In 2009, African heads of state adopted the Africa Mining Vision (AMV) which seeks to see mining on the continent creating local industries through value addition, jobs and infrastructure as opposed to the exportation of mineral ores, as has been the case, historically.
While Uganda’s President Yoweri Museveni has been a key proponent of this strategy, the country still falls way short of its targets, as a study – ‘Evaluation of the Sustainable Management of Mineral Resources in Uganda and Alignment with the Africa Mining Vision’ – has revealed.
“Persistent revenue leakages and tax arrears, high informality in artisanal and small-scale mining (ASM), infrastructure and skills constraints limiting value addition, weak enforcement of social and environmental safeguards, corruption and elite capture undermining sector governance are some of the key challenges we identified,” Dr. Susan Nakanwagi (PhD), the study’s lead consultant, said at a validation workshop in Kampala last week.
The workshop pooled various stakeholders including miners, government representatives, civil society and academia, to review the draft report.
The study commissioned by the African Minerals Development Centre (AMDC) of the African Union (AU) reviewed Uganda’s performance against the six pillars of the African Minerals Governance Framework (AMGF).
The score: legal and institutional framework (67%), geological and mineral information systems (70%), fiscal regime and revenue management (61%), linkages, investment and diversification (50%), ASM (47%) and environmental and social issues (59%) – averaging out at 60%.
Ncube, a Programs Officer at the AMDC
The report recommended the adoption of a model mining agreement to standardize contracts, the strengthening of enforcement and transparency in licensing to curb corruption, regular geological database updates, plus increasing funding to the Department of Geological Survey and Mining (DGSM).
It also advocated from the introduction of a windfall tax to capture super-profits, plus increased infrastructure and skills development to support beneficiation. Formalization of ASM through cooperatives and simplified licensing besides offering them better financing solutions was vital as well, the study said.
The report further calls for tougher environmental protection laws and mine closure requirements including rehabilitation bonds plus the phasing out of mercury use in ASM gold processing.
Reactions
Morris Tabaro, an inspector of mines under the Ministry of Energy and Mineral Development, noted that the ban on the export of mineral ores and the emphasis on value addition in-country was in line with the Uganda’s determination to end widespread poverty countrywide.
“If we want to take everyone out of poverty, we need manufacturing to happen here; and as much as possible, it should involve Ugandans. The advanced countries got there by developing their mineral resources, industrializing and manufacturing. The ban has done more good than harm,” he said.
He was happy that the private sector was slowly adjusting to the export ban realities, and in so doing, investing in beneficiation. The Ministry’s operations were increasingly becoming digitalized so as to facilitate faster processes in the mining industry, Tabaro added.
In his remarks, Kenneth Asiimwe, the CEO, Uganda Association of Artisanal and Small Scale Miners (UGAASM), noted that while formalization of ASMs was a welcome addition in the new mining law, they still faced difficulties accessing finance, largely because traditional lending institutions do not understand the intricacies of mining.
This has seen many ASMs resort to high interest loans from moneylenders of up to 1 to 2% a day (or 30 to 60% a month).
“ASM generates cash daily; so the miners are risk averse when it comes to taking these high-interest loans. However to retain the bulk of our revenues, UGAASM is considering starting a miner’s bank that understands how our industry works,” Asiimwe said.
He added that the ASMs were willing to pay taxes if the system is eased, say through Point of Sale (POS) machines.
URA’s Mbabazi (L) and UGAASM’s Asiimwe
While acknowledging this need to digitalize the tax process in mining, Rachel Mbabazi-Bakazi, the head of Natural Resources Management at the Uganda Revenue Authority (URA), emphasized the need to sensitize the miners first about the taxes that are due from them.
This, she added, the tax body was doing, with ongoing sensitization drives across the country.
“The law presently is targeted more towards large-scale miners. So, for the ASMs we may introduce presumptive taxing and maybe also adjust the frequency of taxing them – say monthly or annually. These are some of the discussions we are having with the miners,” she added.
The URA was also currently looking at amending the entire tax laws that affect the sector to resonate with the Mining and Minerals Act, 2022, Mbabazi said.
Mineral development has been identified as central to Uganda’s ten-fold growth strategy – which aims to grow the economy from $50 billion in FY2023/24 to $500 billion by 2040.
Historically, Uganda’s mining sector contributed significantly to the gross domestic product (GDP) and exports, peaking at 7% and 30%, respectively, in the 1960s.
The Uganda Bureau of Statistics (UBOS) says mining added 2.2% to the GDP, in the 2022/23 financial year (about $1.1 billion).
With minerals like gold, copper, graphite, REEs, marble and phosphates, Dr Nakanwagi sees no reason why this contribution cannot be increased significantly.
Meanwhile, Hajara Nakiberu, an environment inspector at the National Environment Management Authority (NEMA), highlighted the destructive nature of mining activities while urging caution.
Because minerals were a finite product, the environment needed to be protected and restored long-term, way after the resources are exhausted, she said. More funding to NEMA would help the body better its capacity to carry out better inspection of mining activities, Nakiberu added.
Allan Agumya, a seasoned miner
Feedback from the workshop would be added to the final report before it is released later this month, Dr. Nakanwagi said.
AMDC Statute
Mkhululi Ncube, a Programs Officer at the AMDC, commended Uganda for scoring above average, in as far as aligning its mining industry to the AMV was concerned and hoped that it would join Guinea, Mali, Zambia, and Nigeria in ratifying the AMDC statute.
A minimum of 15 African Union member states need to ratify it before it is fully operational; meaning there is still a long way to go before Africa’s mineral wealth contributes significantly to sustainable development on the continent.
