Has Uganda revamped her mining sub-sector?

This followed decades of stagnation that provoked the rage of both domestic and foreign miners operating in the country. The outrage climaxed in the calling for the lifting of the ban that had already slowed their operations and left players grappling with losses, according to their lobby, the Uganda Chamber of Mines and Commerce. 

Prior to the ban, gold was Uganda’s most valuable mineral export, surpassing coffee at one point, according to data from the Bank of Uganda (BoU). It then dropped from an average of $10b per quarter over the previous four quarters to zero in the second quarter of the 2020/2021 fiscal year. 

This number remained unchanged until the third quarter of the 2022/2023 financial year. Since then, the average amount of gold exported each quarter has decreased to $6b.

Has the calculated risk yielded any dividends?
Ms Irene Batebe, a chemical engineer and the permanent secretary (PS) of the Energy ministry, says the volumes of trade dropped immediately after the halt because a lot of minerals that were leaving Uganda unprocessed stopped. She adds that it has taken time for mining firms to pick back up to what they were previously exporting as they generate capacity by setting up processing facilities. 

“But that is for the good of the country because you might lose some mineral exports momentarily to gain a frenzy in the long-term. We do have quite a number of new companies coming up that are requesting for new licences,” she told Saturday Monitor. 

The country intends to develop the general mining industry through increased investment, value addition, national participation, and revenue generation with this 2018 mining and mineral policy so that it becomes a major driver for employment creation and GDP growth. 

The mining and mineral policy identifies 18 mineral deposits prioritised for exploration and development. Among these, eight have been identified to contain critical minerals. 

The country aims to establish itself as a hub for regional processing as it rejuvenates its railway lines in areas where significant mineral resources have been verified and the provision of electricity to mineral processing facilities. 

The country’s 2023 Energy Policy Review acknowledges that a ban on unprocessed mineral exports is a factor that may impede industry development due to capacity constraints, but it is beneficial to the country in terms of sustainability and contribution to GDP. 

“We have done some initial assessment working with the National Planning Authority (NPA). The mineral sub-sector can potentially have the same impact or even more than what we see in the petroleum industry if well galvanised. If we do not capitalise on processing minerals for export, we are losing almost three quarters of the potential value that we are supposed to get out of these minerals,” PS Batebe stated. 

What minerals has the government prioritised?
They are five in number, and they include iron ore, gold, copper, phosphates and development minerals such as marble and limestone. The Energy ministry also called for more surveys to study the qualities and quantities of the existing occurrences. But it still faces low investment in large-scale mineral production, making the current raw material export ban one of the biggest obstacles for prospective investors hoping to develop critical minerals for the global market, according to the Uganda Chamber of Mines and Commerce, a mining lobby. 

The ministry’s data shows that there are more than 790 mining firms in Uganda that hold mining licences, with few foreign firms in the majority of the country’s critical mineral exploration projects. 

An Orom-Cross Graphite Project, for instance, was fully acquired by a UK company in 2020. The project reported 24.5 metric tonnes of graphite-containing resource deposits and is currently conducting feasibility studies. The Energy ministry reports that the foreign company plans to take a final investment decision this year, with the goal of beginning production in 2025. 

An Australian company that is investing in a Ugandan company that owns the rights to the Makuutu Rare Earth Project is another example. It is estimated that 532 metric tonnes of 640 parts per million rare earth oxide are present in this deposit. The foreign company established a demonstration plant in eastern Uganda and is now awaiting a mining licence to start mineral processing and exports this year. 

The largest mining operation in Uganda used to be the Kilembe cobalt/copper mine and associated copper smelting plant in Jinja. However, production was discontinued in 1982 due to a drop in global copper prices. A concession agreement was signed by the government and a Chinese company in 2013 with the aim of rehabilitating the mine. But the agreement was terminated in 2017 due to noncompliance with the terms of the agreement. 

The government is currently looking for new investors for Kilembe.

What problems are players in the mining sub-sector met with?
It is anticipated that the country’s discovered oil resources will fetch it $2b on average over the course of at least 26 years, or contribute 10 percent of its GDP. The Energy ministry states in a 2023 report that “due to Uganda’s landlocked status, maintaining an effective transportation infrastructure is crucial for connecting the country with global markets. The energy-intensive nature of the mining sector also makes a stable power supply essential.” 

The main obstacles to mineral development plans have been the large use of antiquated mining techniques, informality in the mining industry, a lack of institutional and human resources to conduct exploration, quantification, deficient physical, research and development infrastructure. 

In addition, there is a dearth of investment in sectors that make use of the minerals that are readily available. This is despite the nation’s goal of raising processed mineral exports from five percent to 7.1 percent of all manufactured goods.

“For us it’s not just adding value to the raw materials but it’s stimulating an entire eco-system and creating a job market. For every licence that we are issuing, there has to be a commitment for value addition. To add value, we need to set up the facilities and this is done by the licensee,” said Ms Irene Batebe, a chemical engineer and the permanent secretary (PS) of the Energy ministry. 

This indicates that the country’s ability to implement this policy with its own internal mineral processing capacity has been inscribed with the licence requirements of miners with commitments of value addition. 

The government has also set up associations among small-scale and artisanal miners and provided them with facilities for mineral processing also known as mineral beneficiation centres in mineral wealth areas like Ntungamo, Busia and Karamoja districts. 

“This was done like this so that we don’t leave all the burden of value addition to the licensees, be it artisanal, small scale or large scale since it is capital intensive. We are expecting that during this financial year, we will have these facilities equipped using money from the National Treasury and then roll them out across the country,” said PS Batebe.