What you need to know:
- Between August 2019 and August 2020, gold earned $1.4b (Shs5.4 trillion), which was an increase of Shs900b from the $1.2b (Shs4.5 trillion)of the previous year. (Source: Bank of Uganda)
Two girls lifted their eyes up and one asked me whether I wanted to buy gold when I stopped to observe their activities. They did not use sluice ponds, nor did they dig any pits they collected mud gathered by the road side and started panning using a plastic basin to get gold.
“See, I have found some gold,” said the girl pointing at tiny golden coloured particles inside the basin. “If you buy this gold, I will have money to buy food at our home,” she said. The girl is a resident of Rupa in Moroto District, Karamoja Sub-region in north-eastern Uganda. This area is known for alluvial gold. Experts say gold in the area is 98 per cent pure.
She needed a paltry $40 (about Shs140,000) for a gram of gold. That same volume trades at $1,600 (about Shs5.9m) on international market.
This encounter is miniature of how gold is traded like any other ordinary product on the local market at the extraction sites operated by artisanal and small scale miners (ASM)
Outside the ASM mine sites, however, gold trade becomes a complex affair. The market gets murky as soon as the precious metal leaves the mining sites. Often unlicensed gold dealers are also engaged in the trade.
“When we get gold, we sell it to dealers who come from Moroto Town or the Turkana from Kenya, or we take it to some Indians in Kampala,” said an artisanal miner and local gold dealer commonly known as Poshu poshu. His real name is John Bosco Mugarura.
Poshu poshu is a Karimojong word which means low grade gold.
“The Karimojong did not know me so they did not trust dealing with me in gold. They would always sell to me the lowest grade after they had sold good quality to their known dealers who speak or learnt to speak Karimojong language. But I persisted and now they trust me,” Poshu poshu said.
He also owns a mill that crushes the ore containing gold.
Poshu poshu has permits from Moroto Local Government administration and pays a monthly fee to the municipal authority.
Gold exports surpassed all traditional agricultural exports such as coffee, tea, cotton and fish in 2019.
The Economy Performance report released by the ministry of Finance mid- January shows that Uganda earned $1.36 billion (Shs4.8 trillion) from gold exports last year. But questions abound regarding the source of the mass gold exports.
“The share of minerals, especially gold, has increased significantly, raising doubts about data captured. How can a sector [mining] that contributes 0.3 per cent to Gross Domestic Product have exports of over $1 billion?” Dr Fred Muhumuza, a lecturer at Makerere University, wondered.
Question now is, if gold exports earned $1.36 billion last year, why then is its contribution to GDP a paltry 0.3%?
This could suggest that not all gold exports from Uganda belong here.
Last year, Uganda helped Venezuela to export its gold to international markets. Venezuela is under international sanctions.
The Economic Performance report shows that gold exports shot up sharply in April with volumes of 8,692kg valued at $363.4m, up from 1,714kg worth $69.7m in the previous month. Bank of Uganda is yet to explain this astronomical variation.
In May 2019, gold exports dropped again significantly to 2,198kg worth $89.3m.
This reporter’s research reveals that ASM play a big role in increasing gold production. The new technologies introduced by Tanzanians are helping in this but majority evade taxes by trading through informal channels. The artisans also do not pay royalties, which is a legal obligation.
“No one will find a kilogramme of gold and reveal it to you,” the coordinator of National Association of Small Scale Miners only identified as Emma said.
“We cannot declare what we earned because we have been termed illegal miners,” he added. Emma operates in Mubende area.
“Because of insufficient documentation of gold sales, coupled with rampant smuggling, royalty payments are irregular and in many cases non-existent,” Mr Vincent Kinene, the Mubende District natural resources officer, said.
He added that in the last 10 years, Mubende has experienced a gold rush but received royalties only twice.
A joint study by the Centre for Research on Multinational Corporation (SOMO) and the Centre for Research and Sustainable Solutions (CRSS) in 2016 estimated that 20kg of gold could be produced monthly in Kassanda District alone, but 2015 exports statistics showed that 0.54kg of gold was exported from the area.
“We have several gold buyers around the country and the ASMs prefer that market because the companies require big amounts of gold, yet ASMs can sell a few grams at a time. What they do not understand is that such buyers actually cheat them,” Mr Julius Omijjo, the plant manager at Greenstone Resources Limited, a gold mining company in Busia District, said.
Gold is easily transformable to any product. For example, it can be moulded into bangles, necklaces or any jewellery, and can be easily taken across any border by road, water or air. Dealers are cagey about their trade, but security personnel know a few tricks.
“Recently, we arrested a Rastafarian at Entebbe International Airport wearing gold disguised as a chain. It took us a long scrutiny of the chain to discover that it had 18 grammes of gold hidden in it. We confiscated the chain and handed it over to Bank of Uganda,” Mr Moses Musinguzi Karakini, who is in-charge of mineral policing, said.
The Rastafarian was heading to Zambia, but is now serving a jail term.
Passing gold through metal detectors at the airport is not a single man affair. It is a chain process involving security persons at all checkpoints, including those manning the scanner.
The security person with prior knowledge ignores to read the gold signal, so it passes.
Most times the gold is also smuggled out in small quantities. A gram, for example, can be placed in a pocket and it passes.
This is repeated several times until a large amount has been smuggled. Sometimes, a number of travellers in a smuggling racket pocket small amounts each.
Another trick, as explained by Mr Musinguzi, is that a dealer will get a permit for the first time, use it genuinely paying taxes and exporting.
After establishing marketing channels abroad and building trust that he is a genuine dealer, he does not renew the permit when it expires.
He starts smuggling the gold to his ready markets.
According to police, five to eight men are arrested for smuggling gold monthly. Women are not so much into smuggling but aid smugglers by making contact with suppliers.
It becomes more difficult with the porous borders. In Mubende, for example, there are miners and dealers from DR Congo, Mozambique, Rwanda and Zambia.
They often move by road and hence smuggle as much as possible because of lack of scanning facilities at the borders. For example, gold disguised as a bangle from DR Congo goes through Uganda to any country unnoticed.
Sometimes smugglers place the gold bars in several bags with personal belongings as normal travellers from DR Congo.
If the bags are not thoroughly searched, the gold crosses the border unnoticed. Most times Ugandan gold leaves the country in the same manner to other African countries before the mineral is re-exported. This is common at the Amudat border in Karamoja where there are Somalis, Ethiopians and Kenyan immigrant dealers.
“We have suggested to government that there should be a mineral tracking team from the mines at the processing and exports points. Traders should be compelled by law to declare who they sold the gold to. This will help keep data on production, exports and export destinations,” Mr Musinguzi said.
In DR Congo, a pilot project on development and implementation of an electronic traceability system for ASM is being carried out in Kampene province. The idea is to fish out conflict minerals especially tin, tantalum, tungsten and gold.
DR Congo and Uganda are under UN sanctions over conflict minerals. But latest data shows that Uganda’s gold exports did not significantly drop in 2008 following the sanctions in 2007.
“… Still a substantial proportion of exported gold seems to be derived from in-country ASM,” reads a report by SOMO and CRSS.
In 2008, Uganda’s gold exports were estimated at 2.8 tonnes that largely went to the United Arab Emirates.
Gold is used in a wide range of products. It is an essential component in electronics and computers, jewellery, pharmaceutical- dentistry, medicine and medals. It is also a trade commodity as people buy gold bars, gold coins and bullion as a common investment practice. In countries such as India, gold is used as security for loans.
The World Gold Council predicts that demand for gold will continue to grow through 2020.
Annual demand requires more gold than is annually mined and the shortfall is made up from recycling,” the World Gold Council states.
In July, Daily Monitor published a story indicating that Uganda has continued to offer exit route for illicit gold smuggled from the war-torn Democratic Republic of Congo, despite international pressure, fuelling conflict in the country. Multiple reports by the Wall Street Journal and Daily Monitor unearthed a racket that is at the core of smuggling gold from DRC, disguising it as Ugandan gold and exporting it to other countries.
A 2017 report by the Financial Intelligence Authority of Uganda on illicit financing indicated that gold from DRC was being rebranded in Uganda and exported as Ugandan gold mostly to the United Arab Emirates.
The UN Group of Experts on the DRC also confirmed that Kampala for many years has been a centre for smuggling and exporting Congolese gold. The report said Congolese gold, most of which is artisanally mined is exported almost exclusively to UAE, after transiting through Uganda.
In recent months, record amounts of gold dug from artisanal mines in the conflict zones of Eastern Congo have been smuggled across the porous border with Uganda, where it is being stamped with fake certifications before being shipped to international markets in Dubai, Mumbai and Antwerp, according to Ugandan officials.
Despite a near total lockdown of the economy, Uganda earned more than $120 million from gold exports in March and April, according to the central bank, equal to nearly half of total export earnings. Exports from Uganda in 2019, which totaled just more than 25 tonnes, was not of Ugandan origin.
Dr Fred Muhumuza, an economist and a lecturer at Makerere, in March told Daily Monitor that gold exports have in the last five years increased mainly because of a refinery in Entebbe that attracts regional gold dealers.
In Uganda, gold is mainly mined in parts of Kigezi, Mubende, Karamoja Buhweju and Ibanda.
Other areas are Namayingo, Busia and Kitumbi in central Uganda. Much of the mining is artisanal and on a small scale.