Massive effort needed to revive mining sector

By David Mugabe

Poor financial support to monitor and supervise the mining industry is costing the country billions in under-declared royalties and taxes, a senior mines inspector has said.

Gideon Amunyo, the inspector of mines in charge of western Uganda, says his office is meant to oversee the entire western region from Mbarara to Bundibugyo, but it does not have enough capacity to do so and revenue is being lost.

“A mere sh100,000 in fuel for an entire month is a drop in the ocean when you consider the amount of movement required in adequately supervising the mining activities in the area. As such, mining investors constantly under-declare their finds, which costs the state a lot in royalties and taxes,” Amunyo is quoted in a statement following a late February field excursion organised by the Uganda Chamber of Mines and Petroleum (UCMP).

The other impediment to a profitable extractive industry, according to Amunyo, is the low level of staffing and a failure to adapt international legal provisions that would safeguard the industry and further strengthen regional security needed for a stable industry.

Uganda is yet to adopt the Dodd Frank Law, a US legislation that aims to limit the trading of conflict minerals that have for long funded wars such as that in the neighbouring Democratic Republic of Congo.

The “bag and tag” initiative requires US companies buying from a region rich in minerals to ensure their supply does not come from areas controlled by armed groups or corrupt soldiers. Since Uganda neighbours the DRC, it is important that it adopts the initiative, according to Amunyo, otherwise its minerals such as tin and wolfram (tungsten) will become unattractive.

“The delay to embrace the law has seen increased smuggling of minerals from Uganda to neighbouring Rwanda where the law is already in existence and, therefore, a guaranteed market. This means Uganda loses out on would be returns were the minerals to be sold legally,” he says.

The department of geological survey and mines is also poorly staffed and facilitated.

The excursion discovered that the Kirwa Wolfram Mine, located in Kisoro, is bogged down because of ownership wrangles, leaving the biggest and oldest mine to operate below full potential.

But there is some good news with Krone mines, which extract 30 tonnes per year despite applying rudimentary methods.

At Hima Cement in Kasese, a new eco-friendly plant plus additional deposits of raw materials have upped the company’s stakes in the last couple of years.

William Gumisiriza, the quarry manager, notes that Hima is well set for the next two or so decades as a result. Reliance on road transport, however, means costs in that regard will remain high.

“A working railway network linking western Uganda to the coast like it was in the past would of course serve us and other mining firms in the area well,” says Deis Twine, the production superintendent.

Though still run-down, Kilembe is fully facilitated and is awaiting a credible investor to resuscitate it.

Five companies have been shortlisted for the same and a winning bidder should be known by the end of the year.

Following the airborne geophysical survey data covering 80% of the country, Uganda is embarking on a serious exploration phase concentrating on areas that have obvious anomalies.

Catherine Wabomba, the geotechnical officer at UCMP, says the inaugural fact-finding trip has been an eye opener that puts in perspective the level of investment and commitment that is still required to push the mining industry forward.

UCMP intends to gather as much first-hand information as possible about the country’s mining operations which can reliably be used to attract investment into the sector.