Halting of gold exports causes huge drop in mineral imports

According to data from Bank of Uganda, there have been no gold exports for at least six months not. file PHOTO 

What you need to know:

Data suggests that due to low or no activity, especially in the gold exports market, dealers that import minerals purposely for re-export were largely silent during the first half of the 2021/22 financial year. 

At least more than 90.1 percent of Uganda’s mineral exports are re-exports, according to analysed data from the Ministry of Finance.

Uganda sources much of its mineral re-exports, particularly gold, from third party countries, among them Tanzania, Zimbabwe and DR Congo, Bank of Uganda data indicates.  Details from Ministry of Finance indicate the suspension on mineral exports by dealers for the better part of the first half of the 2021/22 financial year forced a massive fall in mineral imports that enter Uganda, which are later re-exported.

During the period, details show, mineral imports dropped to a paltry $110.81m due to a dispute involving new levies slapped on gold and other minerals exports in July.

The drop, according to Ministry of Finance, was largely driven by a suspension on gold exports, which retrospectively forced dealers to halt imports for purposes of re-exporting.

Data contained in the Ministry of Finance Macroeconomic and Fiscal Performance report for the first half of the 2021/22 financial year, indicate that mineral imports, which are largely dominated by gold, fell to just $110.81m compared to $1.12b that was shipped in in the same period during the 2020/21 financial year.  The drop, which represents a decline of about Shs1.01b, the report indicates, therefore means that only $110.81m worth of mineral imports were shipped in.

However, the report does not give details of which mineral was most affected but available data suggests gold took  the biggest drop.

Ministry of Finance blamed the drop to a dispute over levies particularly on gold that were implemented in July last year but have since been withdrawn and replaced with new ones passed by Parliament about two weeks ago under the Mining and Mineral (Amendment) Bill 2021.

The new amendments introduce a levy of $100 for a kilogramme of refined gold exports, which is a revision from the 5 percent and 10 percent that had been imposed on a kilogramme of refined and unrefined gold, respectively.

The dispute had stalled activity in the mineral value chain, forcing exporters to suspend activity, which retrospectively affected mineral imports.  .

During the period, according to Ministry of Finance, earnings from exports declined by $759.47m, falling to $1.8b from $2.5b during the same period in the 2020/21 financial year.

The drop was largely due to zero export of gold, according to Ministry of Finance.  Earnings from all other exports increased save for those from minerals. 

For over six months, Uganda has not exported any gold due to a dispute between government and dealers over levies.

“At the start of 2021/22 financial year, government imposed a levy of 5 percent on every kilogramme of refined gold and 10 percent on unprocessed gold exports,” the Ministry of Finance Macroeconomic and Fiscal Performance report notes, blaming the lack of gold exportation for the fall in export receipts.

Gold exports, according to data from Bank of Uganda, had, until the suspension, been growing rapidly, forming at least 44 percent of Uganda’s export receipts.

Much of Uganda’s gold exports are re-exports from Tanzania, Zimbabwe and DR Congo supported by large investments in a number of refineries across the country.

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