The latest research findings show that questionable data collection gaps and policy weaknesses surrounding Uganda’s mining sector are largely to blame for illicit financial flows that drain the country’s tax base during a time of rising public debt.
Whereas the total value of illicit financial flows originating from Uganda’s mining sector every year remains unclear, a significant portion of illicit financial flows associated with this industry is driven by corruption and tax evasion, according to research data.
A previous audit by the Auditor-General’s Office revealed mining companies disclosed 16 kilogrammes of gold exports to Uganda’s Energy ministry during the financial year 2016/17 but official data compiled by Uganda Revenue Authority (URA) indicated exports amounting to 8,691 kilogrammes were captured during the same period.
The audit also revealed mining companies did not pay mining Ush35 billion ($9.5 million) in royalties during the financial year 2015/16. Concession fees totalling $1,760,000 due from mining companies were outstanding by the end of June 2016. This resulted in a revenue loss of Ush41.4 billion ($11.2 million) pegged to the mining sector in 2015/16.
An estimated 10,273 tonnes of vermiculite valued at Ush8.3 billion ($2.2 million) was exported during the financial year 2019/20 without export permits contrary to the law and yielded a revenue loss of Ush102.7 million ($27,772), according to the Auditor- General’s findings.
Mineral exports valued at Ush26.3 billion ($7 million) were exported between 2017/18 and 2019/20 without official approvals, the Auditor General found.
Around Ush5.4 billion ($1.5 million) was recovered from Kasese Cobalt Company in unpaid mining royalties during the financial year 2010/2011.
The unpaid royalties covered the period 2004-2009 and were linked to under declaration of invoices for cobalt metal, copper, and nickel hydroxide for purposes of diminishing its royalties expenses.
“There are no clear statistics on the gold produced and mined in Uganda. Such discrepancies underscore the existential threat paused by illicit mineral trade and financial flows on the domestic revenue mobilisation efforts of the country…” reads a joint research report published by Global Financial Integrity and Advocates Coalition for Development and Environment (ACODE) titled, Uganda’s Mining Legal Regime; Addressing Illicit Financial Flows (Iffs) Risks And Revenue Loss In The Mineral Supply Chain dated January 2025.
About 90 percent of Uganda’s mineral production is dominated by artisanal and small-scale mining operations. This sector employs roughly 200,000 Ugandans according to research data.
“I usually capture data that I receive from other entities but I do not manage Uganda’s mining industry. You need to speak to the Ministry of Energy on that issue,” said Asadu Kisitu Kigozi, URA’s Acting Commissioner for Customs.
In comparison, Uganda’s public debt burden- one of the largest consumption areas for tax revenues has steadily risen over the past three years and also provoked alarm bells in parliament.
Total public debt stood at $25.6 billion by the close of June 2024, with external debt accounting for 57.2 percent while domestic debt accounted for a 42.8 percent share. The country’s total debt portfolio stood at Ush88 trillion ($23.7 billion) by the end of June 2023 according to government data.
Domestic debt grew from 18.7 percent as a share of Gross Domestic Product (GDP) in the financial year 2022/23 to 20.1 percent in the financial year 2023/24.
”We, therefore, recommend that government should gradually scale down on domestic borrowing because it is becoming unsustainable and also negatively affects private sector credit…” reads part of the report of the parliamentary budget committee on the national budget framework paper for the financial year 2025/26 financial year 2029/30 dated January 2025.
“The Ministry of Energy has different data on mineral exports compared to what URA captures in its systems. The problem of data collection gaps in government also affects other areas. For example, the Auditor General’s office has discovered discrepancies in student enrolment data held by the Ministry of Education and the local governments whereas the data is collected from the same schools! A look at our gold exports would make you believe there is no gold refinery in this country because most of the gold originates from other places. The most effective way of taxing the mining industry is to collect income tax and other taxes at source based on production levels and let the industry players take care of the rest. There is also need to zero down on real owners of mining sites for purposes of enforcing industry compliance rules. For instance, all the mining sites in Mubende district are controlled by three people that possess all the mining licences in that area but their identities are yet to be verified,” argued Julius Mukunda, Coordinator of the Civil Society Budget Advocacy Group.
“Harmonisation of government’s records management system might not be enough to solve the problem of tax revenue losses in Uganda’s mining sector because it features highly connected people that are in position to defy government laws and regulations and get away with it. Such people dominate the illicit trade and illicit financial flows as well around the world. As a result, it is almost impossible carrying out reforms in the mining sector because of huge political influence peddling,” observed Dr. Brian Serunjogi, Acting Head of the Micro economics section at the Economic Policy Research Centre (EPRC).
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