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Uganda in tough test on oil money

The compliance test

The government has to approve an administrative secretariat that will be charged with the day-to-day activities on EITI such as ensuring participation of all stakeholders; receiving data on revenue payments by companies and receipts by the government, facilitating the multi-stakeholder group to develop a report, and disseminating the report among other roles.

 Samuel Okoulony, the programme officer, natural resources governance at Transparency International-Uganda told The Independent that Uganda faces a compliance test.

“The challenge we have always had, even with our own laws, is compliance,” said Okoulony, “This is a voluntary initiative but if you fail to comply, you get kicked out, something which could reflect badly for the country’s international credibility when it comes to investor confidence.”

Okoulony and others appear to be talking out of experience. Despite Uganda being rich with deposits of high value-minerals,the country is yet to attract the giants of the mineral sector.

Data collected in an airborne geological survey in 2012 covering about 80% of the country showed that the country is endowed with gold, limestone, uranium, marble, graphite, gypsum, iron ore, wolfram, nickel, copper, cobalt, tin, and rare earth elements, among others.

When information was released just before the first ever Mineral Wealth Conference in October, 2012,Ugandans hoped that the local mining sector would finally take off and attract investment from some of the global mining giants.

Executives of the Uganda Chamber of Mines and Petroleum, who over the last five years have been working with the government to attract international investors into Uganda’s petroleum and minerals sector, were puzzled when the move failed.

In spite of their efforts, the contribution of the mining industry in Uganda now stands at just under 0.5%–a far cry from the 1950s and 1960s when over 30% of the country’s GDP came from the mining industry.

It is hard to find credible data on gold mining in Uganda and as a result, the government, districts and ordinary citizens lose out on revenues and royalties worth billions of shillings every year. In a 2013 report, for instance, the Directorate of Geological Survey and Mines noted how Uganda produced a paltry 4.3kg and 5.3kg in 2012 and 2013 respectively.

But the same report said Uganda exported 164kg of gold in 2013 with 161kg of it imported for re-export, mostly from South Sudan and DR Congo. However, according to Bank of Uganda, the country did not import anything from South Sudan in 2013 and that in fact, Uganda exported close to 500kg of gold that same year. This was over and above what the directorate reported.

A Global Witness report titled, “Undermined: How Corruption, mismanagement and political influence is undermining investment in Uganda’s mining sector and threatening people and environment,” revealed concerns that government’s decisions in Uganda’s extractives always require President Museveni’s blessing.

Global Witness noted that when it comes to mining rights, it seems being close to President Museveni or his inner circle makes it easier to get permission granted and one’s activities and investment protected.

“This means that Ugandans are not always necessarily getting the best company for the job,” the report noted.

“Companies that receive licences via advantageous political connections rather than merit may not be able to do the job, and may not comply with other applicable laws such as those about taxes due, or how they should treat their workers and the environment.”

The tell-all Global Witness report published in June 2017 enumerated other challenges that plague Uganda’s extractives sector.

Citing numerous examples, Global Witness noted how mineral deals are often clinched by allegedly paying third parties to secure meetings with President Museveni. In one example, Global Witness noted how a former minister allegedly received millions of dollars in bribes to influence the award of a 25-year copper mining concession deal to a Chinese consortium.

According to the report, having got the deal in 2013, the concessionaires, Tibet Industry Company Ltd, were supposed to invest US$ 175 million into the facility, create over 300 jobs and pay government millions of dollars in taxes and royalties. But because they bribed their way to the deal, proper due diligence was not done about them. Later on, President Museveni cancelled the deal.

In 2016, the Inspector General of Government conducted an investigation which revealed that the award of the exploration licence by the Directorate of Geological Survey and Mines to Dongsong Energy Group, another Chinese company was fraudulent.

But rather than allow the IGG use her independence and take due action, President Museveni intervened, blamed her for disrupting the project and directed her to leave Dongsong do its work. Years later, the Sukulu project is yet to live up to its hype.

The report said President Museveni without following due process directly influences the award of deals to investors, who sometimes turn out to be fake, evade taxes and abuse human rights and the environment.

The report mentioned Museveni’s close relations including; Gen. Salim Saleh, his wife, Jovia and sister-in-law, Barnabas Taremwa, Fred Kabagambe Kaliisa, the former permanent secretary in the Ministry of Energy and Mineral Development, Richard Kaijuka, the former minister of energy among the most influential individuals in the sector.  There were also international investors, politicians and technocrats at the Directorate of Geological Survey and Mines.

“Rather than fulfilling its mandate to work for the benefit of the Ugandan people,” the report noted that the Directorate of Geological Survey and Mines is controlled by a hidden alternative power structure and decision making process or shadow system which benefits predatory and politically powerful Ugandans.

The opaque deals in Uganda’s oil, gas and mining sector, Global Witness noted, has often left the sector with unfulfilled potential.  “Most of this value, however, remains untapped and not beneficial to ordinary Ugandans,” Global Witness said, “But even if it were tapped, it is at risk from corruption, mismanagement and political interference, according to Global Witness.”

Fearing donor pressure?

In their 2013 paper titled, “The Transparency paradox: Why do corrupt countries join EITI?” Liz David-Barrett and Ken Okamura from the Said Business School at the University of Oxford noted that governments join the EITI because they are concerned about their reputation with international donors and expect to be rewarded by increased aid.

Whatever Uganda’s motivation to join EITI, Winfred Ngabiirwe, the former coordinator of Publish What You Pay in Uganda and the current head of Global Rights Alert told The Independent on Aug.21 that she is looking forward to seeing “clean business” in Uganda’s extractives sector.

“We expect honesty and transparency in the industry and we hope EITI will enhance our ability to fix things in Uganda’s extractives sector.”

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