𝗠𝗘𝗠𝗢𝗥𝗔𝗡𝗗𝗨𝗠 𝗢𝗡 𝗧𝗛𝗘 𝗦𝗧𝗥𝗔𝗧𝗘𝗚𝗜𝗖 𝗨𝗧𝗜𝗟𝗜𝗭𝗔𝗧𝗜𝗢𝗡 𝗢𝗙 𝗠𝗜𝗡𝗘𝗥𝗔𝗟 𝗥𝗢𝗬𝗔𝗟𝗧𝗜𝗘𝗦 𝗜𝗡 𝗞𝗪𝗔𝗟𝗘 𝗖𝗢𝗨𝗡𝗧𝗬

By Prof. Hamadi Iddi Boga

This memorandum is submitted to the Kwale County Budget and Economic Forum (CBEF) to provide policy recommendations on the optimal utilization of mineral royalties in order to enhance long-term economic transformation, fiscal sustainability, and inclusive development in the county. Kwale County has, in the Financial Year 2025/2026, received approximately KSh 1.16 billion as its 20 percent share of mineral royalties. These funds represent a significant fiscal opportunity. However, their current allocation, as reflected in the supplementary budget, is largely directed toward infrastructure projects such as roads, dams, health facilities, and the upgrading of vocational training centres. While these investments are important, they do not sufficiently address the structural economic challenges facing the county, including high youth unemployment, limited economic diversification, and weak linkages between key sectors such as mining, agriculture, and tourism.

Mineral royalties are fundamentally different from ordinary revenues. They are finite, volatile, and non-recurring in nature. As such, their use requires a distinct policy and fiscal approach that prioritizes long-term value creation over short-term expenditure. The current approach, which largely treats these funds as conventional development resources, risks dissipating a once-in-a-generation opportunity to transform the county’s economic base. There is therefore a compelling need to reframe mineral royalties as strategic capital that must be invested deliberately to generate sustainable economic returns and intergenerational benefits.

(i) A savings or future fund to preserve and re-invest a portion of the revenues for future generations. This should easily fetch another 100 million per year if invested smartly. The Fund will also be used to include royalties from other projects such as the clinker project in Patanani, The Cement Project in Shimoni and the Mrima Hill Minerals Project.

(ii) An economic transformation window to finance high-impact, job-creating investments.

(iii) And a community development component to address immediate social and infrastructure needs. Therefore, I propose an allocation structure of 40 percent for long-term savings, 40 percent for economic investments, and 20 percent for community development would strike an appropriate balance between present and future priorities.

The economic transformation component should prioritize sectors with strong multiplier effects and employment potential. In particular, there is a critical opportunity to strengthen the linkage between agriculture and the tourism sector by investing in aggregation systems, cold chain infrastructure, and contract farming arrangements that guarantee markets for local producers. Additionally, a dedicated youth enterprise development facility should be established to provide blended financing, combining grants and concessional loans, to support small and medium enterprises in sectors such as agro-processing, construction, logistics, and services. Complementing this, a local supplier development programme should be implemented to build the capacity of local businesses to participate in procurement opportunities within the mining and tourism industries, thereby retaining more value within the local economy.

Infrastructure investments funded through mineral royalties should also be more strategically targeted. Rather than dispersing resources across multiple projects, priority should be given to infrastructure that unlocks productivity and supports value chains. This includes farm-to-market roads, irrigation systems linked to specific agricultural enterprises, and facilities that enable storage, processing, and market access. Similarly, investments in human capital should be aligned with the needs of the local economy by transforming vocational training centres into centres of excellence that deliver skills relevant to mining, construction, tourism, and enterprise development.

To ensure fiscal discipline and accountability, it is further recommended that clear rules be established governing the use of mineral royalties. These should include prohibitions on the use of such funds for recurrent expenditure, requirements for multi-year investment planning, and strengthened transparency and reporting mechanisms. Regular public disclosure of allocations and outcomes, coupled with robust oversight by both the County Assembly and participatory forums such as the CBEF, will be essential in building public trust and ensuring effective utilization of these resources.

In conclusion, mineral royalties present a unique and time-bound opportunity to reposition Kwale County onto a path of sustainable and inclusive economic growth. However, realizing this potential will require a deliberate shift from fragmented and short-term expenditure toward strategic, investment-driven use of these resources. The CBEF is therefore urged to consider and advocate for the adoption of this proposed framework in its advisory role, in order to ensure that the benefits of Kwale’s natural resources are maximized for both current and future generations.

𝗦𝘂𝗯𝗺𝗶𝘁𝘁𝗲𝗱 𝗯𝘆

𝗣𝗿𝗼𝗳. 𝗛𝗮𝗺𝗮𝗱𝗶 𝗜𝗱𝗱𝗶 𝗕𝗼𝗴𝗮