Govt seeks to create mining firm, sell shares to investors
Government will form a national mining company through which small and large scale miners will hold a stake. Photo / File
What you need to know:
- Government says it will create a special purpose vehicle in which medium and large-scale mining enterprises will own shares
Uganda is planning to establish and list a conglomerate or a special purpose vehicle of specific mining companies on the international capital market to raise funds to support the mining sector.
The details are contained in the 2024/25 Budget Call Conference, which comes on the back of a commitment in February, in which, government indicated it would form a national mining company, in fulfilment of the Mining and Mineral Act 2022.
It was not immediately clear how this will be achieved but details indicate that government will convert the wholly owned special purpose vehicle into a minor shareholding company for both medium and large-scale mining enterprises.
“Government will establish a conglomerate of specific companies in the mineral sector and then form a special purpose vehicle that is owned 100 percent,” the Budget Call Conference reads in part, noting this will help in attracting capital and sufficient technology to invest in a sector that is highly capital intensive.
Details also indicate that the special purpose vehicle will be the holding company, through which government will hire international specialised concessions to manage the mining sector, sell some equity to strategic investors, and acquire required capital through leasing.
Government will also use the special purpose vehicle to list shares on the international capital markets and workout a revenue sharing mechanism with investors.
Government has already indicated that it plans to establish a national mining company that will own up to 15 percent of stake in all medium- and large-scale companies in the country. International capital markets allow governments, companies and high value individuals to borrow and invest across national boundaries.
These allow companies and governments to tap into foreign markets and access new sources of funds given that many domestic markets are too small or too costly for companies to borrow from.
They also allow individuals, companies, and governments to access more opportunities in different countries to borrow or invest, which in turn reduces risk.
The mining and quarrying sector has a large contribution to Uganda’s gross domestic product, which according to data from Uganda Bureau of Statistics, contributed Shs2.626 trillion in the 2020/21 financial year, representing 1.8 percent of national gross domestic product, up from 1.6 percent.
In addition to the crude oil in the Albertine region, geological companies have discovered large deposits of rare earth, gold, copper, iron ore, cobalt, marble, vermiculate, and other minerals across the country.
Marble accounts for 62 percent of minerals that were produced in the country in the 2020/21 financial year.
Uganda also has large deposits of limestone and pozolanic, which are ideal for cement production.
The mining sector is dominated by artisanal miners who produce majority of the country’s gemstones, metallic minerals, industrial minerals and other industrial minerals.
Artisanal miners, many of whom are largely informal, use rudimentary tools to extract minerals such as gypsum, clay, sand and limestone, among others.
