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Capitalism and the Pied Pipers of Our Time

11 min read.

The tale of Elkhorn is not one of a town laid low by rampant diphtheria but one of business as usual in spite of that awful disease. This once-thriving mining town in the United States became collateral damage in the capital wars among the one-percenters of the Gilded Age. With COVID-19, it’s happening again today, but at a vastly greater scale and with devastatingly widespread consequences.

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Capitalism and the Pied Pipers of Our Time
The ghost mining town of Elkhorn, Montana. Photo: Flickr/Henry Smith
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After nearly five months locked down at home in the small city of Bozeman in southern Montana, my wife and I recently ventured out for a hermetically sealed road trip. Many of our compatriots were still not taking the COVID-19 pandemic seriously enough, and we wondered if there was someplace within a day’s drive where we could avoid unmasked human spillover from local taverns, family reunions, birthday parties, football games, rock concerts, rodeos, political rallies, county fairs, farmers’ markets or protest marches.

Although rich in social activities, Montana is better known for its big sky landscapes, isolated nooks and crannies and local populations that can be counted on the toes of your two feet. Here, a GPS is useless for lack of detail, so we consulted a real, 3-D atlas to find a suitably quiet spot for a picnic, and off we went.

Just over an hour out, we turned from a minor highway onto a dirt road and followed old tree blazes, breadcrumbs, chunks of rusted cast iron and other detritus deep into the mountain forests of the southwest corner of the state. Our excursion came to an abrupt end at the forlorn little hamlet of Elkhorn. (Population:10)

In the 1880s and 1890s, Elkhorn was at the centre of the richest silver mining region in the world. The nearby town of Boulder boasted that it had more millionaires, per capita, than any place on earth. Elkhorn’s population once topped 2,500 and consisted of miners, engineers, shopkeepers, teachers and a sufficient number of doctors, dentists, lawyers, surveyors, assayers, carters, blacksmiths, bartenders and prostitutes. Unusual for a Montana mining town, many of the workers, mostly from Europe, brought their families with them.

The mine and most of the remaining structures are now in ruins, with only a couple of buildings reoccupied by service sector hands dangling trinkets or claiming to be hunting guides. What caught our eye immediately was a rustic sign pointing to the Elkhorn cemetery, which was almost a mile out of town, around the backside of a mountain along a rocky, overgrown, forest track. There we found the perfect day-trip destination in a COVID-infested world. All the residents were practising horizontal and vertical social distancing; they sported full-body covering; and, there was one hundred percent sheltering in place.

Tombstone tourism

My wife and I are tombstone tourists. We like to wander through churchyards and cemeteries, reading gravestone obits and epitaphs. Each odd-angled monument and slab reveals something about the place and its people – even if it’s only a couple of dates and a name. Each is a particle of evidence, waiting for Wikipedia to provide context. It’s a painless way to learn history.

The Elkhorn cemetery occupies the side of a steep hill with perhaps a hundred and fifty graves scattered among the pine trees and boulders. We could identify a few oldsters, but most of the dead seemed to be in their twenties and early thirties. That was strange. More startling was a whole section of the hillside where were buried only children – dozens of them from age zero to about ten. And all had died within the two years between 1888 and 1890. Clearly something awful had happened in Elkhorn.

That awful something was diphtheria, a bacterial disease with symptoms and effects eerily similar to COVID-19. Unlike COVID, which is known to prefer vulnerable elders, diphtheria selects the young. Even though Elkhorn lies isolated high in the mountains, in its heyday, inhabitants moved in and out fluidly without restriction. There was even a narrow-gauge railway with daily service twelve miles down to Boulder city. This measure of mobility exposed nearly everyone to diphtheria. The close environment of the mines created conditions for transmission among many young men. One-room schools, packed with kids, helped to spread the deadly disease among the town’s children. In that pre-vaccine era, the deceased were isolated from the living by locating the cemetery at what may have been thought to be a safe distance from town. This primitive form of zoning was Elkhorn’s only apparent response to a virulent disease.

The diphtheria epidemic was not the direct cause of Elkhorn’s demise. In fact, the high death rate did little to deter the town’s frantic pursuit of profit. Mining persisted for several years after the epidemic peaked. Elkhorn’s downfall was actually the result of a crash in the silver market.

In an attempt to loosen the national money supply, which was backed by the country’s gold reserves, the Silver Purchase Act of 1890 required the U.S. government to buy tonnes of silver. This had the effect of driving up the price of silver, which greatly pleased the miners. An alliance between grassroots populists and the silver mine owners lobbied to place the USA on a bimetallic (gold and silver) currency standard, but the movement eventually lost steam. Gold, not the relatively abundant silver, would continue to back the value of paper money well into the 20th century. Soon there wasn’t enough gold in reserve to secure the amount of paper currency in circulation, and the Panic of 1893, a great depression, hit the whole country like a flash fire in tunnel 13.

The crash of the national silver market left Elkhorn’s remaining residents with no economic reason to stay in their once-thriving community. With no market for its silver, Elkhorn finally withered and became a ghost town. External forces, political and economic, had made planning for Elkhorn’s future impossible and unnecessary. The town became collateral damage in the capital wars among the one-percenters of the Gilded Age.

A Kenyan detour

As we unwrapped our cheese and pickle sandwiches in front of the boarded-up Home for the Feeble Minded (that’s what they used to call people with developmental disabilities), my wife asked, “Why do you suppose they put a mental institution like this in such an out-of-the-way corner of the state?”

We had decided to save lunch until we got back down to Boulder to investigate the grand Italianate Revival red brick edifice that had first opened in 1905.

“It could have been a gift from the state legislature at a time when Boulder was losing its economic base,” I said. “All those millionaires must have had some political influence. Or, it could have been to hide people with embarrassing conditions…embarrassing to their families. The atlas says this area produced 4 million pounds of lead, which is often associated with silver. The toxic waste from that much lead coming out of the mines must have dropped everyone’s IQs lower than squid shit.”

She gave that some thought and asked, “What does this place remind you of? No, not this place. The old mining operations.”

Without waiting for my brain to engage, she answered herself. “It’s like Kenya and the colonial capitalism that was going on when we left. Developers from outside – from the UK, Holland, USA, China – put up the capital, upped the value of their investments with tax holidays, underpaid workers and monopolies given out like royal land grants and carted away the profits. Minus twenty-plus percent for the president’s favourite charity.”

“Yeah,” I agreed, “they even brought their own cart. But there’s been nothing like a diphtheria epidemic in Kenya, where workers and their families would have been forced to endure with little help. Unless you count malaria. Besides, the jobs created by foreign investment paid pretty well didn’t they?”

“I think I said ‘underpaid,’ didn’t I? Certainly not paid enough for decent housing, school fees and retirement. And capitalism has brought its own versions of the plague to Kenya. Think about the conditions in Nairobi’s massive slums. Political corruption. Destruction of fragile ecosystems. Pollution of Lake Naivasha from chemicals and fertilizer. So, what about the flower business, itself?

“I see your point.” I wasn’t going to argue. I had read that weddings and other big flowery events have been cancelled all over the world after COVID jumped the pond. At the time, Kenya was employing something like 150,000 workers in the flower business and shipping US$1 billion worth of geraniums, roses and carnations per year. Forty-two cargo flights every week, just to the Netherlands. Now, all those flowers are going straight into the compost.

“So, the bottom dropped out of the Kenyan ‘silver market’,” she said, shaking her head. “Where did that leave all those workers? Selling trinkets in a ghost town?”

“Luckily, Naivasha isn’t a one trick pony, it’s a town with options. Not 150,000 worth of options, though, and, if the pandemic doesn’t end soon, Kenya may be dealing with more than a few ghost towns. I suspect people are already moving back upcountry.”

“That’s always been the Kenyans’ main safety net, hasn’t it? That’s where Rose’s family went during hard times.” (Shortly after we left Kenya for the US, our Kamba neighbour and good friend, Rose, decided to look for work upcountry and took a job at a clinic in Embu. Nairobi had always been tough on her kids.)

“Wups! We had better get moving.” I could see in the mirror that the sky was filling with black clouds and streaky lightning. “Those clouds look like they’re getting ready to let loose the artillery. This car is too flimsy to hold up in a barrage of Montana ice bombs.” We both were remembering the hailstorm of 2010 that kept the panel beaters happy for a year.

Business, as usual

After returning to Bozeman later that evening, we saw in the day’s newspaper that Montana’s institutionalised elders were being hit hard by the virus – one memory care facility already had fifteen deaths. Nationwide, old folks living in congregate care facilities make up just one per cent of the population but are now close to fifty per cent of all COVID deaths in the US, where elder care is a lucrative and poorly regulated business.

From a sidebar on page one, we learned that President Trump is insisting that all children in the US are to be sent back to school in the autumn despite the danger from forced proximity. The better to hasten their parents’ return to the labour force and, thereby, reduce the unemployment numbers prior to the general election in November. The paper reported that seventy-five per cent of our local parents agreed with the president’s policy of sending their kids daily into a petri dish of potential disease! The need for a basic income with which to purchase the necessities of life was overriding medical science, good policy, common sense and even parental responsibility. Where was our government?

Turning to page two, we found Congress dithering over the allocation of money to temporarily provide a minimum income to families out of work or otherwise in need because of the virus. Service employees were especially hard hit, as restaurants, bars, beauty shops, nail and hair salons and other close-contact businesses shut down for the duration, which might be forever as far as anyone knew.

Further down the page, the governor of Florida was cooking the COVID death statistics so he could justify reopening the state’s economy. Look! Things aren’t so bad! Back to work! On to Disneyworld! Spend! Florida soon had the highest COVID infection rate in the US, the country with the highest infection rate on the planet. Young adults, anxious to get out and party in a state that specialises in partying, took heed of the governor’s fairytale justification, went out, scooped up the virus and generously spread it around. The governors of many states that had already closed down buckled under pressure from their chambers of commerce and allowed or mandated businesses to reopen prematurely.

Businesses at the gateways to nearby Yellowstone National Park applauded the government’s decision to open the park to visitors from around the world, none of whom would be subject to quarantine. Employees of park concessionaires are already testing positive for COVID.

Even our state university, a local money-spinner with 16,000 students, was saying that it will reopen this fall with in-person classes – but no testing! We wouldn’t want to cull the herd too early, before tuition fees have been paid.

To read about it in the news, the whole country was performing a high-wire act without a safety net. For over a century-and-a-half, a limitless array of business deals and their promised billions had hogged the spotlight in America’s economic circus, leaving public health and other social issues with little more than pennies from heaven. The tale of Elkhorn is not one of a town laid low by rampant diphtheria but one of business as usual in spite of that awful disease. It’s happening again today but at a vastly greater scale and with devastatingly widespread consequences.

Hello! Emergency assistance?

Ignorance of biological causation was a contributing factor in earlier epidemics. We can’t say that today. We know that immobilising whole populations, prohibiting all large and most small gatherings, restricting travel to zero, quarantining, face covering, minimising exposure to others, social distancing, testing, contact tracing and frequent sanitising are all necessary to stop the spread of the virus. Modifying social behaviour is the key to successful suppression, even if it requires enforcement of stringent regulatory measures and cutting off sources of income.

With incomes diminished, we also know that greater social security payments, paycheck supplements, universal healthcare, loan forgiveness, rent subsidies, free child care, school fee waivers, home care for the vulnerable and accessible technological surrogates for face-to-face contact are needed before individuals can afford to modify their behaviour. Such an array of social and economic lifelines, normally paid for by progressive taxation and deficit spending, will be required for the country to survive this pandemic. Why, then, are we not organising our resources to do these things?

Hope is on the way

Years ago, I worked with a British ex-air force officer who had had the job of predicting the weather for the Allied invasion of Normandy. In other words, to determine what day would be D-Day. The secret in that era of primitive weather forecasting was what meteorologists called the Persistence Theory. That is, tomorrow’s weather in the English Channel will be much like the weather today. If the weather has been slowly trending toward less rain and wind, the trend should persist for a few more days. Not much hard thinking involved, he said. Just note the trend and work with it.

The same is true of anything riding on capital markets, which is to say almost everything in America. There is a great amount of inertia in waiting for venture capital to turn a profit and for existing assets, like oil wells, to be thoroughly wrung dry. This results in a perverse lack of planning. American cities march to the discombobulated cadence of opportunistic capital investment schemes, both public and private. In a capitalistic environment, order won’t be created by the occasional regulatory device. And, it certainly won’t be commanded by city planners that don’t understand the stakes. Our cities are a farrago of costly investments and will not easily trade their sunk costs for some more organised vision of the future. Disorder, in the service of greater profit, is a dominant trend in our society and we’ll stick with it.

Investors, financiers and other capitalists believe they can tolerate the dead bodies, social disruption and lingering after-effects of a pandemic – or of global warming, for that matter – as long as dividends, interest and other payments arrive on time and in sufficient quantities. And, if profits fall below expectations, the rich are powerful – and corrupt – enough to demand that the government provide a bailout even before it provides personal protective equipment, testing kits and ventilators. And this dystopian state of affairs will persist until the day we realise that health, safety and the general welfare can only be guaranteed within a completely reformed socio-economic system that puts human life ahead of profit – by transforming the greedy frog into a munificent prince.

As we adjust to living with COVID, we may notice trends that signal a growing popular response to social and economic pressure, and we may try to accommodate those trends. We may begin to see that people, seeking healthier environments, are moving from more dense urban to less dense suburban and rural settings, like Kenyans moving upcountry.

Cities and towns may then become aware of a commensurate shift in infrastructure needs. People are already gathering in fewer large public venues much less often and at lower densities. Will these venues – schools, universities, stadiums, arenas, churches, concert halls, theaters – remain viable? If not, will they need some kind of support? Will they convert to virtual venues? Or will they wither away? What about changes in the volume and patterns of our consumption? Our housing? Our mobility? It’s too early to say if we will even be able to adapt to the coming disruptions on our own terms. External factors, like an election, the weather or a pandemic may determine our lives from now on.

On the radio the next morning, we heard that the American economy shrank by over thirty per cent last quarter. This is the greatest downturn ever. Despite all efforts by the business community and its praetorian politicians to reassure Americans that normal is just around the corner, we aren’t buying it. Most of us are too frightened. When we can see the bodies stacked in front of makeshift morgues, we know there is a problem so serious that the usual propaganda and marketing abracadabra won’t work. We’re just not going to do the things that have kept money in circulation. The COVID pandemic is already gnawing at the foundation of our consumptive (pun intended) economy.

But, this is still capitalist America. Before our plutocrats and oligarchs divert their wealth to build a people-friendly, post-pandemic state – a new “city on a hill” – they will first reap the profits that lie along the present path, as rocky as it may be for the rest of us.

Meanwhile, they offer us hope that the old normal will return with the discovery of a vaccine. A very profitable vaccine.

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Jay Moor worked for the UN in Nairobi for fifteen years, ending a wide-ranging career in international development, city/regional planning and public policy as chief of strategic planning for UN-HABITAT. Now retired, he lives with his wife in the small US city of Bozeman, Montana, where their long Kenyan adventure frequently returns as a persistent memory, stimulated by almost anything.

Reflections

Gold and Gemstone Policy in Kenya: The Devil Is in the Detail

Small-scale artisanal gold and gemstone mining is decades-old but lack of knowledge and expertise, and limited support from the government have hampered the sector’s development.

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Gold and Gemstone Policy in KenyA: The Devil Is in the Detail
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The evergreen town of Kakamega is a picture of the hustle and bustle typical of any Kenyan town, with many hundreds of folks going about their daily business. But as you leave the town behind, the environment changes, a lush countryside of cultivated fields and densely planted trees giving no hint of the gold mining taking place in the nearby locality of Ikolomani.

Across the country, 432 miles to the southeast of Kakamega is the beautiful transit town of Voi, the largest town in Taita Taveta County which lies at the foothills of the Sagalla massif. But the much smaller town of Mwatate is the county capital, and the source of gemstones that Kenyans from other parts of the country know little about. Mwatate has rubies, red garnet, emeralds, moonstones, tsavorite, okenorite, and many more.

Small-scale artisanal gold and gemstone mining has been going on for decades in both Kakamega and Taita Taveta counties, undertaken mainly by local artisanal miners and by a few non-locals and foreign nationals.

The Mining Act 2016 recognises three levels of mining rights: artisanal mining permits, small-scale mining permits and large-scale mining licences. The small-scale permits and large-scale mining licences are issued at the national level through the Kenya Mineral Rights Board (MRB), while the artisanal mining permits are issued through the county artisanal mining committees. The Mineral Rights Board and the county Artisanal Mining Committees are administratively governed by the State Department of Mining under the Ministry of Petroleum and Mining. The Director of Mines and his representatives in the various counties are in charge of overseeing the implementation of the ministry’s policy frameworks. The Ministry of Petroleum and Mining has key mining regulations in place to govern this process.

But even though the Mineral Rights Board is in place, the process of setting up the county Artisanal Mining Committees (AMCs) has been long drawn out and there seems to be no hurry to implement the mining regulations that were commissioned in 2017. Kakamega County’s AMC was gazetted on 27 March 2020 and the team commissioned on 20 July 2020. However, the AMC has yet to begin its work as the key governmental mechanisms necessary to run the committee are still pending and so no mining permits have been issued to artisanal miners in Kakamega County since the gazettement.

Artisanal miners in Taita Taveta County are in a different situation altogether. The list of members of the county AMC constituted through their appointing authorities has been forwarded to the Ministry of Petroleum and Mining but the AMC has yet to be gazetted. When contacted on this issue, one of the reasons cited by the ministry officials was that factions within the mining fraternity have disputed the list of people proposed to be part of the AMC.

Applications for small-scale mining permits are submitted to the Mineral Rights Board through the Mining Cadastre Portal. The platform is meant to bring these services close to the miners but they complain of the slow response from the Ministry of Mining. They must travel to the ministry to submit the paperwork even after uploading it onto the portal. Access to a stable internet connection is also a challenge in the remote areas of Taita Taveta and Kakamega while some of the small-scale miners lack the capacity to use the online system. Most have to travel to the Ministry’s offices for assistance or else hire someone with the skills to undertake the work for them, rendering the application process both tedious and time-consuming.

The ministry has not undertaken any capacity building and shows a lack of commitment to make the system more efficient and user-friendly. The biggest hindrance, however, is the low budgetary allocation made to the Ministry of Mining, which leaves the staff with limited options in their efforts to serve small-scale miners.

The stated goal of the Mining Cadastre Portal is “to provide an electronic platform for all stakeholders in the mining sector in Kenya to engage directly with the Ministry of Mining.” Existing mineral rights holders (those with mining permits and licenses for mining) or those with pending applications can download, complete and upload the requisite documents. Prospective mineral rights holders can also submit their particulars and other supporting documents through the portal.

The portal is also a one-stop shop for information on mining activities in Kenya. It has a cadastre map of the key areas with mineral resources, as well as details of licence holders, and on-going applications; a click on any part of the map automatically displays the existing information about that specific geographical location.

For artisanal and small-scale miners (ASMs) in Kakamega and Taita Taveta, the portal has had a significant impact on access to public information on mining in Kenya. But the portal also has its limitations. Mining is a highly skilled sector that requires high levels of expert knowledge. Some of the requirements on the portal are beyond the scope of knowledge of most gold and gemstone miners in Kakamega and Taita Taveta. For instance, the portal requires a miner to take the coordinates of the area for which they are applying for a permit. This requires equipment that is typically used by geologists and land surveyors and that is expensive to hire or purchase. A sketch of the area or locality where the miner intends to undertake extraction is another requirement, a very sophisticated process that miners in general cannot undertake on their own.

Lack of knowledge and expertise coupled with lack of access to the internet, or even computers, therefore leaves the small-scale gold and gemstone miners unable to fully exploit the portal.

Aside from these limitations, however, the Kenya Mining Cadastre Portal has been a game changer when it comes to eliminating brokers from the mining sector and it has proven to be a more efficient system than the manual issuing of permits and licences

For instance, unlike the manual system that had no clear guidelines regarding payments, all fees due to the ministry are clearly indicated on the portal and paid directly to the ministry through a cashless system. Moreover, as the portal has centralised all the country’s mining information, cases of loss or manipulation of files or documents have reduced significantly.

The gold and gemstones that are mined in Kakamega and Taita Taveta are exported out of the country with or without any value addition under the provisions of the Mining Act of 2016 which require an export permit from the Cabinet Secretary the application for which is made on the Mining Cadastre Portal.

But while the law on the issuance of mineral export permits is sufficiently detailed, its implementation is the biggest challenge and I have no doubt at all that gold and gemstones are imported into and exported out of Kenya without any form of declaration. There are many routes along the porous Kenyan boarders through which the minerals can slip in or out of the country.

For instance, most of the gold that is mined in Kakamega is taken to Uganda by road undeclared. How can this be remedied, especially for gold and gemstone miners who want to run a clean business? Also, the process of implementing the gold refinery centre in Kakamega and the gemstone value addition centre in Voi remains pending. If the sector is streamlined, then the issue of traceability of gold and gemstones will be resolved and the mineral export licence will be of value to the artisanal and small-scale miners in the sector.

The article is done with support from Diakonia Kenya Country Office under the Madini Yetu Wajibu Wetu (Our Minerals, Our Responsibility) Project. Views expressed in the article are those of the author.

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Reflections

Sustainability Is Key in the Management of Natural Resources

For mineral wealth to have a positive impact there must be transparent policies, reasonable public regulation, commodity flows and sustainable and varied production systems.

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Sustainability Is Key in the Management of Natural Resources
Photo: Unsplash/Sebastian Pichler
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Natural resource wealth has massive potential and can hugely impact the economy of a country. The natural resource sector and more particularly the petroleum and mining industry is distinguishable from other sectors of the economy in that ventures in this sector are high-risk and prone to failure if not competently undertaken. Moreover, resources in the sector are typically immovable and must be exploited on the site of their discovery.

Being exhaustible and non–renewable, these resources call for prudent exploitation and management that must also factor in intergenerational equity. And unlike other industries, the exploitation of natural resources is community-based, in the sense that the activity takes place inside communities, providing opportunities for conflict as the business pursuits of an investor threaten the general welfare of the community.

Despite the lucrative nature of the sector, it comes with a number of challenges. Learning from the many countries that have experienced the “resource curse”, it is imperative that from the outset, the following issues are taken into consideration if at all a country wishes to progress and develop through the proceeds of its natural resources.

First, a country endowed with mineral resources should always plan to diversify its economy using the proceeds from its mineral wealth. This is done to avoid the Dutch disease and to ensure that the economy can withstand shocks caused by fluctuating prices. Venezuela and Nigeria are two countries that experienced economic recession due to a fall in the price of oil.

Second, while mineral exploration and production automatically comes with a high pollution risk, there is need take contingency measures to mitigate any such damage. Deliberate steps need to be taken to avoid the Niger Delta situation where land has been so degraded that the cost of cleaning up is estimated at £900 million.

Third, the phrase “resource curse” arises from the many cases where the discovery of minerals has resulted in retrogression instead of progress for the communities within which the commodity has been found. More often than not, these host communities experience conflict when the expected benefits are not realised, sometimes because of unrealistic expectations but more often because of corruption. It is important for investors and communities to engage from the outset, ideally with the government facilitating the process. Increasingly, however, civil society and religious organisations are stepping in to fill the gap left by unresponsive governments.

It is clear that natural resource wealth can provide opportunities for countries to improve the living standards of their people and can positively impact the development of nations. Indeed, it is a commonly held belief that nations richly endowed with natural resources are more advantageously positioned to shape the economic, physical and social aspects of their development than those less endowed.

However, the paradox of plenty has been the subject of extensive research by scholars and practitioners precisely because many resource-rich countries are associated with increased poverty levels, civil war, reduced economic growth, greater inequality and social injustice. This is because of a lack of goodwill to develop other sectors of the economy that are not necessarily dependent on natural resources, among other factors.

There are however, countries that can be cited for having taken off successfully.  Norway, one of the world’s richest economies, and Botswana, one of the largest producers of gemstones, have both clearly demonstrated how natural resources can be harnessed to foster development, build the economy and generally improve people’s livelihoods.

Conversely, countries like the Democratic Republic of Congo, with its has huge deposits of natural resources including cobalt which is highly sought after and is of great economic value, and Angola, with its vast reserves of natural gas, are examples of how resources can come to be regarded as a curse due to the civil wars, conflicts, under-development, low GDP, and the many other problems associated with these nations despite being resource-rich.

A number of academic studies also suggest that natural resource wealth slows down the economic growth of a country. This narrative is however challenged by countries like Singapore, the United Arab Emirates and Taiwan which, despite being modestly endowed, have invested the revenue from their limited natural resources in the areas of education and research, have strengthened their policy and legal frameworks and institutions, and established parameters for advancing wealth creation and multiplication, as well as savings for the future generations.

Many theories have been advanced in an attempt to explain the resource trap in mineral rich countries. However, none of the hypotheses advanced has identified the root cause of the paradox of resource abundance. This is because, by themselves, natural resources cannot be classified as either a curse or a blessing; they are opportunities that prudently exploited can jumpstart an economy and bring long-term fiscal benefits to a country.

Unfortunately, a majority of resource-rich countries are anti-democratic and have opaque policies and institutions. Predatory governance, greed and corruption often lead to the signing of secretive and exploitative production contracts that only benefit the investing multinationals and their countries of origin.

However, there are many tried and tested strategies and approaches that have resulted in strong economies with stable and functioning governments. For mineral wealth to have a positive impact and be a blessing there must be transparent policies, reasonable public regulation, commodity flows and sustainable and varied production systems.

A good example is the resource-rich state of Alaska in the United States where 9.6 billion barrels of oil were discovered in 1969. That year Alaska collected US$900 million from the oil lease sales but all the money was soon squandered. Worried that money from the oil resources would go to waste and benefit just a few, Alaskans voted to have the proceeds spent on state development.

Seven years later, and with infrastructure development largely achieved, a public vote established the Alaska Permanent Fund through a constitutional amendment. The fund was designed to receive at least 25 per cent of the oil revenue and in 1982 a dividend programme was added to the fund. The sovereign wealth component promotes and ensures intergenerational savings while the dividend fund ensures that all residents of Alaska enjoy the fruits of their natural resources by receiving annual dividends in the form of cash transfers. Since the first deposit of US$734,000 was made in 1977, the fund had over US$64 billion dollars in 2019 with each resident of Alaska receiving US$1,606 in dividends that year.

From the example above, it is very clear that a country can truly develop using its natural resource wealth. One of the ways in which it can do this is by securing tenure rights to natural resources through regulations that determine who can use the natural resources, for how long and under what conditions. Tenure rights clearly specify the expectations of each stakeholder with regards to their roles and, importantly, the role that the hosting communities are going to play during the entire period of the extraction of the resource.

Contract transparency is another way in which good governance can prevail in the extractive industry. Resource extraction contracts signed between the host governments and the multinational companies should be made public to provide general information to the public and ensure transparency, scrutiny and accountability.

There are countries, like Ghana, that support the idea of contract transparency as a fundamental principle in managing their extractive industry, but many nations have not fully embraced the idea of contract transparency for fear of sparking public outrage and also to conceal the information for personal gain. Through contract transparency, everything that is in the contract is laid bare and the specific expectation from every stakeholder is made public. This promotes good governance and transparency and also ensures that the benefits trickle down to the community level, promoting sustainable development.

Creation of a strong regulatory and institutional framework is also another way of ensuring good governance in the management of natural resources. The legal or regulatory framework can either enhance or inhibit development in the extractive industry and there is no template for what needs to be done in order to ensure a strong legal and regulatory framework. Each country has a unique opportunity to come up with its own tailor-made legal and regulatory framework that works for it and this involves developing laws and regulations that address specific issues in the industry while at the same time safeguarding the interests of the communities and  incorporating international best practices.

Having competent and functional institutions to implement the laws and regulations is another important step towards ensuring good governance in the management of the extractive industry. For the enacted laws to be effective, they must be implemented by institutions that are proactive and competent. Narrowing the implementation gap by ensuring that what is happening on the ground is in tandem with the provisions of the law is one of the critical roles of functional institutions.

A strong civil society can help in ensuring good governance in the management of natural resources.  Civil society organisations provide information and have the moral legitimacy to set the resource governance agenda. They can help to democratise power in resource management, and can work to keep other resource governance actors like governments and companies accountable. The civil society plays many roles, among which is the monitoring role, where it ensures that all the state and non-state actors play their role effectively in the management of resources and, more importantly in monitoring and ensuring that benefits are realised at the community level. They also help in highlighting corrupt practices in the industry and non-adherence to the internationally recognised practices guiding the extractive sector. Civil society organisations also have a role in representing the views of ordinary citizens on issues of national importance, in this case the extractive industry.

Lastly, civil society also plays a role in setting the agenda to ensure that the interests of the public in general, and development, are given priority. According to the Institute of Global Environmental Strategies Report of 2007, governments are increasingly involving local communities and non-governmental organisations in the management of natural resources. The ways in which the different stakeholders are involved varies. In involving different stakeholders, the governments broaden the scope of engagement and possibly minimise the chances of achieving a negative impact, reduce conflict and increase efficiency in resource management.

And finally, natural resources cannot be discussed without mentioning the environment. In an effort to benefit from the natural resource wealth while dealing with environmental issues, the following principles should be considered: All decisions made must be anchored in best governmental practice in order to ensure best practice in perpetuity. Resources must also benefit communities away from the resource as the impact of pollution may be felt away from the immediate location of the activity. Where there is no scientific evidence of possible impact, an investor should provide contingency measures and where such evidence of possible impact on the environment exists—usually through an Environmental Impact Assessment—an investor must formulate measures to avoid harming the environment and a polluter must sufficiently compensate for harm caused. We must give future generations the same opportunity to have access to a healthy environment that we as a generation have been given.

The article is done with support from Diakonia Kenya Country Office under the Madini Yetu Wajibu Wetu (Our Minerals, Our Responsibility) Project. Views expressed in the article are those of the author.

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Reflections

Time To Address Compensation and Resettlement Issues in Kenya’s Mining Sector

The Land Act, the Mining Act and the Land Value Act are inherently contradictory and the country lacks a national policy on issues arising from involuntary displacement.

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Time To Address Compensation and Resettlement Issues in Kenya’s Mining Sector
Photo: Unsplash/Japhet Khendlo
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Vision 2030 promises to transform Kenya into an industrialised middle-income country and, to that end, proposes ambitious projects which include the Standard Gauge Railway (SGR), the Lamu Port-South Sudan-Ethiopia Transport Corridor (LAPSSET), multipurpose dams and the development of oil and other mineral resources among others.

Large-scale projects, including mining projects, catalyse socio-economic development, which is what many people expect and can easily see. On the other hand, they undermine human rights, cause livelihood disruptions and break up the social fabric of the affected communities. This article focuses on this second aspect and examines compensation and resettlement policy gaps and challenges with respect to the mining sector in Kenya.

Large-scale mining projects lead to involuntary displacement, deprive those affected of the use or access to their resources, disrupt sources of livelihood and interfere with the cultural fabric of the affected communities. International safeguards developed by the World Bank and the Africa Development Bank on involuntary displacement recommend that all community concerns must be taken seriously in the planning and implementation of all investment projects.

World Bank guidelines provide that involuntary resettlement should be avoided and where it is unavoidable, all the people affected must be fully and fairly compensated. Moreover, compensation and resettlement should be seen as an opportunity to improve the livelihoods of those affected. However, the legislation currently guiding compensation and resettlement in Kenya does not regulate these processes in a clear and specific manner.

Take for instance the story of Phase 2A of the Standard Gauge Railway (SGR) that runs from Nairobi to Naivasha traversing Nairobi, Kajiado, Kiambu, Nakuru and Narok Counties, a project which was delayed for three years due to land acquisition and compensation issues.

In the June 22 2019 edition, The East African published stories of human suffering caused by the project. A mother of three, Ms Kusero was promised Sh2 million for her quarter-acre property but a house made of recycled oil drums is all she received as compensation for allowing the SGR to run through her land. Hers was one of many such stories of families whose land was compulsorily acquired for the project. On paper, they were paid billions in compensation but in reality, only a few actually received compensation.

Ms Kusero says that for people like her there were no negotiations and raising grievances regarding compensation was extremely frustrating. “You go to the National Land Commission and you are asked to go to the Ethics and Anti-Corruption Commission. Then you are sent to the Directorate of Criminal Investigation and Director of Public Prosecutions before being bounced back to the National Land Commission. In the end you get frustrated without redress.”

The second story is about the extractives sector and concerns compensation owed by the Kenya Fluorspar Company to the Kimwarer Community in Kerio Valley. After exploration and confirmation of the existence of viable fluorspar, the company excised land and started its mining operations before it had compensated and resettled those it had displaced. There were no consultations whatsoever regarding compensation.

A task force report on the Review of Fluorspar Mining in Kerio Valley established that some attempts at compensation were made. In 1982, two cheques of Sh3,606,000 and Sh500,000 were released by the National Treasury to the District Commissioner to compensate the affected residents. The land compensation value was determined at Sh450 per acre of which Sh50 was deducted directly by the District Commissioner as contribution to a local school fundraiser in the Kimwarer area.

The affected residents who wanted alternative land in compensation were promised they would be resettled on Kilima I and II and Grosell farms in Uasin Gishu. They were also promised that they would receive shares in the Flourspar Company and in the Wagon Hotel in Eldoret town. Those among them who attempted to settle in the promised land were later evicted and accused of invading private property. To date, the victims of these atrocities have not received justice.

Gaps and challenges in the policy and legislative frameworks

Large-scale mining operations require massive tracts of land and often lead to significant human rights violations. Communities whose livelihoods depend on land find themselves in a struggle to defend their rights against the mineral rights granted to investors who are usually large-scale multinationals acting with the full support of host governments.

Kenya’s constitution sets out the general principles of equitable, sustainable and efficient use of land and establishes forms of land ownership. It vests ownership of mineral resources in the government, which means that any land with mineral resources can be compulsorily acquired in the public interest. It further protects the right to property from unlawful deprivation of ownership or limitation of enjoyment unless for public purposes or in the public interest in which case prompt, just and full compensation is required. It is from these provisions that mineral resource projects draw justification to cause involuntary displacement.

Kenya passed a new Mining Act in May 2016 to bolster the legal regime and reinvigorate the mining sector. The Act provides that where a mineral right disturbs or deprives access to the landowner, causes damage to property or occasions loss of earnings, the landowner may claim compensation whose payment must be prompt, adequate and fair.  It doesn’t define what “prompt”, “full” and “just compensation” mean. The mineral rights holder is responsible for all the compensation and resettlement costs.

Moreover, the Mining Act appears to overlook the sensitivity of cultural resources. It does not protect or seek to identify cultural assets. Instead, it provides that no demand or claim for compensation shall be made for any loss or damage for which compensation cannot be assessed according to legal principles. Cultural resources are sensitive owing to the level of emotional reaction they spark when interfered with. They include spiritual sites, shrines, medicinal plants and graves whose value cannot be determined using formal processes but only through consultations and negotiations in good faith. The World Bank’s cultural safeguards on involuntary displacement provide that cultural property should be identified, protected and appropriate actions taken to avoid or mitigate adverse impacts, and that interference with cultural assets may only be justified when the loss or damage is agreed to be unavoidable.

The Land Act empowers the National Land Commission on all matters related to compensation. The Commission has the responsibility to make inquiries and determine interests in the land, receive claims of compensation and facilitate just compensation. It does this on request from agencies seeking to compulsorily acquire land. From 2013 to 2019, the Commission paid-out Sh38.273 billion in compensation of which 75.2 per cent went to the SGR and road projects. Within the same period, neither land acquisition nor compensation was undertaken by the Commission for mining-related projects, which raises the question as to how land acquisitions and compensation for extractives are carried out.

Parliament passed the Land Value (Amendment) Act In 2019 to address concerns relating to compulsory land acquisition, compensation and resettlement. One of the gains in this law is that it defines “just compensation”, “prompt” and “full”, terms that are used in the Mining Act, the Land Act and in other laws without clarity.  Accordingly, “Just compensation” means a form of fair compensation that is assessed and determined on the basis of the criteria set out under the act. “Prompt” means within a reasonable period of time but not more than one year after the Commission has taken possession of the land. “Full” means the restoration of the value of the land, including improvements made on the land at the date of notice of acquisition.

It is to be noted that unlike in the past where the NLC was required to compensate the landowner before taking possession, the Land Value law now allows possession of the land before compensation is paid. This is contrary to the Mining Act which provides for prior payment of compensation. Taking possession before compensation would disadvantage the affected persons and the one-year period set for paying compensation is too long especially for large-scale mining projects that normally deprive the owner of use of property such as farmland, homestead and grazing areas. The World Bank standards require that compensation is paid in full before displacement or restriction of access.

The Land Value law also provides criteria for assessing the value of compulsorily acquired land based on a land value index to be developed by the Land Cabinet Secretary in consultation with county governments and approved by the National Assembly and the Senate. Assessing land value for compensation purposes requires wide consultations with the affected persons and the relevant agencies, which this Act does not seem to embrace. As provided for, the development of a land value index excludes the participation of the National Land Commission, land valuation agencies such as Surveyors of Kenya, government ministries such as the Ministry of Petroleum and Mining whose main work causes involuntary displacement.

Key issues and action required

The first issue is the fragmentation of the legal frameworks that guide compensation and resettlement in Kenya. The country lacks a national compensation and resettlement policy that standardises compensation and resettlement and ensures that all socio-economic and cultural issues arising from involuntary displacement are properly addressed. The national policy framework on compensation and resettlement should be developed taking into consideration international best practices and safeguards to provide a harmonised policy direction that considers all the complexities that come with involuntary displacement. The policy framework should broadly articulate compensation and resettlement in such a way that it is understood to be an opportunity for improving the livelihoods of the affected people rather than as a process to subjugate them and worsen their livelihoods. At the very least, regulations on compensations and resettlement should be developed for the Mining Act.

The second issue is the uncoordinated institutional approach for compensation matters. The National Land Commission takes charge of both land acquisition and compensation based on requests and funds from the acquiring agencies whose roles are often unclear. The suggested national policy should provide a clear framework for institutional coordination and harmonise the efforts of all relevant agencies; compensation and resettlement must be a multi-agency function. In this way, overlooking community concerns will be minimised and, more importantly, the processes will be more transparent and less fraudulent. Effective institutional coordination will also enable an integrated grievance redress mechanism.

The third issue concerns the land survey regime; it is mired in corruption, inherently opaque and exploitative. Compulsory land acquisition heightens emotions and ignites serious land speculation perpetrated by public officers with privileged information who collude with greedy elites to defraud the state through inflated land prices.

Reforms to introduce transparent land surveying and valuation are required. This means strengthening the policy frameworks and the institutions involved and also requires a robust mechanism for monitoring compulsory acquisition, compensation and resettlement. It should become policy that a compulsory land survey is undertaken prior to the compulsory acquisition of any unregistered land.

The fourth issue is the absence of cultural resources as a factor of compensation and resettlement in the available legislations. Disruption caused by extractive projects on the social, economic and cultural ecosystems of the affected people can never be truly compensated or restored. Compensation merely helps the affected persons to continue with their livelihoods but does not and cannot restore their exact loss.

Legislations guiding compensation should clearly recognise cultural resources and all assets with cultural meaning and value for the affected people as an aspect of the process of negotiating compensation. Effective community participation must be allowed in identifying and deciding the compensation for cultural resources that may be affected by mining projects.

The final issue has to do with the procedures for paying compensation. Where the project affects the whole family, it is unclear whether compensation is awarded to an individual or to a household. Capacity building for the beneficiaries on the use of finances is also a concern and because it is rarely undertaken, waste of compensation funds, family disintegration, homelessness and other socio-economic concerns ensue. Support mechanisms to ensure effective financial planning are therefore important.

The lack of a mechanism to monitor the payment of compensation is another concern, leading to serious irregularities, corruption and human rights violations. Furthermore, the approach to dispute resolution needs to be harmonised to recognise structures at the county level. As they currently stand, the Land Act, the Mining Act and the Land Value Act are inherently contradictory.

The article is done with support from Diakonia Kenya Country Office under the Madini Yetu Wajibu Wetu (Our Minerals, Our Responsibility) Project. Views expressed in the article are those of the author.

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