Uganda losing revenue, more mineral inspectors needed

OIL|GAS|INFRASTRUCTURE

Contradicting figures: An investigation by the Auditor General for the 2016/2017 financial year revealed that mining companies reported to the energy ministry only 16kg as the amount of gold they exported. However, records at URA for the same year, according to the report, showed that the amount of gold exported from Uganda was 8,691kg in the same period.

Could Uganda be losing revenues from minerals due to lack of supervision owing to inadequate staffing?

The Directorate of Geological Survey and Mines (DGSM) says it has only 10 mines inspectors, 40 active mining licences for large scale mines and over 102 location licences for small scale mines. 

The directorate says each of the 142 mines must have at least one inspector stationed at the site to monitor and take daily recordings of production figures.

Agnes Alaba, the acting director of DGSM, explained that the directorate is overwhelmed by the numbers and hardly conducts inspection in most parts of the country.

"Because of the limited numbers in personnel, whenever we have plans for inspection, we largely focus on the bigger mines," Alaba explained on the sidelines of the Citizens Convention on Mining in Kampala recently. 

The annual convention was organised by the Global Rights Alert, Advocates Coalition for Development and Environment (ACODE) as well as the energy and minerals ministry.

This year's convention was organised under the theme, Sustainable development of mineral wealth in East Africa.

Alaba said even for the few mines that are inspected annually, the inspectors rely on production records provided by the same companies.

"The challenge with depending on records from mining companies is that they might under declare. If they under declare, it means we will lose out on revenues from the sector," Alaba said.

"For the country to benefit from the mining and minerals sub-sector, we need to urgently train mine inspectors for each mine," Alaba said.

Where are the inspectors stationed?

Of the 10 mine inspectors that the country has, according to Alaba, only six are deployed to the different regions, while four are stationed at the DGSM headquarters.

One of the mines inspectors is in Moroto and serves the entire Karamoja sub-region, another is in Tororo and monitors mining activities in Busoga, Bukedi, Bugisu and Teso sub-regions.

The other inspectors are located in Mbarara for the Ankole sub-region, Kabale for Kigezi sub-region and Rwenzori, and another in the north.

"We are overwhelmed. We cannot regularly inspect all these mines. We cannot tell what is done at the different mines in the country," Alaba said.

She said this is the reason DGSM cannot know the actual production capacity of the mines.

"Every financial year, we set targets to inspect all mines, but we cannot because of the limited manpower. This has been one of the biggest challenges for a long time," Alaba added.

Minerals in Uganda

Over the years, the Government has been carrying out appraisal of minerals in the country.

There are several potential mineral targets that have been discovered in the areas of Masaka, West Nile, Iganga, Mayuge, Hoima, Kaliro, Kabale, Mubende, Busia, Karamoja, Buhweju, Rukungiri, and Kisoro.

The key minerals include uranium, gold, iron ore, limestone, marble, copper, cobalt, and phosphates (apatite plus francolite).

Others are tungsten, glass sands, beryllium, bismuth, columbite-tantalite, lead and zinc ores, lithium, tin, iron ores, platinum, uranium, rare earth metals, vermiculite, and kaolin, among others. 

With the ongoing exploration, more mineral deposits are yet to be discovered, according to the DGSM.

Under the National Development Plan II (NDP II), which ended in the last financial year, the Government had earmarked six key minerals for exploitation; iron ore, limestone/marble, copper/cobalt, phosphates, uranium, and dimension stones.

For these minerals, the geological studies and analysis show that 300 million tonnes of limestone deposits are estimated to be in Karamoja; over six million tonnes of copper are anticipated in Kilembe, Kasese; 7.3 million ounces of gold deposits in several parts of the country.

The above have to be inspected regularly for Uganda to benefit, according to Alaba.

Inconsistencies          

Civil society organisations concurred with the DGSM and pointed out that already, there have been conflicting figures of the minerals produced.

 Xavier Ejoyi, the country director of ActionAid, said Uganda's contradictory figures can be attributed to lack of inspection. 

"Different reports have highlighted a mismatch in gold exports recorded by the Uganda Revenue Authority (URA) or the energy ministry," he said.

For instance, he pointed out, a 2016/2017 financial year investigation by the Auditor General revealed that mining companies reported to the energy ministry only 16kg as the amount of gold they exported.

But records at URA for the same year, according to the report, showed that the amount of gold exported from Uganda was 8,691kg in the same period, Ejoyi said.

The Auditor General's report also indicated that sh35b worth of mining royalties for the 2015/16 financial year was not paid by companies. The report further indicated that the firms had not paid $1,760,000 (sh6.4b) worth of concession fees as of June 2016.

Ejoyi noted that the audit establishes similar discrepancies in export volume declarations and unpaid fees almost each financial year and that this could be only a tip of the iceberg. He also said the Auditor General estimates Uganda to be losing billions of shillings in poorly regulated and monitored mining operations due to loopholes in the legal and institutional framework.

"The DGSM must have inspectors in every place in the country," Ejoyi said.

"We have minerals almost everywhere, how can a country have just 10 mine inspectors?" he wondered.

Frank Dixon Mugyenyi, the board chairperson at the Minerals Africa Development Institution (MADI) wondered why the country has not prioritised mines inspection.

"During colonial times, the DGSM was the most treasured institution in the country. It should be even now because of its potential. Once Uganda starts to prioritise inspection of mines, we will register more revenues and reduce on borrowing," he said.

Nicole Bjerler, the head of facility at the Democratic Governance Institute (DGF), said the mining sector can liberate Uganda's economy if prioritised.

Interventions by the ministry

Sarah Opendi, the Minister of State for Mineral Development, said her ministry is prioritising capacity building and the introduction of new technologies to address the inspection challenge.

"As the new leadership at the ministry, we found out that most of our departments do not have the required manpower. We will ensure that we train and recruit many people to fill the gaps," Opendi said.

Regarding the new technologies, she said, the ministry, through the mine department, has a technical collaboration with Partnership Africa Canada to implement the regional initiative on the fight against the illegal exploitation of natural resources.

The initiative is one of the protocols of the pact on security, stability and development under the international conference of the Great Lakes Region.

Through the initiative, Opendi said, a mine site inspection manual for Uganda was developed and that it will be used to train government inspectors such as mines, customs, Police, labour and environmental officers.

"Each East African country is supposed to implement mineral labelling and certification. Tanzania launched it at the start of this year and we are planning to implement the same. We hope that this will reduce smuggling of our minerals and hence, increase revenue collection," Opendi said.