Challenging industry dynamics exacerbate the benefits balancing act as reform is underway.
KAMPALA, UGANDA – Uganda has ambitious goals for its mineral sector. By virtue of its shared borders with the mining heavyweights of DRC and Tanzania, Uganda’s government and private investors have made a case for its geological potential in spite of its under-exploration. Giving further credence to its potential, historic production within the country boasts a diversity of minerals, from vermiculite to tungsten, copper, cobalt and gold.
Today the sector is a fraction of what it was in the heyday of the 1960s, when it contributed 30% to Ugandan exports and 6% to GDP. These numbers waned as political turmoil upset operations in the 1970s and 1980s, leading to a present-day mining sector that is 90% artisanal and contributes 0.4% to GDP. Foreign investor interest in East African mining opportunities has raised Uganda’s profile as an investment destination in recent years, however the sector has a way to go before it can attract the necessary actors to elevate the sector into large-scale, industrial operations.
Adding to its own mining potential, Uganda has a strategic position in the East African region and can serve as an entry point for mining investors targeting DRC and South Sudan. While on one hand this makes Uganda an attractive base for service providers, it also raises questions of transparency and brings the country under scrutiny for mineral smuggling. Crucial to Uganda’s upward mining trajectory will be the implementation of transparency on the part of the government to ensure investors of the country’s business climate.
With the proper oversight mechanisms and institutional support, Uganda can serve as a regional example for accountable and sustainable mining practices. Through membership in the International Conference on the Great Lakes Region (ICGLR) and the country’s recently completed Sustainable Management of Mineral Resources Project (SMMRP) program, Uganda is already laying the foundations for best practices from budget reporting to mineral exporting. A significant next step will be membership in the Extractive Industries Transparency Initiative (EITI) coalition, a group of states and organization committed to good governance in the natural resource sectors.
As a member of the ICGLR, which has established its own mineral tracking and certification system, Uganda is working to confront the challenge of mineral smuggling. With the ICGLR tracking process underway, minerals from Uganda will soon be tagged although implementation will be costly. Assistance from the Uganda Chamber of Mines and Petroleum (UCMP) will help to troubleshoot implementation.
“The chamber is working with the government to see how we can bring about a quicker implementation process for mineral tracking. This will save a lot of money for the government and give us easy access to the international markets. At Uganda’s annual Mineral Wealth Conference this year, we brought in experts to hold a session on EITI. In that same session we also brought in people who have actually implemented tagging schemes in other countries in Africa, as well as some of our local members who are applying these schemes on a smaller scale at their own operations,” said Irene Nakalyango, CEO of UCMP.
Looking to the wider region to confront the challenge of mineral tracking, Minister of Energy and Mineral Development Irene Muloni emphasized the need to collaborate. “As developing countries in the region, we constantly share frameworks as they come into place that help to ensure the stable and transparent development of the mining sector, and the country as a whole,” she told MACIG.
With Rwanda having begun implementation in 2011 of its International Tin Research Institute Tiny Supply Chain Initiative (iTSCi), there are lessons to be learned from Uganda’s regional counterparts. “Where frameworks and mechanisms are in place in other countries and working efficiently, we are open to implementing them here as well,” said Muloni.
On the home front, Uganda has rolled out its SMMRP initiative, begun in 2004 and recently completed. The program has been aimed at improving government transparency and building the state’s capacity to manage the sector. Funded by a group of institutions including the World Bank, SMMRP has implemented a computerized mining cadastre system to increase oversight of the issuance of mineral rights. SMMRP has also spearheaded the mapping of the country’s geology and mineral resources in partnership with the Geological Survey of Finland.
Previous geological mapping in the country dated back to the 1960s.The newly updated database of information gives Uganda a distinct advantage over other under-explored jurisdictions and has already had a demonstrable impact on activities. “Since we started the project in 2004, we have seen a six- to seven-fold increase in investors interested in exploration,” said Edwards Katto, acting commissioner for Uganda’s Department of Geological Survey and Mines.
Transparency on the level of reporting will be the next step to improve Uganda’s positioning as a privileged mining destination in the region. When it comes to the country’s natural resource sector, the call for EITI-sanctioned transparency was first made by the oil and gas sector. Not long after the country’s first commercial oil discovery was made in 2006, the Ugandan government in response included within its 2008 Oil and Gas Policy provisions to move toward EITI implementation.
Five years later, the country appears no closer to achieving candidacy. The prospect is still on the horizon, however. While speaking at the sixth EITI Global Conference in Sydney this May, Muloni reaffirmed the country’s interest in joining the organization.
Joining the EITI coalition will pave the way for good governance through budget monitoring, as well as cut down on corruption and establish more trust between stakeholders. Most importantly for Uganda’s developing mining sector, such a sign of stability and accountability would help to coax in investor dollars to fund much-needed exploration programs that will take the industry to the next level.
This article was written as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Official Mining in Africa Country Investment Guide, will be launched next February 2014, as the only official publication providing country-specific information at Africa’s top mining event, the 2014 Investing in Africa Mining Indaba™ held in Cape Town, South Africa.