Uganda has suspended the issuance of new mining licences and put on notice those with non-performing ones following revelations that a number were handed out irregularly.

Officials from the Ministry of Energy said most of the illegal licences had ended up in the hands of speculators who lacked the financial or technical ability to deliver.

The department of geological survey and mines in the Ministry of Energy — Uganda’s licensing authority — has asked the speculators to justify why their licences should not be revoked. 

“We have found it necessary to streamline the manner in which we issue the licences. We have established a committee to scrutinise applicants’ competence before they are issued with new licences or their old ones are renewed,” said Peter Lokeris, a junior minister in charge of mineral development.  

The committee comprises technocrats from different ministries plus the Attorney General who shall vet applications under a competitive bidding process.

Normally, potential investors present their applications to the commissioner’s office and are issued with a licence. But an inside source said because the vetting process is not vigorous, it is open to corruption and favouritism. 

Official documents from the mineral department show that there were 625 concession holders by the end of September. But the majority are not performing to the expectations of the ministry.

So far, seven mining lease holders and 15 exploration licence holders have been served with notices of non-fulfilment of their obligations.

Uganda now joins Kenya and Tanzania, which have been revising mining laws in the wake of increased exploration and mining interests across the East African region.

Two weeks ago, Kenya issued a new law that requires foreign-owned mining companies to surrender 35 per cent of their local operations to Kenyans.

The law followed a set of new regulations that slapped a 20 per cent tax on the sale of assets by prospecting firms in the oil and mining business, as Kenya sought to raise more funds to finance its growing expenditure.

In Tanzania, the government raised the amount of revenue mining firms should pay to at least 0.3 per cent of their annual turnover, up from the previous ceiling amount of  $200,000.

Rwanda has also been renegotiating expired mining licences in a review that could see some companies lose lucrative contracts.

A privatisation process that began in 2005 saw a number of mining concessions formerly held by state companies transferred to private companies or to joint ventures in which the private interest held the majority share.

Sealing loopholes

Analysts said the government was keen to seal loopholes in the mining business in the wake of the gas and oil exploration business, as well as mineral finds in Kenya, Uganda, Tanzania and Rwanda, pushing the industry’s interest in the region to an all-time high.

But in Uganda, for example, the government is losing out on revenue due to speculators who lock out serious investors and delay the sectors’ growth.

“When serious holders work, we tax royalties, but being inactive, all that speculators pay for are license fee,” said Mr Lokeris.
An exploration licence, for example, costs just about $500, yet speculators cut million dollar deals with them.

Recent surveys have revealed the presence of substantial high value deposits in Uganda including gold, tin, iron, bentonite, vermiculite, limestone, wolfram, copper, nickel marble silica and diatomite. Airborne geophysical surveys also show regions with the potential for uranium, rare earths, base metals and diamond deposits.

But because speculators hold licences for the majority of these regions, the sector’s growth remains at stake.

“Speculators ask for huge sums of money which pushes genuine investors away,” said Wilson Mutagwaba, mineral consultant at MTL Consulting  Company Ltd. “If you cannot develop that land all the expected advantages of jobs, loyalties and taxes is denied,”
However, Irene Nakalyango the chief executive at the National Chamber of Commerce and Industry argues that allowing speculators is one way the country will achieve the required percentages for local participation in the mining industry and help to boost its growth.

“When investors come seeking partnerships, speculators who hold licences would be a good choice,” said Ms Nakalyango.
In Tanzania, the government has eliminated speculators by enforcing the laws on mining and installing electronic systems to track work progress of licence holders.

Gold is Tanzania’s largest mineral export standing at 50 tonnes a year.