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Uganda is losing money in uncollected royalties and fees-Auditor General

Uganda has lost at least 4.4 billion shillings (approx.1.3 million dollars) in uncollected mineral royalties in the last five years, according to a report from the Office of the Auditor General (OAG).

A woman 'washes' the powder using water and mercury to extract the gold.

A Mubende woman ‘washes’  gold powder , also called panning, using water and mercury to extract  gold. (Photo: C. Musiime)

In the Value for Money Audit report to Parliament for the period ending December 2015, John Muwanga, the Auditor General, blames the Directorate of Geological Survey and Mines (DGSM) and Uganda Revenue Authority (URA) for failing to promptly collect royalties and other fees from mining companies.

“It was observed that Non-Tax Revenue (NTR) outstanding as at 30th September 2015 totalled to 4.4 billion shillings and this amount related to the period from July 2011 to September 2015.  These include, royalties, licence fees, mineral rent among others,” the report reads in part.

The audit was meant to assess the extent to which government is regulating, monitoring and promoting the mining sector, identify performance gaps, possible causes and suggest recommendations to improve its performance.

Although the Mining Act, 2003 provides for a penalty to be charged on unpaid royalties, including possible suspension of mining activities, the report reveals that there was no evidence to show that penalties had been charged or that the Directorate had taken necessary steps to recover the money.

“By failing to collect all the mineral fees that fell due and imposing the 2% penalty on the outstanding royalties as provided for in the Mining Act, 2003, there is a risk that this money may never be recovered,” the report reads.

In its management response to the audit query, DGSM acknowledged the unpaid dues, but attributed the problem to disparities in revenue assessment as well as the collection system. “This issue is currently and concurrently being addressed by the Directorate of Geological Survey and Mines and URA,” confirmed the Directorate. “In addition, the Ministry of Energy and Mineral Development will establish a desk in Uganda Revenue Authority and use an electronic system for quick reconciliation of mineral revenue. Previously, the Ministry has been using a manual based system,” read their response.

Use of cyanide and mercury

The Auditor General also expressed concern over rudimentary mining practices that were identified by his Team during field visits to Mubende, Moroto, Buhweju, Namayingo, Busia and Kabale. The Team found that artisan and small scale miners use rudimentary and labour intensive mining methods, such as heating up iron ore using firewood.  In addition, there were no occupational health and safety measures undertaken by the miners.

For instance, in Busia and Namayingo Districts, miners were found using mercury and cyanide in the gold mining process to recover fine gold from the crashed rock tailings. According to the Auditor General, the DGSM has been sensitizing artisanal miners but the intervention has had no impact on the way the miners conduct their business.

Uganda is party to the Minamata Convention on Mercury (2013) to protect human health and the environment from emissions and release of mercury and mercury compounds-a key additive in artisanal gold extraction processes. The country has not yet operationalised the document and has no legislation in place specifically regulating mercury or cyanide, which are potentially hazardous to human health and the environment.

Report by Edward Ssekika