Kenya set for windfall from export of titanium

Business Daily Kenya:  Kenya’s move to tap into its vast mineral wealth has started to pay off with titanium emerging top as the country’s ...

Business Daily Kenya: 

Mineral wealth. Photo/Courtesy

Kenya’s move to tap into its vast mineral wealth has started to pay off with titanium emerging top as the country’s leading mineral earner in the first quarter of of this year.

Extracted in Kwale County by Kwale Mineral Sands Project, a Kenyan subsidiary of Australian Base Resources Ltd, the mineral has opened a wide lead over exports like soda ash, iron and steel.

Official data released by Kenya National Bureau of Statistics, shows that the country’s foreign earnings from exports increased by 3.5 per cent to Sh135 billion in the first quarter of this year from Sh130.5 billion in a similar period last year.

“This was due to increase in prices of tea, coffee and titanium ore in the international market,” the report says. Price of titanium almost doubled to Sh31,828.23 per tonne in the first quarter of 2017 compared to the first quarter of 2016.

During the period under review, the price of tea increased by 10.9 per cent from Sh281.85 per kilogramme to Sh312.69 per kilogramme while that of unroasted coffee rose to Sh548.92 per kilogramme from Sh508.05 per kilogramme.

Increase in the export of titanium is expected to earn Kenya higher royalties and even encourage further exploration of the mineral, whose extraction started barely four years ago.

Under the mining agreement, the company remits royalty to the government at the rate of 2.5 per cent. Exploitation of the mineral started in October 2013 and first shipment of 25,000 tonnes of ilmenite, which is one of the major components of titanium, was made to China in February 2014.

According to Ken Gichinga, Chief Economist Mentoria Consulting, the returns from titanium will spur the government and investors into exploring other minerals that lie untapped in the country.

“Increased prices and earnings from titanium ore will strengthen Kenya’s position as a diversified economy. Kenya has only started to tap into its vast mineral wealth. This with time will help catapult the economy to new growth levels,” Gichinga said.

Another economist, Raphael Matu, a director at the Royal Business School also observed that the increase of the price of exported goods like titanium is good for the country because it will improve not only the terms of trade but also the balance of payments.

“Increased foreign earnings will lead to an increase in the foreign exchange reserves which can be used by the government to import other things, payment of foreign debts or as contributions to the International Monetary Fund,” he said.

Titanium ore is used to manufacture paints, plastics, paper, sunscreen, cosmetics and fabric pigmentation. It is also used as an alloy with other metals to produce lightweight metals for jet engines.

Besides exports, the country’s expenditure on imports increased by 31.5 per cent to Sh422.7 billion in the first quarter of this year mainly on account of increased import value of petroleum products, industrial machinery and automatic data processing machines and telecommunications equipment. Industrial machinery remained the leading import expenditure item.

However, expenditure on wire products and road motor vehicles declined by 65.5 per cent and 3.8 per cent, respectively. In the period under review, Asia emerged the leading source of imports by accounting for 69.4 per cent of total imports.

Expenditure on imports from the Far East rose by 26.1 per cent to Sh221.6 billion, mainly on account of imports from China which nearly doubled from Sh65.3 billion in 2016 to Sh113.6 billion in 2017.

However, imports from India and Japan dropped by 16.2 per cent and 8.0 per cent to Sh47.8 billion and Sh18.9 billion, respectively. Gichinga said the cost is the major reason business is shifting to the Far East.

“For example real estate companies are increasingly sourcing for construction material from China due to significant cost savings as compared to sourcing elsewhere.”

But Matu is concerned about the increased spending on imports when compared with export earnings. He said increased spending on imports and less earning from the exports would increase the deficits in the balance of trade. “This slows down the growth rate since the imports are withdrawals from the economy. Increased deficits may in turn call for more borrowing,” he noted.

The post Kenya set for windfall from export of titanium appeared first on Mediamax Network Limited.

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