Uganda losing billions to mineral smuggling

KISORO – Undulating hills with sparse rainforests and streams give Kisoro a spectacular beauty seen nowhere else in Uganda. But this beauty conceals a dark, thinly disguised secret, mineral smuggling racket, which has kept the area impoverished and costs Uganda billions of shillings in revenue.true

Kisoro is one of Uganda’s richest districts in mineral deposits like tin, gold [right] and wolfram (tungsten). However, while the smugglers are happy, district officials are cursing.

“The district does not get any revenue from the minerals,” says Milton Bazanye, the district chairman.

“The energy ministry says Kisoro only has exploration licenses. But unknown to the officials in the ministry, most of these so called explorers are mining and selling minerals without paying any royalties.”

Illegal mining rampant

Bazanye singles out Kirwa, a prominent wolfram mine, which, according to officials at the mines department in the energy ministry, was closed two years ago.

Despite the closure, mining goes on, but no revenue is remitted to the Government.

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Heaps of iron ore sold on the roadside in Muko sub-county, Kabale district

“One Saturday morning, down the Kirwa hills in Kabaya village, Nyarubuye sub-county, I found 16 young men scrounging in mounds of suspected wolfram deposits, as others crushed rocks in search of the mineral,” said Bazanye.

Milton Nsanze, one of the artisanal miners in Kirwa, said a person can collect between 2kg and 4kg of wolfram a day. Their manager, Gerald Ndagyize, said they are hired by G. Nzabonimpa of SEB and Company Ltd., a Kisoro-based mining company.

Nzabonimpa buys the wolfram at sh10,000 per kilo. But Nsanze said sometimes they hide the wolfram and sell it to another businessman at sh17,000 per kilo.

According to Nsanze, the businessman sells the wolfram to someone in Kigali at sh37,000 per kilo. But Nzabonimpa’s son, Alex Nambajimana, who doubles as the company director, said they do not engage in illicit dealings, even though their exploration license was still valid at the time the mine was closed.

Nationwide problem

Vincent Kato, the principal geologist in the Ministry of Energy and Mineral Development, says smuggling of minerals is not limited to Kisoro.

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A committee set up by energy ministry permanent secretary, Kabagambe Kaliisa discovered that most explorers are engaged in mining

While on an operation last year, Kato and other officials from the energy ministry arrested a man trying to smuggle 45kg of wolfram, worth over sh1.2m, from Nyamuriro in Isingiro district, into Tanzania. In Muko sub-county, Kabale district, heaps of iron ore are sold by the roadside.

While Rwanda and Tanzania are the popular end points for mineral smugglers in the western region, most minerals in Karamoja and eastern Uganda end up in Kenya.

Karamoja has more than 300 artisanal gold miners, each with a capacity to mine about 27 grams a day (10kgs a year), according to Kato. There are more gold miners in Busia, Buhweju, Kigezi, Mubende, Namayingo and Mubende. Despite having hundreds of small-scale miners, national gold production (exports) has averaged 3kg per year for the last five years, according to records at the mines department.

Records show that no gold was produced in 2009, while in 2012, the department recorded 4.3kgs, worth sh5m.

Last year, it was 3.9kgs, worth sh3.2m. Most likely, much of the gold mined is not reported to the mines department as miners would rather smuggle it out of the country to avoid paying royalties. Besides the artisanal/ the illegal miners, could it also be possible that licensed miners are evading paying royalties?

Unlike oil fields where the Government deploys geologists to monitor activities, it has no resident officials in the mines. The Government has thus always depended on the mercy of the mining companies to declare the quantities they have mined.

One is charged tax/royalties, depending on one’s declarations. A 2012 inspection report on limestone mining in Hima by Edmond Ssekimwanyi, a senior statistician in the geology department, listed difficulty in monitoring royalties paid for mined limestone as one of the key challenges.

In financial year 2010/2011, the Government recovered sh5.4b from Kasese Cobalt Company for unpaid royalties between 2004 and 2009.

Investigations started when an employee informed the Police that they were underquoting invoices for mineral exports, specifically cobalt metal, copper and nickel hydroxide, to pay lower royalties.

Kato has singled out the cement sector as worthy of further investigation. A source, who preferred anonymity, added that more minerals are smuggled through the airport, under the guise of exploration licenses.

More than three quarters of the licenses issued by the mines department each year are for exploration.

For instance, of the 839 licenses that were valid by June last year, about 500 were exploration licenses, according to the energy and mineral annual sector performance report for 2012/2013. The three-year exploration licenses, which are renewable twice, allow holders to pick potential mineral samples from to test their commercial viability.

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A man crushes a rock in search of wolfram in the closed Kirwa mine in Kisoro district

The exploration samples are tax-free. But it has emerged that a number of players are hiding under exploration licenses to smuggle minerals out of Uganda.

“Most of the exploration companies are not doing exploration, but speculation. Several have failed to comply with the conditions of the exploration license,” reads a 2012 report on appraisal of exploration and mining licenses.

The report was compiled by a four-man committee, set up by the energy ministry permanent secretary, Kabagambe Kaliisa, to investigate challenges in the mineral sector. The committee disclosed that most holders of exploration licenses are engaged in mining instead.

According to a source in the ministry, the problem is exacerbated by the lack of a mineral testing laboratory, which means samples have to be taken abroad for testing.

“In the process, the so-called mineral explorers smuggle out large quantities of minerals disguised as samples, without paying royalties,” the source explained.

For instance, while the ministry recorded only 3.9kg of gold worth sh3.2m produced last year, the source revealed a mineral explorer who made off with 500kg of gold, worth sh419.2m, disguised as samples, through Entebbe Airport in June last year.

Kato confirmed the incident and called for cooperation from the airport staff in fighting mineral smuggling.

“The airport staff should first crosscheck with us to confirm whether the quantities of mineral samples being taken out are the ones we permitted,” Kato explained.

“But concerning this particular incident, they called me when the person had already fl own out.”

The law

According to the Penal Code;

1. Any person who takes, conceals or otherwise disposes of any ore or any metal or mineral in or about a mine, with intent to defraud any person, commits a felony and is liable to imprisonment for five years.

2. Any person who exports or imports any goods from or into Uganda, packed in any package, whether or not with other goods, in a manner calculated to deceive any authorised offi cer, commits the offence of smuggling. On conviction, that person is liable to imprisonment for not less than three years and not more than 14 years; and shall in addition pay a fine of not more than sh5m. Should the offender default, he/she shall be sentenced to a further term of imprisonment of not more than two years.

3. Where in the course of smuggling, an offender is armed, uses or threatens to use a deadly weapon, the offender shall, on conviction, be sentenced to death.

How minerals are smuggled across Kisoro border

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Time check is 7:20am on a windy Sunday. I set out to verify allegations that minerals are smuggled through the Cyanika border in Kisoro. Boda boda riders at the border lead me to Emma, who refers to himself as the ‘chief smuggler’.

According to Emma, if one wants to smuggle, they have to hide the minerals in his makeshift office during the day for easy departure to Rwanda at night.

“Most times, we use boda boda on the paths in the forest (near the border post),” he said.

“We have Indian buyers from Kigali whom we meet in Rwanda, not far from the border.”

 Emma says they sometimes smuggle more than 100kg of minerals, mainly wolfram, in one day, selling it at sh25,000 per kilogramme.

Although most smugglers use hidden paths, a policeman on duty that Sunday, whom I tricked into believing that I wanted to join the illicit trade, said it was possible to use the official border post.

“You place the wolfram in a box of mineral water or milk. Give the box to the boys who sell snacks at the border. They will go through,” the policeman said.

Ironically, the police are aware of the crime.

The Kisoro LC5 chairman, Milton Bazanye, says when the district complained about illegal mining last year, the Police set up a post at Nuyu, about 70 metres from Kirwa mine. But its presence has not stopped the illicit business.

District Police Commander Bosco Otim refused to comment on the illicit trade.

Officers at Cyanika border, one of the most notorious mineral smuggling routes, as well as Uganda Revenue Authority’s western region spokesperson, Charles Lumanyika, also declined to comment.

Quick money woos students

Mineral smuggling in Kisoro is so widespread and lucrative that students have been compelled to join the bandwagon.

“During my S4 vacation in 2012, I used to smuggle minerals from Kirwa to Rwanda, through Cyanika border. I would earn about sh500,000 a week,” said a teenager in Nuyu trading centre.

“I made a lot of money and decided that after S6, I would go straight into the business.”

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Where is the problem?

There are only three field inspectors of mines, stationed in Kabale, Mbarara and Tororo regional offices. Each inspector has more than five districts to monitor on a fuel budget of sh300,000 for every three months.

He is also given sh150,000 every three months to run the office. The entire department, which generates over sh4b revenue a year, works on a sh250m annual budget.

“This money cannot do much in monitoring mines. It is frustrating,” a mines inspector said on condition of anonymity.

No wonder, Milton Bazanye, the district chairman for Kisoro, said they did not see any mines inspector in their area last year. The geological survey and mines department estimates that the Government loses over sh4b to mineral smuggling every year.

Officials expect to recover this if the department’s budget is increased to at least sh1b, to intensify inspection.

“We are losing a lot of revenue through smuggling. If we reduce smuggling, the revenue from mineral royalties will shoot up to more than sh8b,” Kato said.

Mineral smuggling has been reported across Africa, although it is more widespread in the great lakes region. International agencies have attributed the endless conflicts in the region to proceeds from illegal mining and smuggling, especially in the DR Congo.

After its inception in 2012, the Tanzania Minerals Audit Agency made 37 arrests of mineral smugglers involving $10.3m (about sh26b) within two years, according to a report released this month.

Tanzania wants the East African Community to harmonise mining policies and legal framework to curb mineral smuggling in the region.

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Way forward

Kato says there is a plan to restructure the ministry and divide the current geological survey and mines department into three semi-independent departments, with separate commissioners.

The proposed departments include mines, geothermal resources and geological survey. The plan, which was passed by the Cabinet last year, is waiting for the Ministry of Finance to study the financial implications before implementation.

Kato expects the move to increase the number of staff to monitor mines.

To strengthen the sector, the Government ought to implement the certification of minerals, to indicate their origin and formalize artisanal mining, as required by the 2010 guidelines set by the International Conference on the Great Lakes Region.

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The writer, Francis Kagolo, stands atop a rock against a backdrop of a spectacular scenic view