Low investment in the mining sector: Who is to blame?

April 30, 1975, marked the end of the Vietnam War and humiliation for Americans. This was the same day Saigon City, the capital of then South Vietnam was taken over by the Vietcong and North Vietnamese army. The war had been ongoing since 1955, but with the fall of Saigon, the Americans had to retreat in humiliation. Saigon has since changed its name to Ho Chi Minh City, popular with tourists that visit Vietnam. However, somewhere in Lubaali-Kayonza, Kitumbi Sub-County, Mubende District is an illegal mining settlement named after Saigon City.

Mubende’s ‘Saigon City’ does not have the hallmarks of the city it is named after. It is dominated by tinned roofed houses, shacks. It is midday on a Thursday. People can be seen sipping on an occasional beer. However, this is only in a section of the 200 square kilometres where these tinned roofs in the valley can be seen. Uphill, there is a brown colouring that is visible from a distance. There is also the noise of something like a stone crusher, blaring generators, hammers hitting stones and men who look like the colour of earth. People descended on this piece of land almost seven ago after it was mentioned that there is gold in the area. This marked the influx of people who came to join in the Gold rush. All over Mubende District, there are about eight illegal mining settlements with about 8,000 people.
Under Ugandan law, the mining they carry out is considered illegal. Some, however, refer to them as artisanal miners. The estimates point to about 20,000 artisanal miners in Uganda. In Mubende, they are all involved in the mining of gold. It is an entirely informal economy valued at billions of shillings that is largely untaxed and an unregulated market.

“It is a money economy here and we depend on the miners to make money. There is no agriculture here. It is all mining. Without the mining, I would be out of business. The miners like to drink a lot of alcohol. We offer them that service,” narrates Mr Innocent Sabiti, the only beer and soda depot owner based in Saigon City.
He is originally from Kanungu District, hundreds of kilometres away from Mubende. His plan was not to carry out mining but rather to provide services that miners may need. Within illegal mining settlements, there will always be people that carry out value-added services. This ranges from shopkeepers, welders, casual workers, gold buyers, mechanics and mobile money operators, among others.

Illegals or not?
In February 2016, an exploration licence belonging to Gemstone Resources expired and the licence holder under the law can apply for renewal. However, other mining companies can also apply for the same licence. Miners under the Namulanda Artisanal Mining Association and Ssingo Artisanal Miners Association (SAMA) applied for a location licence (only meant for small-scale miners) on the 207.3747 square kilometres of the land. Their licence is still under consideration. The applicants under SAMA is a group of illegal miners that had been mining for gold for almost seven years and have been at loggerheads with Gemstone Mining Company. In most instances, they prefer not be called illegal miners but rather artisanal miners.

“We are artisanal miners. Unlike the licence holder (Gemstone), we have actually been mining gold. The licence holder has only been seating and speculating on the land without doing any work,” narrates Mr Emmanuel Kibirige, the executive director of the SAMA. Mr Kibirige and members of the association took over a section of the Gemstone licence and started mining gold. It is on the premise of this that they are referred to as illegals.
“Anyone who violates the law is doing something illegal. That makes them illegal. What these people do is to invade a license of a company and then start mining,” explains Mr Denis Kusasira, a partner at ABMAK Associates, a law firm with expertise in mining in Uganda.

He insists that artisanal miners are people within the community that “scratch” the surface of the land trying to find minerals. These people are often locals within a community. However, what is visible in Mubende is an influx of people from around the country and foreigners, all prospecting for gold.

In ‘Saigon City,’ Mr Bassa Nyansio who is considered a mayor in the area reveals that they have a large population of Rwandan nationals that are carrying out mining activities. This is indeed true as several Rwandan nationals are currently involved in the rudimentary mining. Several shops in the area also provide mobile money services inclined to Rwanda that can be used to send money back home. There are also some Congolese on these mines. Notably, Tanzanians and Chinese are also involved in processing Gold from the tailings picked by the artisanal miners. It is premised on this that some officials within the Directorate of Geological Survey and Mines (DGSM) argue that what is currently ongoing in Mubende is illegal mining.

A myriad of problems
Illegal mining currently takes place on less than 20 per cent of the licensed area of land in Uganda, leaving 80 per cent that can attract investment. “There are so many other factors that are to blame for the significantly low investment in the mining sector,” says Mr Don Binyina, the executive director of the African Centre for Energy and Mineral Policy.

“There is speculation in Uganda with several companies holding up to 900 licences. Some of them – if not most - are not operational. How deep are the pockets of the individuals involved? Can they actually carry out any work like exploring for gold? Speculation would not be a big problem but Uganda has a lot passive speculation. This is because the first-come-first serve provision in the law doesn’t require proven technical and financial capacity by applicants,” he explains.
According to DGSM, several companies also do not submit returns on the exploration work they have carried out. Additionally, areas that are licensed for exploration work to determine the mineral deposits are actually parceled out actual mining activity. For instance, a company called Optima Mines is carrying out mining of gold on a licence meant for exploration work. The company has invested in excess of $2m on facilities used in the processing of gold. Even more troubling, DGSM that is supposed to carry out licensing and regulation of the sector is largely underfunded to do adequate monitoring of what is going on in these mines.

During the mining conference, Mr Edwards Katto, the commissioner of DGSM, noted that in order to attract investment in the sector, Uganda has to set up an exploration company that would do most of the exploration data and sell that data to prospective investors.
“This department will be responsible for appraising the known mineral potential such that when investors come, they find basic information rather than spending money and most of the work has been done. They will find well-cooked food available and for them, they should start going into mining,” he says.

On this basis, President Museveni revealed plans by the government to set-up an exploration company to de-risk Uganda’s mining potential.
“Therefore, on the issue of minerals, that is what we have decided to do. Go back to 1986 and say look here, let us do the thing (exploration) ourselves,” he said.
The estimation by UCMP is that investment of Shs340b in exploration has the potential to attract millions of shillings in the sector. However, that does not solve the other issues around the mining sector.

Stalling investment?
Uganda hosts its largest mining conference every October. The Mineral Wealth Conference, as it is called, attracts investors from around the world with the aim of presenting opportunities in the mining sector. One of the most talked about subjects at this year’s conference was the artisanal miners that were being accused of stalling investment opportunities.
“Companies want to come into the country and invest. When they get to know that an area to be explored is being occupied by illegal miners, they will consider that a risk. If I have a mining lease, how will I attract investment if the illegal miner is on the land?” explains Mr Elly Karuhanga, the chairperson of Uganda Chamber of Mines and Petroleum.

Uganda has been unable to attract significant investment from global markets in the mining sector with exception of limestone, marble and copper mines. Hima Cement and Tororo Cement are the largest players in the mining of limestone for Cement production. This year, Dao Marble started mining and production of marble products from Karamoja and Tibet-Hima has a contract to produce copper from Kilembe Mines. There is small-scale mining on-going for minerals like Tin, Wolfram and Gold. Notably, small-scale mining for gold can require investment of about $300,000 (Shs1 billion), a cost considered to be high for some of the people engaged in illegal mining activities.

DEVELOPMENTS IN MINING

Mining law being reviewed

For the last two years, the process to review Uganda’s Mining Act 2003 and Mining Policy 2001 has been ongoing. The consultations for the Draft Mining Policy have been concluded and by 2017, it should be tabled to the Cabinet for approval.
The purpose of the review is to bring the law and policy up-to-date in order to attract investment in the mining sector. Additionally, there will be provisions that would finally define artisanal mining in Uganda and this allows a process on how it can be legalised. More so, the policy also attempts to have a mix of competitive bidding and first come first serve basis in applications for an exploration licence.

Lessons from Rwanda, Tanzania

There is recognition in Tanzania and Rwanda on the role that artisanal and small-scale plays in the mining sector. In both countries, these activities are legal. The understanding is that this kind of mining creates job opportunities. In legalising these activities, the two countries collect royalties and regulate activities of artisanal mining.
In Uganda, there are no clear statistics on how much gold is recovered and sold by artisanal miners.
Additionally, the government loses revenue from royalties because the current artisanal mining activity is unregulated. In regulating this mining, Rwanda and Tanzania are also able to ensure a level health and safety for the artisanal miners. This recognition has not stopped the entry of international investors in the mining sector of Rwanda and Tanzania.

Mining revenue
Mining currently contributes only 0.5 per cent to Gross Domestic Product. However, these are statistics for the formal sector. Informally, the contribution is 3.5 per cent. There are about 200,000 miners around the country, most of them unregulated.

Location licence

A location licence, according to The Mining Act, 2003 section 54 (2), is a licence for prospecting and mining operations by methods which do not involve substantial expenditure and the use of specialised technology.
This is mostly meant for small-scale miners who do not have the capacity to afford high-tech equipment for mining.
“If we secure a licence, we will be able to engage in better and safer mining activities. We have been unable to invest money in improving standards and mining activities because we were unsure about the future,” Mr Emmanuel Kibirige, the general secretary Ssingo Artisanal Gold Miners Association, said.

An illegal gold miner cannot walk into a bank and secure loan, whereas if they had a licence they could secure financing for mine improvement and standards.
AUC Mining, which held the exploration licence, claims it has been unable to carry out any exploration activity on the land because of the influx of illegal miners.
There have been several attempts to evict illegal miners but this has been met with stiff opposition.