Investing in infrastructure like roads and electricity is one of the ways the Uganda government is ensuring the country realizes maximum benefits from its extractives (minerals and oil and gas), according to Joseph Enyimu, the Ag. Commissioner Economic Development, Policy and Research Department at the Ministry of Finance, Planning and Economic Development.
“The role of government is to de-risk and deliver an enabling environment. As such, the amount of public resources going towards energy, the transport network, but also in creating the institutional regime to support you is a significant investment. It may not be invested directly into a mine, but it will reduce your transaction and operation costs and afford you a higher return on investment,” he said.
He gave an example of the so called ‘oil roads’ – the approximately 700km network of constructed and upgraded roads within the Albertine region – that the state invested in over the last decade, to facilitate activities around the development of oil fields.
Enyimu, who was representing the Finance Ministry’s Permanent Secretary, was responding to a question about the sufficiency of the money allocated to the mining subsector in the national budget, at a recent forum organized by the Natural Resource Governance Institute (NRGI) in collaboration with the Advocates Coalition on Development and Environment (ACODE), the Civil Society Coalition on Oil and Gas (CSCO) and the Uganda Chamber of Energy and Minerals (UCEM) with support from the UK international Development.
Held under the theme “Unlocking Mineral Value Addition to Support Uganda’s 10-Fold Growth Strategy” the dialogue saw participants from the private sector, civil society and government institutions deliberate on practical steps to enhance value addition to the energy transitional minerals and achieve the country’s growth targets.
One of the ‘oil roads’
The Ugandan government, set a bold target to increase the size of the economy from about $50 billion in the 2023/24 Financial Year (FY) to $500 billion by 2040. This tenfold growth strategy is anchored on four primary sectors: Agro-industrialization, Tourism development, Mineral development (including oil), and Science, collectively referred to as the ATMS. The National Development Plan IV (NDP IV) FY2025/26 to FY2029/30 being the starting point.
This would therefore mean extensive exploration activities are carried out to help in quantifying the country’s mineral deposits, finalizing the minerals’ governance regime, commercializing mining operations and products; in addition to delivering first oil and commercializing the petrochemical industry amidst seeking more oil discoveries.
All in all, these interventions in mineral-based industrial development should lead to a contribution of $20 billion annually to GDP from the extractives, according to Enyimu.
In the FY 2023/24, mineral production generated a non-tax revenue (NTR) of UGX 26 billion ($ 1.64 million) – though massive under declaration of mineral production is extensive.
Enyimu (top L), Kedi (top R) plus Kenneth Asiimwe (bottom L) from UCEM and Nicholas Magara (bottom R) Principal Environment Officer, Ministry of Water and Environment on a panel
Oscar Olaro, a Senior Planner for Science, Tech and Industry Development at the National Planning Authority, believes Uganda has a real opportunity to increase revenues from mining by learning from peers like Botswana, Tanzania, Zambia, South Africa and Morocco, which have used a combination of targeted financial instruments (blended finance, guarantees, incentives) and other strategic policy interventions to de-risk value addition.
“Strategic value chain development can turn mining into a major driver of economic transformation,” he said.
The Uganda National Mining Company (UNMC), which was established to serve as the state’s commercial vehicle in championing national participation in the mining sector, is expected to take the lead in this regard.
With mineral occurrences including copper, cobalt, gold, gypsum, salt, phosphate, limestone, iron ore, graphite, nickel, kaolin, lead, tin, wolfram, zinc and lithium, the Uganda government feels it can harness these resources for value addition, industrialization and economic development, noted Vincent Kedi, the Asst. Commissioner, Licensing and Administration at the Department of Geological Survey and Mines (DGSM), hence the ban on the export of unprocessed minerals.
“Our value addition ambitions are justified by our mineral wealth, favourable investment climate and competitive legal and regulatory framework following the adoption of the Mining and Minerals Act, 2022,” he said.
“And apart from subsidized electricity and an excellent transport network countrywide, plus water, we also have a booming construction sector that needs these minerals and a manufacturing sector serving a regional market of over 150 million people,” Kedi added.
Uganda has recently moved to revive copper and cobalt mining at Kilembe after more than 40 years, following government’s selection of Sarrai Group as its preferred partner. Iron ore mining meanwhile has been ongoing, while graphite and rare earth elements (REEs) mining is also set to commence.
That said, Kedi recognizes that for the mining sector to adequately contribute to the country’s grand growth plans, mineral projects will have to be de-risked through sustained nationwide exploration. Also, significant financing will need to be attracted and price volatility on the global metals markets addressed.
Other challenges, Kedi noted included changing perceptions of investors towards value addition as opposed to the export of unprocessed minerals, training adequate human capacity, addressing environmental concerns, smoothly handling state participation in the sector and collaborating with rather than competing against neighbouring countries with similar minerals.
“Initially the minerals export ban was resisted but today we are glad that several stakeholders have adapted and are now adding value. We have over eight gold refineries in the country today while Tembo Steels and Abyssinia Iron and Steel are adding value to iron ore from zero to finished products. The Ministry of Energy and Mineral Development is also planning to establish mineral beneficiation centres where artisanal and small scale (ASMs) actors can add some value,” he said.
In April last year, President Yoweri Museveni launched Uganda’s first tin refining plant in Ruti, Mbarara City. The facility is owned by Woodcross Resources.
Museveni launching the new Tembo Steels plant (top L), Abyssinia’s (top R) and Woodcross Resource’s tin refinery (bottom photo)
It is only with intermediate minerals like vermiculate that the ministry has allowed exports in semi-processed form Kedi said, since finished products are not achievable in-country.
Dr Theophilus Acheampong, an economist and political risk analyst in the extractives industry, public financial management, and academia, however, believes export bans on minerals like has happened in Uganda and in another 12 or so African countries will not automatically result into value addition.
He would rather see these countries adopt key competitiveness factors that will help them processes their minerals into value-added products like lithium and EV batteries.
These factors include: resource availability and proximity, skilled workforce plus research and development (R&D) capabilities, industrial Infrastructure and ecosystems, deliberate government incentives and policy support, a stable investment climate and finally strong ESG frameworks for securing access to sustainable finance and premium markets.
As part of Uganda’s strategic drive towards beneficiation, it was important that it assesses itself against these six parameters.
“Because Uganda is also competing for investments with other regional countries, that in some cases may have more resources or a better regulatory regime, it is important to benchmark and assess where the country sits among those six clusters while also quantifying the different mineral resources at your disposal,” Acheampong, who delivered his remarks virtually, advised.
More Deliberations
Onesmus Mugyenyi, Executive Director, ACODE noted the need for more engagement and coordination within not only the government ministries, departments and agencies but also within the private sector, civil society and government, so as to achieve the NDP IV targets.
He also highlighted the lack of value addition guidelines, with clarity lacking around which minerals deserve value addition and how much value to add in some cases. Ineffective communication or misinformation was another concern afflicting the minerals industry.
Onesmus Mugyenyi
“You realize that some of the issues need more scrutiny, so we are going to align them and share them with the Permanent Secretary, at the Energy and Mineral Development Ministry, for further action, as she had requested,” Mugyenyi said.
Adding, “Until recently, the extractives were closed off. Even up to today, you will knock on some doors, and they will not open, yet you are only looking for some information. But I think the situation is improving. With more collaboration like today where the government, the private sector and civil society are meeting to debate pertinent issues, I think the communication will also improve a great deal.”
