Uganda minerals should benefit the local masses

John Bosco Bukya, the chairperson of Uganda Artisanal and Small-scale Miners' Association says that despite the emphasis the government is putting on industrial mine development by foreigners, a significant share of Uganda's mineral production and related sources of employment are widely attributed to Artisanal and Small Scale Miners. He is optimistic that this category can turn around the sector once given chance and supported.

Uganda minerals should benefit the local masses
John Bosco Bukya

By John Kusolo

John Bosco Bukya said the current legal and regulatory framework was not miner-friendly and wants government to license all Ugandans plying this trade.. In Uganda, Artisanal mining takes place in the areas of Mubende-Kassanda, Busia, Namayingo, Buhweju, Karamoja and Bugiri. But in many of these areas, artisanal miners are threatened with eviction from the mines, Ignorance and the lack of licenses.

Meanwhile, Uganda Extractive Industries Transparency Initiative (UGEITI) has released a report for Fiscal Year 2019-20. Below is what is contained in it:

In January 2019, Cabinet made the decision for Uganda to join EITI, the global standard for the good governance of oil, gas and mineral resources. Uganda's candidacy application, which detailed the country's statement of intent for improving the governance of its extractive sector as documented in the Uganda EITI National Work plan 2020-2022, was submitted in July 2020. Uganda was admitted to the EITI in August 2020 as its 54th member country.

EITI implementation in Uganda is overseen by a tripartite Multi-sector Group (MSG) comprising twenty five members as follows: five representatives from civil society, seven from extractive companies and thirteen from government. The MSG is supported by a Secretariat (UGEITI) which oversees EITI implementation on a day to day basis.

DT Global in consortium with BDO LLP and VJW Consulting Ltd was appointed as independent Administrator to prepare the first UGEITI Report for the year ended 30 June 2020, which was finalized in May 2022. Uganda's validation will commence in April 2023.

The first UGEITI report covers payments made by extractive entities and revenues received by Government Agencies and other material payments and benefits to Government Agencies as stated by Requirement 4.1 of the 2019 EITI Standard. It also includes contextual information about the extractive industries in accordance with EITI Requirements 2, 3, 4, 5, and 6.

REVENUE GENERATED FROM THE EXTRACTIVE INDUSTRIES

The receipts reported by the Government between 1st July 2019 and June 30th 2020(FY 2019-20) reveal that total revenues received from the extractive sector amounted to UGX 436,353 million which is broken down as follows:

Uganda Revenue Authority (UGX 423,195 million) 96.97% of total payment, Social and environmental expenditure by extractive companies (UGX 11,987 million) 2.75% of total payment, National Environment Management Authority (UGX 1,130 million) 0.26% of total payment, Substantial Payments (UGX 78 million)0.02 % of the total payment.

CONTRIBUTION TO UGANDA'S ECONOMY

The macro-economic data provided by the Uganda Bureau of Statistics (UBOS) indicates that mining and quarrying sector accounted for UGX 2,266.31 billion in FY19-20 which represents 1.63% of the national GDP on current basic prices, including 1.17% from formal sector activity and 0.46% related to informal sector activities. The contribution of the mining and quarrying sector to GDP has decreased compared to the prior year's contribution (1..72%).

The data from the Uganda Bureau of Statistics (UBOS) also indicates that the oil and gas sector employ 178 persons directly while ASM's direct employment is estimated at approximately 300,000 jobs. All direct employments represent 1.84% of the country's total workforce of 16.3 million.

The contribution of the extractive sector to Government's revenue amounted to UGX 436.35 billion accounting for1.27% of the total domestic revenues in FY 2019-20.

The value of exports from the extractive sector amounted to UGX 2.598 billion accounting for 0.02% of the country's total exports in FY 2019-20.

BENEFICIAL OWNERSHIP DISCLOSURE

The terms "beneficial owner" and "politically exposed person" are defined in the AML Act 2013 and the Income Tax (Amendment) Act 2019 respectively. These definitions are detailed in Section 4.10.1 of the UGEITI report. Legal ownership information of a company can be accessed from Uganda Registration Services Bureau(URSB) at a search fee of UGX 25,000 as detailed at the following link: Business Registration Forms(ursb.go.ug)

Extractive entities included in the reconciliation scope were requested to submit information on their beneficial owners. Details are contained in Annexes 4 and 5 of the UGEITI report. To date, there is no comprehensive register of beneficial owners for companies operating in the mining, oil and gas sectors.

However, a National Beneficial Ownership Committee was set up, through the EITI implementation process, to spearhead efforts towards achieving beneficial ownership transparency in Uganda.

CONTRACT DISCLOSURE

The model Production Sharing Agreement (PSA) is publicly available on UNOC's website. However, the production sharing agreements signed with oil and gas companies are not currently publically available.

The UGEITI MSG has set up a Contract Disclosure and Legal Affairs Committee to facilitate engagements with government institutions and companies on how to achieve contract disclosure.

EXPLORATION ACTIVITIES

Exploration in Mining Sector

The main exploration projects currently ongoing in the mining sector in Uganda as reported by the Directorate of Geological Survey and Mines(DGSM) include; a Copper-Cobalt-Nickel anomaly in Kitgum district identified by Sipa Exploration (U) Ltd, a gold deposit in Busia district discovered by Wagagai Mining (U) Limited; Copper-Cobalt-Nickel mineralization in Kases and Bunyangabo districts being drilled by Jervois Mining Ltd, a gold anomaly in Zombo district being followed up by Samta Mines and Minerals Uganda limited, an underground gold mine in Ibanda district being developed by Simba Mines Ltd, deposits of graphite in Kitgum district discovered by Consolidated African Mineral Resources Ltd, an underground geological model being drilled and developed by African Panther Resources Ltd at their Kikagati tin mine,over over 50 metric tons of Marble discovered by Sunbelt Mining Co. Ltd in one of their Moroto concessions, and M/S Rwenzori Rare Metals Mukutu-Buwaya Aluminous clay project( REE, Alumina, silica, iron ore, magnesia, zirconia, rare metals) of 3,000,000,000 T.

Exploration in Oil and Gas sector

Details on the history of petroleum exploration in Uganda are contained in section 4.1.1 (a) of the EITI report. Following the first licensing round in 2017, three (3) exploration licenses were issued.

For these licenses, Armour Energy Uganda Limited operates an exploration license (PSA-01/2017) over the Kanywataba block; and Oranto petroleum Ltd operates exploration licenses over Ngassa-Deep block (PSA-02/2017) and Ngassa- Shallow block (PSA-03/201). These exploration licenses cover an area of 754km2. There is still over 90%of acreage in the Albertine Graben that requires licensing for further exploration.

REGISTER OF MINING RIGHTS

 Section 3 of the mining(licensing) Regulations (2019) stipulates that Online Mining Cadastre is established for the management of all mineral rights and mineral dealer operations in Uganda including licensing, communication, reporting and payments. the mining Cadastre Map portal is publicly available on: https: // portals.landfolio.com/Uganda/the portal allows one to search by license code or by holder name, and to view for each title;

-the identity of the license holder;
-the status of the license;
-the date of application;
-the date of award; the expiry date;
-the commodity produced; and
-the area of the license.

TRANSPORT REVENUES

Transport of Oil and Gas

The East Africa Crude oil Export pipeline (EACOP) is a 1,443 km crude oil export pipeline that will transport Uganda's crude oil from Kabaale, Hoima District in Uganda to the Chongoleani Peninsula near Tanga port in Tanzania. In Uganda, the pipeline is 296 km long and crosses 10 districts and 25 sub-counties. In Tanzania, it is 1,147km long and traverses 8 regions and 25 districts.

The EACOP project will be implemented in accordance with the framework of four (4) major agreements presented in the following table.

1.Project: East African Crude Oil pipeline (EACOP)
2.Agreement: Inter- Governmental Agreement (IGA), signature signed on 25th May 2017 by Government of Uganda and Government of Tanzania.
3.Shareholders Agreent(SHA) ,signed on 11th April 2021 by TPDC, NOC, CNOOC Shareholder, TotalEnergies.
4.Host Government Agreements(HGA) signed on 11th April 2021 by TPDC, NPC, CNOOC, TotalEnergies.

Transportation Tariff Agreement(TTA) signed on 11th April 2021 by TPDC, NPC, CNOOC, TotalEnergies.

Transportation of Minerals

The transportation of minerals is subject to a movement permit issued by the Commissioner Mining Department in the Directorate of Geological Survey and Mines, which requires a valid Miner dealer license (MDL) or a mineral right.

In practice, the minerals products are transported by mining companies; own means. Therefore, transportation costs are included as part of the operating expenses. The fiscal regime does not provide for specific payment streams generated by the transport of minerals.

In conclusion, there were no significant revenues from the transport of minerals for the FY 2019/20 as stipulated by Requirement 4.4 of the EITI standard( 2019).

Other areas covered in the report include Notes towards gender sensitive UGEITI reporting and implementation, Scope of data collection and reconciliation, unilateral disclosure for mining sector, Unilateral disclosure for Oil and Gas sector, Completeness and Reliability of Data, Reconciliation of cash flows.

The report made the flowing recommendations:

Main streaming and systematic disclosure of EITI data

The EITI data disclosed in this report was collected from different sources, including Government Agencies selected in the UGEITI reporting process. However, regarding the contextual information on the extractive sector, data on revenues collected and budget allocations are not systematically published within a centralized platform. Government Agencies should set up an open EITI database in their systems as detailed in Section 8.1 of the UGEITI report.

Public disclosure of the register of licenses

Details on licenses, including the full text are available from DGSM at a fee.

It is recommended to make publicly accessible the full text of licenses as detailed in Section 8.2. Public disclosure of contracts and licenses in Petroleum and Mining sectors

The production sharing agreements signed with Oil and gas companies are not currently publicly available. The UGEITI MSG should set up a clear road map for the publication of all agreements in the extractive sector as detailed in Section 8.3 of the UGEITI report.

Data quality and assurance

A number of reporting entities did not comply with the assurance process agreed upon by the UGEITI MSG as summarized in Section 8.4 of the UGEITI report. The UGEITI MSG should engage with reporting entities and emphasize the importance of complying with this provision of proper signature and certification of templates by auditors for future reports, in order to meet EITI Requirement 4.9.

Accuracy of export data

Government Agencies' records on exports were different as detailed in Section 4.13.3 of the UGETI report. The two agencies concerned , DGSM and URA, do not systematically cross-check export data against each other's records to identify the inconsistencies.

DGSM and URA should implement automated controls to ensure the comprehensiveness of export data reported by extractive entities, and develop analytic tools to ensure better control of mineral trading as detailed in Section 8.5 of the UGEITI report.

Public disclosure of beneficial ownership information

To date, there is no comprehensive register of data on beneficial owners of all companies operating in the mining, oil and gas sectors.

The recommendation made is that the UGEITI and URSB put in place a road map relating to the disclosure of information on beneficial ownership as detailed in Section 8.6 of the UGEITI report.

The Extractive Industries Transparency Initiative (EITI) is a global initiative that promotes the open and accountable management of oil, gas and mineral resources.