Sunday August 3 2014

Kanungu leaders appeal to Museveni over iron ore ban

UIMC chief executive officer Bnn Rao (R) takes

UIMC chief executive officer Bnn Rao (R) takes Kanungu District officials around the iron ore extraction sites. The district wants the government to allow the company to continue with its mining operations and exportation of the iron ore, saying the ban has led to loss of revenue to the district. PHOTO BY ALFRED TUMUSHABE  

By Matsiko wa Mucoori & Alfred Tumushabe

Kanungu District leaders have resolved to petition President Museveni to lift a ban on exportation of raw iron ore, saying it has deprived the district of enormous financial proceeds and employment opportunities.

The district officials and councillors made the appeal this week after visiting various sites of an iron ore extraction firm, Uganda International Mining Company (UIMC), which have become idle with heaps of redundant ore.

President Museveni in October 2012 directed the Energy ministry to stop the exportation of iron ore. He said this was intended to raise enough raw materials for the local steel industry to fill its production capacity.

“There is increasing demand for steel products in the country due to the booming construction sector. A big percentage of our iron ore was being exported, leaving some local steel rolling mills to operate below capacity. We expect this to change now that we have stopped the exportation,” Mr Edwards Katto, the commissioner for mines in the Energy ministry, said at that time.

Kanungu District administration wants the government to allow UIMC to continue with its mining operations and exportation of the iron ore, saying the ban has rendered hundreds of residents jobless. The leaders say the ban has made the district lose billions of shillings in revenue, which they had negotiated with UIMCL.

“UIMCL obtained a NEMA clearance in 2012, compensated the land owners and in May 2013, the investors were given a mining lease for the 262 acres. All these were done before the ban or with no information at all about the impending ban on export of raw iron ore. The ban was thereafter implemented yet investors had already invested at least USD 10 million,” district councillor Mr Frugence Muhumuza said during a council session on Tuesday.

The company says it had established a camp, assembled machinery and mined iron ore ready for export.
“We had cleared everything with the government and local people. We were cleared to start but government stopped us after a year yet we had invested a lot of money,” Mr Bnn Rao, the company’s chief executive officer, said on Tuesday.

However, the spokesman of the Ministry of Energy and Mineral Development, Mr Matovu Bukenya, rebuffed the claims. He said when the ban was issued, the government allowed UIMC to export the iron ore stock they had already mined before the restriction would become effective but the period has now expired. He castigated UIMC of using “naughty ways” to force the government to allow the company to continue doing what it had been doing before the ban.

Mr Matovu dismissed the complaints by Kanungu officials that the ban has caused loss of jobs and revenue to the district. “We lose more jobs and revenue in exporting iron ore,” he said.

Mr Rao said the company planned to export iron ore but government put in a new demand for a steel factory. “Establishing a factory is very difficult, you need coal. In the absence of coal, you use gas, yet gas is not going to be available until 2018 or 2022,” he said.

Kanungu District had already finalised a public-private partnership agreement with the investor and they were going to sign a Memorandum of Understanding. Under the MoU, the UIMC was to remit one dollar per tonne of exported iron ore to the district coffers.

The loss
“When you hear of the costs that have been incurred and jobs our people have lost, government should reconsider its position and let our people benefit,” Ms Justine Kakuru, Kanungu District secretary for finance, said.

Mr James Kaberuka, councillor for Kihiihi Town Council said by reneging on the agreement with the company, government could end up paying heavy damages like was the case of Dura Cement company, which sued government for breach of contract and was awarded huge amounts of money in compensation.

The deputy Resident District Commissioner, Mr Richard Ndyana, said the iron ore extraction project is important and asked the district leaders to lobby the government to reconsider its position on the ban.
“I want to urge the district leaders to exploit all opportunities such that mining resumes with relaxed conditions for the benefit of our people,” Mr Ndyana said.

The council resolved to petition the President.
“This is a golden opportunity for us which we must fight for- for the benefit of our children, let us go and meet the President who put the ban and ask him to lift it,” said councillor Mr Frank Byaruhanga.

How it started
In May 2013, the government gave Uganda International Mining Company (UIMC), a 21-year mining lease to mine iron ore in Kayonza Sub-county. Under the terms of the lease, the company was to start mining operations within one year, produce iron ore within two years and have 80 per cent of its unskilled workers and 20 per cent of middle-level management staff from the locals. It was also obliged to engage in local community development through corporate social responsibility, among others.

In January, the Ministry of Energy and Mineral Development announced a ban on exportation of iron ore and UIMC says the government changed its position and asked the company to set up a steel factory instead of exporting the raw mineral.

Energy ministry responds
Asked why the ministry gave UIMC licence to mine iron ore after the President had already issued the directive for a ban on exportation of the mineral, the spokesman of the Ministry of Energy, Mr Matovu Bukenya, said there was no contradiction. He said the ministry gave the company a mining lease but not an export licence. This means that the company can mine and sell its raw iron ore to the local steel industries.

In March this year, UIMC officials went to Prime Minister Amama Mbabazi to plead for the lifting of the ban on the iron ore exports but he told them that the option they had was to mine the raw material and sell it to the local industries.