Will New Mineral Law Deliver Benefits to Ugandans?
The plan by the government to establish a national mining company to join the competitive mining sector is generating debate.
Some players in the sector are asking why the government is forming state-owned enterprises yet it has for long liberalized the mining sector. The suggestion of up to 15% equity stake in medium and large-scale mining operations is subject to suspicion.
Energy and Minerals Minister, Ruth Nankabirwa this week said the National Mining Company will be established to compete with privately-owned mines in the country. It is among the many reforms coming up under the Mining and Mineral Act 2022.
She said the proposed company will be similar to the Uganda National Oil Company but will have up to 15% participatory equity interest in medium and large-scale mining operations, at no cost to the government.
According to Nankabirwa, the establishment of a national Mining Company is among some of the changes coming as her ministry begins implementing the new Mining and Mineral Act 2022 in line with the Mineral Policy of 2018.
The Mining and Mineral Act 2022 also provides that the state may acquire additional supplementary participation in mining companies in cash. The law however provides that the total participation shall not exceed 35%.
While Nankabirwa explained that the state-owned mining company gets as much value from the country’s vast mineral resources, the idea of acquiring 15% participatory equity in medium and large-scale mines has attracted murmurs from a section of miners.
The Assistant Commissioner for Licensing at the Energy, Vincent Kedi in a separate interview with URN said there was nothing wrong with the government’s participation.
“You know when you sit on a round table with a developer, he cannot cheat you. If you wait outside the door as they discuss in the boardroom, they will declare losses to you and you will not benefit anything,” Ssaid Kedi.
According to Nankabirwa, the idea behind states participating in mining operations is not new or unique to Uganda. She cited countries like Botswana, Namibia, Cameroon, Morocco, Tanzania, and Zambia which she said have active State-owned mining companies in Africa.
Kedi told URN that the issue has been discussed at the continental level with the head of states in Africa suggesting the need by countries to have as many benefits from their mineral resources.
Nankabirwa on other hand has defended the idea of establishing the National Mining Company at a time when others have indicated that state-owned companies tend to be more expensive and less efficient.
She told journalists with the state mining company, the government will get direct earnings, dividends, capital gains or other types of profits from operations.
Additionally, the minister opined that the state will earn experience in managing and operating a mining company and have improved oversight and monitoring of private sector partners, and keep a closer eye on the mineral sector.
Uganda is among the countries in Africa that endorsed the 2009 Africa Mining Vision (AMV). The Africa Mining Vision called for the harmonization of mining and mineral policies for the industrialization of African countries by leveraging their mining sector.
Over 500 million tonnes of Rare Earth Elements (REEs) have been estimated in Eastern Uganda by the Makuutu Rare Earth Project. REEs is one of the critical minerals the Ministry is positioning to support the deployment of renewable energy.
Nankabirwa says Makuutu has the potential to bolster Uganda’s worldwide positioning among countries with the most significant production of REEs worldwide, after China.
President Museveni has for instance maintained a ban on the exportation of raw minerals despite outcry by some of the players in the mining.
Uganda like several countries in Africa is endowed with abundant mineral resources, including gold, silver, copper, uranium, cobalt, and many other metals which are key inputs to manufacturing processes around the world.
It is predicted that some of the minerals in Uganda will attract international interest because they are key in electric vehicles and the energy transition debate.
So, will New Mineral Law Deliver Benefits to Ugandans?
Under Mining and Minerals Act, 2022, all mining licences are to be awarded on a competitive bidding basis as opposed to the previous ‘first come, first serve’ criteria.
According to the minister, applications for licences would be filed online so as to improve efficiency and transparency in the mining and minerals sector.
The mining sector in Africa has over the years been subject to suspicion due to allegations of corruption, under-declaration of production and earnings, and lack of transparency among others.
The 2021 natural resources index report by Natural Resources Governance Institute(NRGI) placed Uganda’s mining sector in the “weak” performance band with 55 out of 100 points.
According to the index, issues existed within the licensing process and the governance of local impacts. It said the broader enabling environment was also an obstacle to good governance.
The 2019/2020 Uganda Extractive Industries Transparency Initiative(UGEITI) secretariat found that exports of the mining sector during the FY 2019-20 amounted to UGX 2.598 billion and constituted 0.018% of the total exports of the country.
The UGEITI report found that URA reported the value of gold exported accounted for UGX 4.17 trillion while the local production value of gold according to the Directorate of Geological Surveys and Mines (DGSM) was only UGX 0.001847 trillion (1.847 billion).
“There have been significant discrepancies between the gold production figures reported by the DGSM and the actual exports of gold reported by the URA. Therefore, the perfect panacea for gold trade in Uganda is proper regulation and transparency in the sector,” said the report.
Winnie Ngabirwe, the Executive Director of Global Rights Alert and a member of UGEITI Multi-Stakeholder Group(MSG)told URN in an earlier interview said it was easier to deal with the oil and gas sector because it was better organized than the minerals sector.
“In the mining sector you can’t even understand who are the players.; it is so hard to understand what is going on,” said Ngabirwe, whose organization has been at the front lines in the reforms for the mining sector.
EITI represents a broader push for public disclosure of natural resource revenues—globally, 70% of developing countries within the top 30 gold-producing countries have implemented the EITI.
It is hoped that reducing corruption in the natural resource and mining sector has the potential to create substantial growth in national and local economies.
Other Provisions of Mining and Mineral Act 2022.
The Act domesticates regional and international conventions, treaties, agreements, and protocols to allow for mineral certification and traceability to prevent the illegal exploitation and illicit trade in minerals.
The Act establishes mineral production sharing, local content, international treaties domestication and Artisan Mining (ASM) regulation. According to the Minister, the Mining and Minerals Act will further promote national participation in the mineral industry by including Mineral Production Sharing Agreements (MPSAs).
An MPSA is a contract signed between a government and a resource extraction company (or group of companies) determining the resource each party will receive from the country’s extracted minerals.