Uganda’s government has introduced new rules to regulate how gold is sold and exported, following concerns over illegal trade and smuggling.
The measures, announced by Irene Batebe, the Permanent Secretary at the Ministry of Energy, aim to address gaps between the gold officially mined in Uganda and the much larger amounts being exported, especially to the United Arab Emirates.
Reports suggest Uganda has not strictly enforced international rules designed to stop the trade in “conflict gold”, gold smuggled from neighboring countries like the Democratic Republic of Congo (DRC), often funding violence in the region.
The government says the new rules will help clean up Uganda’s gold trade and stop the country from being used as a route for smuggled gold.
In a statement, Permanent Secretary Irene Batebe said that trading in gold must now be conducted exclusively by parties holding valid licenses. These include mineral dealers’ licenses for precious minerals, mining licenses for gold, or refining licenses for gold.
The new regulations, sources say, were developed following consultations with the Uganda Revenue Authority (URA) Customs department and the Directorate of Geological Surveys and Mines (DGSM). The two agencies, which play different roles in regulating gold exports, have previously reported conflicting figures about the country’s gold production.
Gold is a critical economic driver for Uganda and many other sub-Saharan African countries, with the precious metal now ranking as Uganda’s top export. In 2022, Uganda exported gold worth over $2 billion.
In mid-August 2022, the Central Bank of Uganda announced plans to purchase locally-produced gold. The Bank said the move aimed to support its foreign reserves while reducing risks associated with international financial markets.
Buying directly from artisanal miners would enable the Bank to improve the livelihoods of small-scale miners and reduce Uganda’s reliance on imported raw gold, which contributes significantly to the country’s total imports.
However, concerns remain over underreported gold production by artisanal miners, which denies the government vital revenue.
Reports also indicate that illicit gold buyers frequently bypass regulations, selling directly to refineries within Uganda.
These challenges underscore the importance of stricter enforcement of the new rules to clean up the sector.
Uganda currently hosts at least five gold refineries, including the African Gold Refinery, Simba Gold Refinery, and Bullion Gold Refinery.
Most of these were licensed under Uganda Revenue Authority’s (URA) Manufacture Under Bond warehouse scheme.
However, leaders in gold-rich districts have raised concerns over the government’s decision to waive royalties on gold mined by artisanal and small-scale miners.
They argue this policy has denied local governments much-needed revenue despite the social and environmental challenges associated with artisanal gold mining.
The government recently introduced a $200 export tax per kilogram of gold and set a $270 charge for import permits under the Mining and Minerals (Licensing) Regulations 2023.
Importers are now required to obtain a permit for each consignment, while exporters must prove the gold has been refined to a purity level of 99.9% and demonstrate payment of the $200 tax through the URA.
Additionally, for minerals originating outside Uganda, export permits and documentation showing royalties paid in the country of origin are mandatory.
Efforts to tackle smuggling have intensified, with Uganda achieving the Regional Certification Mechanism (RCM) under the International Conference on the Great Lakes Region (ICGLR) in May 2024.
This certification ensures compliance with regional standards for minerals such as tin, tantalum, tungsten, and gold.
Uganda is the fifth ICGLR member state to attain this certification, following the Democratic Republic of Congo (DRC), Rwanda, Burundi, and Tanzania.
Smuggling of gold, particularly from DRC, remains a critical issue.
A report by SwissAid in May highlighted Uganda and Rwanda as key transit points for contraband gold.
In-region cross-border trafficking involves smuggling gold from one ICGLR country to another, where it is falsely labeled as locally sourced and legally exported.
Out-region smuggling sees gold illegally exported to destinations like Dubai without permits or royalties.
The financial and governance implications of smuggling are significant. Studies estimate that governments in the Great Lakes region lose up to $22 million annually in tax revenue, funds desperately needed for development.
Additionally, the lack of control over artisanal and small-scale gold mining distorts governance and undermines the ICGLR’s efforts to regulate the mineral trade.
In May, the U.S. government issued an advisory warning of the risks associated with the illicit gold trade, including links to conflict financing, money laundering, sanctions evasion, and human rights abuses.
The advisory urged all participants in the gold sector, from miners to financial institutions, to conduct enhanced due diligence to mitigate these risks.
It also flagged corruption and smuggling as contributors to economic crimes, environmental degradation, and the violation of international sanctions.
The challenges facing Uganda and its neighbors underscore the need for stricter enforcement of regulations and collaborative efforts to combat the illicit gold trade in the region.
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