Kenya's mining sector is entering a new era with a law that targets local and foreign investment.

The law is expected to help extractives jump from the current 0.9 per cent annual rate to 10 per cent.

Mining Cabinet Secretary Dan Kazungu said the Kenya Mining Act of 2016 will not only secure the rights of stakeholders in the industry but also increase government revenue.

Under the new law, Treasury will retain 70 per cent of the money government will earn as royalties from industry, allocate 20 per cent to county government hosting the mine and 10 per cent to the community, where mining operations occur.

“This Act will reinvigorate investment by simplifying licensing. It provides guidance on dealing with licence holders through periodic reporting, and how they engage host communities,” he said.

Mining companies will be required to obtain consent of residents before commencing operations and sign community agreements providing a social structure of setting up roads, water, health facilities and other amenities.

The law, which came into effect on May 27, overhauled previous legislation, replacing Mining Act of 1940, Trading in Unwrought Precious Metals Act and Diamond Industry Protection Act.

The new legislation provides for setting up of a National Mining Corporation, a Mineral Rights Board and a clear formula of how royalties earned by the government from the industry will be shared.

The Mineral Rights Board will advise the Cabinet Secretary on grant of minerals rights, areas suitable for small scale and artisanal mining, fees, charges and royalties payable for minerals.

Mining Cabinet Secretary will make regulations on a mineral and metals commodity exchange. A minerals and metals exchange is a market that facilitates futures trading. This effectively eliminates middlemen and other intermediaries who make money out of speculation.

Mr Kazungu said mining will be undertaken under large scale or small scale operations for compliance as requirements for approvals are different while artisanal activities are set to continue subject to fulfilling certain conditions.