Resources 

Monday, January 13, 2014 

Increased investor cash drives resources

DIRE: Uganda’s minerals sector is dominated by small-scale miners who work with the minimum of the required equipment and little money to invest with. (PHOTO BY BAZ WAISWA)


KAMPALA, UgandaThe Ugandan extractive industry notched up impressive achievements in 2013. Many of the successes came in the oil and gas sector like the issuance of the production licence to CNOOC in the last quarter of the year. 

However most notbale was the renewed interest by local and international investors  to inject money into extracting the reputed vast minerals spread across the country.

 In the same manner the government, through public private partnership, showed interest in joinin hands with investors to exploit these natural resources.

 In some cases, the government was helpful in mediating wrangles between miners and local land owners that threatened to distract the progress being made in the mining sector. 

The government has also shown a willingness to make policies and laws that can spur mining and try to limit the bottlenecks.

In the past, the oil and gas sector, has been the frontrunner of Uganda’s natural resource development. The sector has been key in attracting foreign direct investment ever since 2006 when there was a renewed push to  find oil in the Albertine region, western Uganda. 

The discovery of useful minerals in Uganda dates back to hundreds of years ago but mining remains in the hands of ill equipped small-scale miners despite presence of well documented availability of minerals. 

During the First Uganda Mining, Energy, Oil & Gas Conference that met in May last year, Zachary Baguma, Assistant. Commissioner Geology, Ministry of Energy said Uganda has over 20 minerals. 

These include copper, cobalt, high-grade bauxite and phosphate, tantalum, tungsten, beryllium, bismuth, columbite-tantalite and gold. Others are lead, zinc, ores, aluminous clays, lithium, uranium, tin and rare earths.

These minerals are under-explored and unexploited apart from copper that has been mined extensively extracted at Kilembe mines in Kasese, Western Uganda.

The small-scale miners operate in dire circumtances, with the minimum of equipment. They also tend not to have no expertise and financial muscle to fully exploit these resources. This ‘subsistence’ mining is what the government wants to phase out.

At the same conference, Edward Katto, Commissioner at Geological Survey and Mines Department said the government has put in place programmes to address the issue of inadequate geological information flow. 

This information would help attract more investors, improve human resource and develop mining in the long run including provision of market information.

During the second annual Mineral Wealth Conference organised by Uganda Chamber of Mines and Petroleum, Uganda unwrapped its minerals potential to hundreds of interested investors. 

The immense potential points to an exciting future were Uganda can earn   considerable revenue once the minerals are extracted.

One exciting story was told by David Kyagulanyi,  the Director, Kweri Limited,  the company exploring for rare earth metals in Busoga sub-region, Eastern Uganda.

The minerals include aluminous clays, yttrium, and rare metals such as gallium and scandium that can bring into Uganda an estimated value of $370 billion. 

Busoga has huge deposits of gold being explored by a number of firms including Blaze Metals, a Ghanaian, who predict the country can earn $5bn in the next five years once mining starts. 

Kyagulanyi said if exploited, Uganda can become the cheapest and major producer of scandium, quartz, titania, magnesium and this is achievable in  five years if the government succeeds in attracting investors.

Howevr, for mining to flourish, basic infrastructure like roads, railway and airfields, together with utilities like water, telecommunication and electricity are essential. 

Experts also uknderscore the importance of a stable political, economic and social environment that provides fair regulatory framework. 

The government through Uganda Investment Authority has overtime pampered investors with advisory and financial services including incentives and tax holidays in a bid to lure investors.

Some of the incentives include free importation of mining plant and equipment and all spare parts for machinery used in mining imported by licensed mining companies is free of import duty and all taxes as is under the East African Community exemption regime. 

Investors also get protection under the Multilateral Investment Guarantee Agency (MIGA), which Uganda is a signatory.  Mineral exploration expenditure is expensed 100%. Provisions exist for remitting dividends and profits and a generous depreciation allowance for all depreciable mining assets. 

Government statistics show mining contributes about 0.3 percent to Uganda’s GDP. 

Elly Karuhanga, chairman Uganda Chamber of Mines and Petroleum believes that Uganda has the potential to have a flourishing mining sector but counsels that there is a huge need for a steady supply of energy to power the sector. 

Mining is a sector that requires huge amounts of electricity. Therefore the addition of Bujagali (250MW) was a plus.   

Projects like Karuma (600MW), Ayago (700MW), Isimba (130MW), Arianga (400MW) and others also cast a ray of hope that the country will have enough energy to exploit these minerals into good money.

By Baz Waiswa, Monday, January 13th, 2014