%3ATIO

Anonymous said...

According to the Kenya Times Tiomin story, the GOVERNMENT has NOT fulfilled its pledges to Tiomin.

Of course, you want an efficient port if you are an exporter! If KPA can't provide dedicated efficient service, let Tiomin do it themselves.

Outfoxed: The government (not Tiomin) was supposed to buy the land from the farmers.

Kenyans are OK with broken pledges but not other foreign organisations.

Instead of Tiomin, this could be Kenomin & the govt would still not fulfil what their obligations are.

Props: These conditions were already negotiated. The govt will be sued if they don't do what they promised to do. If the Kenyan govt did not want to make these tax/duty exemptions then it should have been part of the negotiations.

Gathunuku: http://www.sys-con.com/read/214557.htm
The Chinese are ALL over this! I think most of the ore will be exported to China.

Banks - Are petrol taxes (75%) also sin taxes?
My point is the government over-taxes & overspends for the goods & services they provide.

xtra-cash said...

I think we all in agreement that the government over taxes without providing services but for the politicians, as the proposed President's salary increase shows. The government should protect those poor farmers and the enviroment. It shouldn't matter who owns Tiomin.

Ssembonge said...

I find it hard to believe that 7 farmers are holding Tiomin ransom. How much of the land do they own.

For now the only only options are to compensate the farmers for the market value of their land. Failing to do so, the govt should exercise eminent domain over their plots.

I thought the govt holds custody to all the land in Kenya.

jke said...

The Chinese...oh my....

As for contributors to the public: what about the flower farms around Naivasha?

Coldtusker, I get your point on the Soda company + the salt being a renewable resource. Makes me think we should have more companies in Kenya that make money from renewable resources (energy,etc.).

evergreen said...

It is reasonable to question whether Tiomin will add any value to Kenya and rightly so in the context of observations on foreign mining companies in Africa. They just rip these countries of resources with most of the benefit going elsewhere.

There are so many issues to be addressed-social, environmental and economic- and Tiomin in my opinion has not been sufficiently open.

The government is another issue altogether-some foreign company comes in promising economic heaven????? and equally significant issues take a backseat.very typical

i read that they plan to ship the raw mat abroad for processing. Will they mitigate their environmental damage or is that another thing they dont care about and no one can hold them accountable because of their aid?

propaganda said...

Coldtusker: Kenya Times might have it wrong: Tiomin's statement says the conditions were part of their loan agreement with their lenders then implies they are also part of the mining lease. Unless KT has said it has a copy of the lease or has a Govt source (or other independent source) to back this 'fact', then it's just a claim Tiomin is making. My take is that they're negotiating via the media -- if Toronto exchange rules didn't compel disclosure -- and they have clearly got you and KT believing them.

Ssembonge: The seven farmers control just above 100 acres. Govt is taking the land by force, but due to separation of powers, the court challenge must be allowed to play out. Ruling Dec 21, and they're out shortly thereafter.

sijui said...

The Tiomin saga is a classic case of why we need a ROBUST property rights and real estate system. The farmers are well within their rights to hold out, especially in a purported open economy where the laws of the market rule. Of course that remains a pipe dream and instead the government's heavy handedness and collusion with foreign investors for short term gains, leads to intimidation of small landowners.

I'm not saying Tiomin has not made a conscious effort to negotiate based on fair market value, what I'm saying is that in a fluid real estate market, property owners ALWAYS hold out for a better deal if they get a whiff that they're leaving money on the table. TIOMIN should put on their poker face and deal with the landowners instead of waiting for the usual corporate welfare that gullible Third World countries offer.
And I second and third what has been said about idiotic and self defeating tax regimes.........the strategy has always been give huge concessions to a few major players in return for patronage and a piece of the action, and then TAX the hell out of them to keep the government afloat. Rather than leveling the playing field for everyone and providing broad based incentives for corporate growth SO that a diverse and large private sector provides the necessary tax revenue through sheer volume.

coldtusker said...

This is a far more complex subject than a short blog. Its easy to blame the "foreign, exploitative" firms.


IMHO, the Tiomin deal was poorly negotiated BUT unless there was a provable case of corruption the government could be sued for MILLIONS if not BILLIONS since it could be deemed a breach of contract.

I wish we - the piblic - had access to the underlying documents to assist us determine the real situation. Neither party wants to take the blame!

If the govt exercises eminent domain then the farmers might lose more their land regardless... sooner or later.

Furthermore, if the project dies then the farmers will not be able to sell their land except to another miner. I doubt the land is worth 80,000/- without the Mining Rights.

Property Rights - The government owns all the land 6 feet under i.e. you only own 6 feet of depth! So even if there is oil UNDER your property, it ain't yours!

Kenya needs an open/transparent system for negotiating such contracts. We also need skilled negotiators who are well versed in issues that include Human Rights, Environment & Economics.
Yes, that is difficult to do in present day Kenya.

IMHO, Kenya should have had a processing facility for the Ore but there may be economic reasons i.e. much cheaper to process in an EXISTING plant closer to the ultimate users.

I do not know enough about Mining, Titanium or Uses.
The ore is a stable commodity but are the constituent products i.e. can remain "safe" when transported?
Are they subject to oxidation en route?
Do they have to remain "fresh"?
Do they require a constant & quality supply of electricity/power?

There are many questions...

I hate exporting Raw Materials but sometimes that is the only economically viable solution.

We import Crude Oil then process it in Mombasa at 3/- higher than the Mid-east producers can. This benefits a few against many more Kenyans!

An example: The Mid-east producers can use "cheap" Natural Gas to produce electricity/heat/power to run their refineries while Kenya often needs to import thermal fuels to do the same!

toiyoi said...

@gathunuku
Chinese/Russians? The west (US/UK) may be evil(whatever that means) but they at least have some relatively good "guiding principles?" such as "Human rights", poverty, etc. Consider facts such as the US/UK citizens pressurizing their Govt to do something about Dafur. (Compare with Chinese/Russians citizens compalining to their governments about external nations' suffering)

But the chinese? Look they do biz with Sudan as if Darfur/southern Sudan did not exist. I fear for us selling ourselves wholesale, again.

Secondly, how do they reciprocate? What products from kenya get into china? Chinese Tea from kenya,maybe? Coffee. Nada.

One would have imagined that after having been bitten by the loans/grants/trade agreements with the west, African nations would have been wiser. But, alas, we cry to be "forgiven" and then jump to bed with the next bloke that comes along!

Anonymous said...

I think African Nations have a battered spouse syndrome (no offense to genuine cases) whereupon we go back being abused again & again... and we choose not the reformed spouse but find a new (unreformed) partner.

Get over this "Chinese" dream!

Toiyoi is RIGHT... we will end up buying our tea from China! Who remembers that old "beef" repacked into new tins & sold at Nakumatt!

SIJUI said...

I'm sorry but I don' buy this "the West operates based on a set of guiding principles" aka human rights etc.........HA!!!!! On which planet? The West has been as conniving, ruthless and under-handed as the garden variety aspiring imperialist. Cold, calculated geo-political interests have always reigned supreme, and they have been very open about that fact too. Note the current discourse going on about Iraq and the U.S. hitting a clusterf**ck precisely because they have 'deviated' from this playbook.

I prefer the devil who stabs you to your face, than in the back under altruistic pretences. Business is business, China wants resources that Africa has......they have the potential to be the largest consumer market in the world.......they have technology and expertise that Africa can exploit at a cheaper cost than from the West.....they don't waste time on frivolous and empty niceties.

Africa has to learn how to play with the big boys i.e. the geopolitical chess game. Emerging powers always negotiate from a position of exploitation and self interest, this has been the case since the time of Adam. China literally and figuratively provides the last opportunity to 'ride the tiger' if only we master the art of avoiding its fangs. I argue its time to learn fast!

toiyoi said...

@sijui
See what i wrote:
"..least have some relatively good "guiding principles?" such as "Human rights", poverty, etc.."

-relatively is the keyword

Now you say
"they have the potential to be the largest consumer market in the world.."

True. American is struggling to tap into that market. But mention one Kenyan product that will penetrate that market. Padlocks? Sufurias? Crayons? Software? Lets not deceive ourselves. This is a big boys market and we do not seem prepared for it nor know how to negotiate our ways into it.

Consider this: Even with the AGOA, meant to give us somewhat of a "trade advantage" with the US (can any one deny this?), we still screw it up and end up using raw materials from China/India, how serious are we?

How, pray me, can we be helped? Are these not the issues Kimunya/Tuju should be grappling with instead of "whatever they do"?

Steve said...

Obviously a subject close to many's hearts.

The whole Chinese in Africa thing is now getting lots of attention from lots of places, but like with any other relationship. the key in making the relationship successful is sound management combined with wide-ope eyes. Trade of itself is not bad and in all honesty, the businesses coming in are private not government concerns.

My feeling is that it is a bit unfair to argue that they have no regards for human rights when you consider that there are European and American businesses that have been operating in the same region that the Chinese are now trying to get into under the same conditions (ie not caring for human rights etc etc) since forever.

But like someone said, this ground cannot all be covered in a single post.

xtra-cash said...

Me thinks, It's not what the chinese or the west want from us, it's what we want from them. Problem is, we send idiots or compromised people to negotiate for us and end up getting f***d. Until we put the interests of our citizens first, we'll never reap the benefits of our resources. The perpetrators might change, though the game stays the same. They look out for themselves first, thats the nature of the business.

bankelele said...

Riba Capital: Learn Chinese at UoN

propaganda: Mobiltelea huko pia? wacha!

coldtusker: I think all nations invest in 3rd world for economic reasons. And durign the cold war, western nations paid lip service to human rights. The Chinese are furthering their interests in the best way they know how.

As for Tiomin, I'd like to have them do the factory here, not just excavate and go process in Canada. Tiomin will also build their own port in Kwale (and not have to use KPA/Kilindini for their shipping)

Tiomin may have been poorly negotiated but it's up to us to improve our negotiating/bargaining skills as Kimunya/Kagwe/Ndemo are doing with Vodaphone

xtra-cash: The world over, most governments provide less service than citizens want. I'm just afraid if these farmers get a new payout, others will also ask for their deals to be renegotiated

Ssembonge: Right, Tiomin should just pay, unless the demands are outrageous. Also I think courts/judges are on holiday from today till January

jke: Flower farms are (for now) human capital intensive and provide some good employment. Long term effects we are not sure of yet though

evergreen: i was arguing that mining companies mostly have a poor legacy in Africa

sijui: Property rights are quite good for the most part.

toiyoi: US/UK have been preaching human rights to Africa only since the cold war ended and they don't do it enough in the (oil producing) middle east.

We have to be firm in our dealings with China and other new partners (see Museveni's coments when he opened the Kampala Serena a month ago)

xtra-cash & Steve: agree we should manage new relationships better so we don't keep getting exploited

warogiwawili said...

Hi guys, Lets not try and demonise China and claim the west is better.. All these countries do not have our interests and we should take care of our selves. Look at what goes on in Nigeria s oil rich parts and Angola. Who kept Moi and Mobutu in power for so long? All these guys only care about a market for their goods and services.

propaganda said...

Banks: Lest my credibility be called into question: The New York Times has linked Biwott to Tiomin. Can't get you a direct link, but here's a story that refers to the piece. The suspicion of "hidden shareholders" has been around for a while. This is because Tiomin has two subsidiaries, Tiomin Kenya and Kenya Titanium, whose shareholding structure invites speculation. Here's the official explanation.

Gathunuku said...

Without getting bogged down with details, here are the way things are. Tiomin is essential a Canadian company. They go over to Kenya and acquire mining rights for substantial titanium deposits. China's almost insatiable appetite for metal ores inevitably has Tiomin rendezvousing with them.
So Tiomin is actually a middleman of sorts here. The Chinese, if invited, would have happily come over, invested whatever GOK asked and gone to mine without a patronising sermon.
A bit of a reminder, politically correct rhetoric (human rights, environmental protection, development partnership etc) is not particularly edible. End of the day, everyone is looking out for themselves. Even the west. Especially the west. And besides, we can sort our own problems. Didn't Lt. Sumbeiywo so ably demonstrate that in Southern Sudan?

Anonymous said...

The more things change the more they stay the same. The chinese/america debate is a rehash of the British/America debate of the 60's and early 70's. Should Africans deal with a former ruthless, coniving "partner" or deal with the new "partner". The new partner even talks about a partnership of equals!!! In the 60's the U.S. came and airlifted people to get an education, Wangari is a beneficiary. We are going through the same motions with the Chinese. We will talk a good game about negotiation, getting a fair share, learning from past mistakes, and walk right into the same trap. ColdTusker you are right we are like an abused spouse. Saying it will be different this time around. One good example, would be to look at the contracts the Chinese negotiate with outsiders, would they agree to the same terms that we agree to?

Anonymous said...

Tiomin was allowed by the High COurt to continue mining by striking down the farmers' lawsuit.

It seems that the land is being leased thus the farmers might even get the land back (less the Titanium deposits). I have no idea if the land will be arable after the mining is completed.

The farmers entered into a contract - was it coerced? - and haven been provided with alternate land elsewhere.

Without having all the facts, I think some farmers are better off with cash & land... but I hope there are no lasting environmental degradation of the land.

Anonymous said...

Fellow Kenyans,

Kuna mtu hapa amesikia kuhusu kitu inaitwa Multilateral Investment Guarantee Agency (MIGA)?

This is "the Gorilla's"
jugular.

The following presentation was made to the Government of Canada this last September, at The National Roundtables on Corporate Social Responsibility and the Canadian Extractive Sector in Developing Countries:

Please scroll to the section on Toronto (Sept 12, 13, 14), under Written submissions (World Economic Justice):

http://geo.international.gc.ca/cip-pic/current_discussions/csr-roundtables-en.asp

Or directly to:

http://geo.international.gc.ca/cip-pic/library/CSR_Toronto_Submission_World_Economic_Justice.doc

MiningWatch Canada's presentation at the Toronto Roundtables:

http://www.miningwatch.ca/updir/MWC_roundtable.pdf

And last, but certainly not least, Tiomin's MIGA-connection:

http://www.bicusa.org/Legacy/Africa%20EI%20projects%20May%202006.xls

More on MIGA later.
---

wanyee
(Ottawa, Canada)

Anonymous said...

Here's the link to that presentation again:

http://geo.international.gc.ca/cip-pic/library/CSR_Toronto_Submission_World_Economic_Justice.doc

And MiningWatch;
http://www.canada.com/ottawacitizen/news/observer/story.html?id=fd182e92-b450-49e3-a2b1-2f92c2a1ea3c

I hope they work this time.

wanyee

Anonymous said...

Let's try this again;

In summary;

"The Gorilla's" jugular is
the Multilateral Investment Guarantee Agency (MIGA).

I have posted a few pieces on this issue, which I consider to be very pivotal to all Kenyans, for several reasons. If you would like to learn more or stay informed on the Tiomin saga, please go to Jukwaa (via google), and refer to the thread on "The Titanium Issue".

wanyee
(Ottawa, Canada)

www.worldeconomicjustice.blogspot.com

(I'll sign on as a blogger next time)

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