Uganda: government introduces new mining laws

Published by MAC on 2019-05-02
Source: The East African

Uganda to own shares in every mining company granted a lease

By Halima Abdallah

The East African

30 April 2019

A new policy will see Uganda maximise the gains from its natural resources

To achieve efficiency and ensure equitable and transparent management of
mineral revenues, Kampala will automatically own shares in every mining
company granted a lease, according to a new policy approved by the Cabinet
this month.

Uganda's Mining and Minerals Policy 2018 also makes value addition
mandatory. It is aimed at helping the country achieve maximum economic
gains from its natural resources.

The policy is a major shift for the sector where investors owned 100 per
cent stakes in mining leases and had the option of exporting raw ore.

The change of law has been necessitated by continuous land conflicts in
mining areas, an increase in corruption in the issuance of licences, a
sector crowded by speculator who lock up investments, the need to stop
environmental degradation and deprivation of benefits arising from mineral
exploitation to host communities.

"The revised laws will help us revive the mining sector," said Permanent
Secretary in the Ministry of Energy Robert Kasande. Uganda's policy change
comes at a time the country's mineral sector is beginning to attract
exploration and mining giants like Australia's Rio Tinto, which last year
signed a $57 million farm-in deal with another Australian firm Sipa
Resources.

MINING GIANTS

Sipa Resources, which started operations in Uganda in 2012, made
discoveries two years later of rare earth minerals in Kitgum in the
country's north. Rare earth minerals contain elements used in making parts
for digital and electronic items.

The new policy requires that the investors must have sufficient capital to
carry out exploration, exploitation and value addition, in line with their
licences. This means that once implemented, the new policy will
automatically kick out mineral speculators.

The chairman of the Uganda Chamber of Mines and Petroleum (UCMP) Elly
Karuhanga said there are "over 800 mineral licences out there" with
speculators holding most of them, a scenario that leads to locking up
investment as speculators trade the licences at exorbitant prices that
scares away genuine investors.

"Those licences should be withdrawn immediately so that people who are
competent take them up," said Mr Karuhanga.

"The policy will guarantee security of tenure by granting licences for
specified periods that are subject to a 'use it or lose it principle',
through enforcement of mandatory relinquishment, fines and penalties to
minimise speculation and hoarding practices," reads the policy.

Mr Kasande said that while implementing the new mining policy and law, the
country will replicate the practice in the oil and gas sector, in which
companies are required to present their local content plans before they
are issued with a licence.

The local content aspect, he said, must have a representation of women and
other disadvantaged groups.

For sustainability, the new mining policy will introduce competitive
bidding rounds to flush out incompetent companies and speculators -- a
departure from the current practice of first-come-first-serve regardless
of capabilities.

"We think that will transform the mining sector. We are concluding
agreements to get money to do aerial magnetic surveys in Karamoja
beginning next financial year. That will give us a better assessment as
far as minerals are concerned," said Mr Kasande.

Uganda's minerals are spread across the country and include, gold, tin,
tantalite, tungsten, iron ore, copper, gemstones, cobalt, sand, all
combined contributing just 0.6 per cent to GDP, according to UCMP.

This is because the country exports unprocessed minerals, with some sold
as non-Ugandan products due to lack of certification.