In this part two of our artisanal miners’ series, we delve in the lack of a clear tax framework to generate revenues for local governments from artisan mining activities. We analyze the potential amount of money local governments could generate, but are currently losing from Gold mining operations.
The Mining Score Card recently launched by ActionAid Uganda in partnership with Africa Centre for Mining Policy (ACEMP) and National Planning Authority (NPA) revealed that there is a weak reporting practice in the mining sector.
It also revealed that even though the mining sector has a great potential of contributing to economic growth and poverty alleviation in the country; less has been done to harness this.
The office of the Auditor General last year revealed in his Value-for-Money Audit report 2016 that government had lost at least 4.4 billion shillings (approx.1.3 million dollars) in uncollected mineral royalties in the last five years.
Currently, the government has embarked on undertaking review processes to update the relevant mining legislations. A Draft Green Paper on Mineral Policy is before the cabinet for review and the review of the Mining Act 2003 is yet to commence.
One of the proposed amendments is the regularization of artisanal mining in Uganda to legally recognize them; integrate them in formal tax arrangements; enable them qualify for social goods, services and infrastructure and to increase revenues to local governments for proper managements. The consequences of under-regulation of artisan miners have wide ramifications and are far-reaching. It includes artisan miners not having access to social goods, services and infrastructure put in place by government; not being taxed appropriately; being prone to machinations by unscrupulous individuals in authorities; local governments not being able to realize their revenue collection targets; and being exposed to crime and conflicts.
The lack of clear sub-national taxation arrangements for artisan miners and utilization of revenue collected from artisan mining is denying local governments of much needed revenues. This is mainly not due to policy or legislative deficiencies, but more due to policy implementation and legislative enforcement. Busoga region is rich in mineral resources particularly Aluminous clays, yttrium, and rare metals such as gallium and Scandium estimated at $370 billion (about Shs942 trillion) by Kweri Investments, the company conducting Feasibility studies in the region. This wealth as mentioned in Part one; has attracted an influx of immigrants from all over the country and as far as Kenya who hope to tap into these resources.
According to Methuselah Batambuze, Community Development officer Buddaya sub-county, the population at Nabwala mining site before the influx was about 2000 and the indigenous people were into agriculture. He however noted that in 2015, with the discovery of gold in that area, the population increased to over 10,000 people.
Batambuze adds that when the miners were convinced that gold was ‘finished’, some left in search for new mining sites.
“What you are seeing now are trucks taking the tailings to other places where they are processed using cyanide for better results,” he told Oil in Uganda
Majidu Musisi, who took part in the first exploration and exploitation for gold in the area in the early 1990s, says he has been at it for now 10 years and has made on average 4 million shillings a week on bad days and over 20 million shillings on good days.
“I have invested in real estate and own more than 5 commercial buildings in Bugiri Municipality,” subdued Musisi reveals to Oil in Uganda.
‘I have also created employment for all these people you see in this mining site,’’ he added pointing to hundreds of youth digging for gold around the site.
A simple analysis of the money made by Musisi in one week; at a conservative estimate of UGX 4 million a week, he makes UGX 16 million a month and UGX 192 million a year. He then shares this money with the people he has employed which to our surprise do not even add-up to 50% of the money Musisi earns. A miner who works at the pit is paid a minimum wage of UGX. 25,000 a day. This money is not taxed because Musisi, like other artisanal miners, are still regarded as an illegal miner.
According to the Mining Act 2003, royalties are to be shared with mineral producing districts based on a basic revenue sharing schemes. The Second Schedule to the Mining Act stipulates that the central government is to take 80% of royalties collected and then distribute the remaining 20% as follows; 17% to “local governments” and 3% to “landowners or bona-fide occupants of land subject to mineral rights.”
This presupposes that central government would first collect the royalties before the local government can benefit from the contribution, implying that local governments do not have the right to tax/ collect the royalties. This is undermining revenue generation and social goods and services delivery at local government level. A failure on the part of central government to collect the royalties on time in the right amounts and distribute them accordingly to the beneficial local governments further worsens the revenue situation at local level. Consequently, local governments suffer financial deficiencies and stress.
The above cited revenue sharing scheme is common in mineral rich jurisdictions and therefore is a widely acceptable practice. However, whether it is the best practice for central government to first collect the royalties and then distribute them to the respective beneficiary district is not clear. We do appreciate that it is good practice to recognize the rights of landowners and bona-fide occupants of land where minerals are discovered and exploited. It is our opinion that local governments are given right to collect royalties and deduct what is due to them and remit that due to central government.
Our rough calculation indicates that if this money would, however, be taxed and royalties deducted, the district is to take 10 per cent of the revenues in royalties and it would generate about UGX. 19 million to its budget. This revenue contribution would be just from Musisi and assuming there are 100 other miners in Bugiri district making the same amount of money, it would be UGX. 1.9bn hence make significant contribution to the district budget.
According to the Bugiri district Budget Framework paper 2016/2017, the rest of the district’s UGX 21 billion shillings budget comes from government and donor programmes.
Interestingly, Musisi has never paid a single direct tax from the income derived from the sale of his gold to the ever available gold trading middlemen.
Just like in other mining areas Oil in Uganda has visited, the roads to the mining area where Musisi operates are impassable during the rainy season.
“If you are not round here and you want access my mining area, you cannot access it when you are not driving a four-wheeled car,” he warns.
Sadly, even the basic amenities like a pharmacy or clinic are not available for the miners who work there.
Some of these things would be solved through paying royalties as District revenues would increase.
According to Shafic Butanda, the Acting Community development Officer Bugiri District, in the more than 10 years small scale miners have been in Bugiri district, there has never been any contribution to the district budget from them ‘’Even right now we are going for a budget meeting but the briefing papers have mentioned the potential revenues that could be collected from gold mining’’ He adds.
Unfortunately, there has been no government plan to formalise Small scale mining in the country. And in Bugiri district there is no scheme to collect royalties since the law gives those powers to collect revenues to the government, which then shares with the district, the district officers say they were not even aware they could collect taxes from the small scale miners. Mr Shafic Butanda the Acting Community Development Officer says ‘’they will start looking into ways of raising money from the miners’
However, even in this, there appears to be an attempt to raise royalties from small-scale gold miners in the Neighbouring district of Namayingo, where according to the Banda Subcounty Chairperson Oguttu Bonaventure, they collect some ‘’little’ money from the miners at Nakuddi gold mining site. “What we collect is based on the same rates as the trading license for the shops in the sub-county which is still little money,’’ he says.
A Case study on revenue sharing schemes in the mining areas of Kabale and Moroto districts commissioned by Transparency International Uganda in 2015, found that while the districts complained of lack of information and erratic payment of their royalties share from government, even government itself doesn’t have enough information and depends on the disclosures of the miners to collect royalties, which in the case of small-scale miners is nonexistent.
This is because small scale miners are usually individuals who rent portions of land for mining from an individual, with an agreement to share what is found on the ground, this is what happens in Nabwala Bugiri district and Nakudi in Namayingo district. Taxing individuals has always been hard and there is an effort by various civil society organisations including ActionAid Uganda to help small-scale miners in Uganda form associations, help them acquire mining licenses and formalise their relationship with government.
This turn of events according to Mr Shafic Butanda, Community Development Officer of Bugiri district will prompt the district to look at creating a mining policy modelled on the National mining policy ‘’Maybe that way we can also help our people benefit from the minerals in the district,’’ he says.
We recommend that local governments are given right to collect royalties and deduct what is due to them and remit the rest to central government. This way local government will not starve of revenues.
Report by Collins Hinamundi Oil, Gas and Land reporter
High court Masindi has indefinitely postponed the hearing of the Rwamutonga case where more than 200 families were brutally evicted to pave way for the construction of oil waste treatment plant, Oil in Uganda has learnt.
Justice Albert Rugadya Atwoki, High Court resident judge Masindi was expected to give a ruling on an application on January 19, 2017but informed the court that he would make a ruling on notice.
According to Bashir Twesigye, Executive Director Civic Response on Environment and Development, the judge’s move to make his ruling on notice shows that the judge is not comfortable with the case hence the hesitation to make a decisive ruling.
“Hon. Justice Rugadya should not have any excuse ruling on the case because he has had six months to study the case,” he argued.
“The judge making a ruling on notice means that he will make a decision when he feels ready,” he explained to Oil in Uganda, adding that since the first ruling was done last year, this second ruling would give the evictees a mileage and has been pending for a year.
The families were evicted in August 2014 from the two pieces of land; one titled in the names of Robert Bansigaraho and another in Joshua Tibagwa. The affected families have since been living in Kakoopo Internally Displaced Persons camp (IDP) with no stable source of livelihood.
Nelson Atich, Bugambe District Councilor and representative of the evictees told Oil in Uganda, that they are shocked by the judge’s decision to make the ruling on notice.
“We are now thinking of petitioning the Principal Judge over this matter,” he stated.
“When we went to court on 19th, January, 2017, we were surprised when the clerk to the judge told us that the judge will give us the ruling on notice. We are in a dilemma, but we think we are not getting justice from courts of law,” Atich said.
He further added that the evicted families have been living in a camp for close to three years now under inhuman conditions yet the case has not been given priority,” Atich said.
Oil in Uganda has learnt that the court ruling was actually meant to be given on December 8, 2016 but was postponed to January 19, 2017.
Last year, Justice Simon Byabakama, the then resident judge Masindi ,ruled that 53 families out of the 200 families affected were illegally evicted on land owned by Robert Bansigaraho since the eviction court order was issued in error.
Justice Byabakama in his ruling also ordered Bansingaraho to compensate the evictees for the unlawful eviction.
“The eviction was unlawful and should not have happened in the first place because at the time of the execution of the warrant of vacant possession, there was an ongoing suit to determine true ownership of the land,” ruled Justice Simon Byabakama last year.
The court went ahead to award costs of the application to the residents, but declined to restore them on the land until the main suit was determined.
In their case application, the evictees, through their lawyers Iam Musinguzi of Musinguzi and Co. Advocates and Jonathan Okiria, an advocate with Justice Centers Uganda in Hoima are seeking a declaration that the families were unlawfully evicted by Tibagwa Joshua and should be awarded compensation.
In November 2016, Betty Amongi, Minister of lands visited Rwamutonga camp and appointed a probe committee to investigate and establish the rightful owners of the disputed land.
According to Isaac Kawooya, Hoima Resident District Commissioner, the committee finalized its investigations and has submitted a report to the minister.
Report by Edward Ssekika
Parliament of Uganda has set up a select committee to investigate the Shs 6bn oil cash payouts to 42 senior government officials. This is the second time the legislative branch of government has probed the executive on oil revenues.
Speaker of Parliament, Hon. Rebecca Kadaga on Thursday last week directed the Commissions, Statutory Authorities and State Enterprises (COSASE) Committee, chaired by Bugweri MP, Hon. Abdul Katuntu to handle the investigation and report to the House in two months.
The motion to set up a select committee was moved by Mbarara Municipality MP, Michael Tusiime last week in a stormy plenary session that extended into the night.
Hon. Tusiime stated that Government had hired a foreign law firm; Curtis Mallet-Provost, Colt and Mosle LLP to represent the country in the law suits and was already costly to the country.
“The American law firm was hired to represent in the $ 404 million capital gains tax dispute adjudicated in London at a cost of $ 10 million dollars,” he argued, adding that it is prudent for investigate the oil cash payouts and especially the procedures that were followed to reward the officials.
According to Hon. Alex Ruhunda, Fort Portal Municipality MP, the move to setup a committee is not to witch-hunt the beneficiaries but a move to create transparency on the issue.
Winfred Niwagaba, Ndorwa East MP concurred with Hon. Ruhunda arguing that it is time for government to demonstrate its tenacity to fight corruption.
“We will be glad to see the perpetuators not only appear before the Anti- Corruption Court, but refund the Shs 6bn back to the Petroleum Fund,” he said.
However, William Byaruhanga defended the payouts, arguing that the case was the first of time in the history of the country, both in terms of complexity and the magnitude of the money involved. Kadaga said, when the team won the case, she wrote a letter thanking them for fighting for the interests of the country.
This is the second time in less than five years that parliament is instituting a probe committee to investigate issues of corruption and alleged misuse of oil revenues.
In 2011, Parliament set up an Adhoc Committee, chaired by Michael Werikhe, the then chairperson of Natural Resources Committee, to investigate alleged corruption in the sector.
A dossier had been tabled before the House by MP Gerald Karuhanga that implicated Prime Minister Amama Mbabazi, Ministers Sam Kutesa and former Energy Minister, Hilary Onek in corruption. The committee report exonerated the politicians of corruption. The country waits the speaker to name the select committee.
BUNYORO LEADERS UNHAPPY
Buliisa county Member of Parliament, Hon. Stephen Mukitale Biraahwa revealed that his constituency, despite housing over 26 oil wells has not benefited from the Capital Gains Tax recovered by government.
“The money would have been ploughed back in the oil sector to prepare for Uganda’s journey towards commercial oil production,” Hon. Biraahwa who sits on the parliamentary committee on National Economy told Oil in Uganda.
He added that the revenues earned so far should be in improving roads in the oil region, training the population, conducting systematic survey and demarcation of land, building capacities of local suppliers and environmental compliance among others.
“What is surprising communities hosting oil and gas activities is that the money is being shared in Kampala by government officials without considering the interests of the industry and the communities” he said.
Bugahya County Member of Parliament, Hon.Pius Wakabi demanded that the beneficiaries who received the oil cash should refund it immediately.
Hon. Wakabi whose constituency has over six oil wells, stated that it is shocking that the money was shared at a time when teachers demand salary increment and lecturers striking over remuneration.
Litmus test for Uganda?
The management of revenues from oil is a litmus test for Uganda. Many activists have questioned whether the petroleum resource will be a blessing or a curse to the country citing scenarios in oil-producing countries in Africa such as Democratic Republic of Congo (DRC), Angola, Sudan, Chad, and Nigeria among others.
Report by Edward Ssekika and our Hoima Correspondent.
Following the oil cash bonanza in which 42 top government officials were rewarded with colossal sums of ‘oil money’, activists want an audit of the entire oil sector.
This move follows a public uproar, over ‘the ‘scandal’ in which 42 top government officials, were paid Shs 6bn (about $1,656,000) as a reward for winning Tullow and Heritage cases over Capital Gains Tax.
Winfred Ngabiirwe, the Executive Director, Global Rights Alert, says the ‘oil cash bonanza’ speaks volumes of how oil money is and will be spent.
“This bonanza confirms our fears that oil revenues will not deliver the country from poverty,” she explains.
“The level of secrecy and the impunity of the key players in the sector only confirm that Uganda is creating her own model of oil curse. It appears, those in power have decided to eat what they can eat, uncertain when production will start and oil dollars start flowing,” she argues.
According to Ngabiirwe, all these are attributed to government’s delay or refusal to sign up to the Extractive Industries Transparency Initiative (EITI), a global frame that promotes transparency and accountability in the extractives sector.
The EITI framework, she argues, would enable Ugandans to know how much the country is earning from oil and gas resources and how the money is spent.
“We need a forensic audit of the entire sector. First, we need to know whether the country is collecting the right amounts of money from oil companies, and are oil companies paying right taxes to our coffers and then Ugandans must follow the money. Short of that, we are dreaming that will benefit our country,” she demands.
Gerald Karuhanga, the Ntungamo Municipality Member of Parliament, concurs with Ngabiirwe echoing that the cash bonanza is a confirmation of how oil money will be put to waste.
He argues that the fact that government can extravagantly spent colossal sums of money on “a golden presidential handshake’, for simply winning a case, what will happen when the ‘real’ petro dollars begin to flow.
Defending the oil cash bonanza, Sarah Birungi Banage, Uganda Revenue Authority’s Assistant Commissioner for Public and Corporate Affairs, notes that the ‘presidential golden handshake’, was in appreciation of the exemplary performance by the team and a standard international best practice.
“….. government granted the team involved an honorarium or bonus or golden handshake totaling Shs 6bn. This represented less than 1% of the amount brought in or defended,” reads in part a statement from URA.
“The team brought in a combined total of $700m into government coffers after a series of court battles in Uganda’s Tax Appeals Tribunal, High Court, Court of Appeal and High Court of London, Court of Appeal of UK, and two international tribunals. This was from the Heritage transaction and the subsequent Tullow transaction. The two cases were an unprecedented win for the country, and the first of its kind in Africa in the sector of Oil and Gas Taxation,” the statement further notes.
The officials who benefited from the ‘presidential golden handshake include; former Permanent Secretary in Ministry of Energy Fred Kabagambe Kaliisa, URA’s Commissioner General Doris Akol, former URA’s head of legal affairs and ED KCCA Jennifer Musisi, Secretary to the Treasury Keith Muhakanizi, former Attorney General Peter Nyombi and his deputy, Fred Ruhindi, Lawrence Kiiza from Ministry of Finance, Ernest Rubondo, the executive director of PAU, Francis Atoke, the Solicitor General. Others include lawyers; Ali Ssekatawa (URA), Martin Mwambutsya (then State Attorney), Peter Muliisa among others.
In November, 2015, President Yoweri Museveni wrote to the Minister of Finance, Hon. Matia Kasaija authorizing cash payments to the 42 government officials.
“I met with a team of officials that handled the case and they requested to be considered for a reward in appreciation for the work done. Given the amount of money that was recovered for the government, I agreed that government pays them some money as a token of appreciation. I therefore direct that a team of 42 government officials be paid Shs 6bn only,” Museveni wrote in his authorization letter.
The oil cash bonanza comes after, the ‘first oil money’ was allegedly illegally released from Bank of Uganda, purportedly on the orders of the President to buy fighter jets in 2013.
Report by Edward Ssekika
Stephen Wafula is a happy gold miner in Nakudi village, Banda Sub County, Namayingo district. The 27-year-old, father of 2 children, says, he switched from agriculture to gold mining last year, after witnessing his colleagues ‘prosper’ from mining. “Unlike farming, there is some money in gold mining. I don’t wait for a season, I earn per day,” he narrates, though hesitant to reveal how much he has earned from gold mining.
Byakatunda Katib who also mines in the same area, says they can earn as much as 20 Million shillings ($5,500) a week from Gold mining, if the season is good.
Like other artisanal miners, the use of rudimentary tools like hoes and spades are used in this area to dig deep underground and extract ore with traces of gold. After extracting the ore (soil containing gold) from the ground, the miners normally have two options; to dry, crush, wash and extract the gold or sell the iron ore to other people who can wash it and extract gold for themselves. Either way, the ore is sun dried and then put into a grinder and grounded into fine soil that is then mixed with water and mercury to attract gold dust (particles).
“Without mercury, it is difficult to extract gold particles because we do not have proper mechanization,” Wafula explains. He adds that after extracting gold, the remaining ‘soil’ containing mercury is disposed of in the open ground or sold for further processing using cyanide.
The use of mercury and cyanide is common in all gold mining area like Busia, Mubende, Moroto and Buhweju among others. These hazardous chemicals are mainly used to attract gold particles from the iron ore.
Mercury is a thick, waxy silver chemical that is used in the extraction of secondary gold. This chemical is used to purify gold from ore in a process called amalgamation. During this process, the vapour from the amalgamation (burning of gold particles mixed with mercury) is inhaled by the miner who often does not have protective clothing.
Many miners like Wafula are not aware of the risks of using mercury. Furthermore, they do not have proper healthy and safety gears for protection.
In the latest value for money audit report into the mineral’s sector, the Auditor General, recommends that government should slap a total ban on the use of mercury in gold mining due to health and environmental consequences. The report covers the period between 2011 to 2015.
“The use of mercury and cyanide in gold recovery is a health hazard and should be discouraged else safety precautions should be taken. There is bound to be serious environmental impacts and health issues related to pollution of streams and rivers of Mubende. According to the report, the tailings containing mercury is disposed of in the open, and when it rains mercury finds itself in water streams where the local people fetch water for domestic purposes.
It takes more than 5 years for mercury to completely dissolve into the soil, while it takes 10 years for Cyanide to dissolve into the soil. The Auditor General findings are similar to the Directorate of Geological Survey and Mines (DGSM) internal inspection report that also noted illegal mining and ‘harmful mining practices’.
According to the DGSM internal inspection report for June and July this year, the inspection team visited several artisanal mining sites where people were using mercury to recover the gold and the remaining tailings are then washed with cyanide in a makeshift processing plant which is a threat to the environment.
In Namayingo district, the inspection report notes that there is a company known as Lujiji Processing Company that has installed a gold procession plant and uses Cyanide to extract gold from tailings left behind by the artisanal miners who are also using mercury to recover the gold.
“The gold processing operations of Lujiji Processing Company should be halted until an Environmental Impact Assessment (EIA) process is finalized and approved by NEMA,” the report recommends.
According to Oguttu Bonventeur Stephen, LC3 Chairperson Banda sub-county, the mercury being used in the mining sites are imported from Kenya through Busia and even as far as from Tanzania. He blames the porous borders and lack of enforcement on the use of the harzadous chemical.
“This mercury is being used a lot here. In a day, I am told they can use about 15-20 kgs of mercury and all that ends up in our water streams,” he told Oil in Uganda during a meeting.
Oil in Uganda has also established that artisanal miners in the mines buys 1 gram of mercury at 600 Uganda shilling at whole sale price and 1000 shillings at retail price.
Emmanuel Kibirige, general secretary, Singo Artisanal Gold Miners Association and a gold miner at Kitumbi, Mubende district, argues that the problem is improper disposal of tailings. He concurs with Auditor General Report, that when it rains, mercury is washed away and end up in streams and water sources.
“The problem is not mercury itself, but its improper disposal. It is disposed of anyhow. I think, we need to find a place, where we can dispose the mud containing mercury, and then treat,” he explains. However, he explains that many miners continue to use mercury without wearing any protective gear. “People here don’t use gloves, they use their bare hands and feet, yet there is mercury,” he said.
During an impromptu visit to some of the mining sites in Bugiri and Namayingo districts respectively, Oil in Uganda also found out that there was limited knowledge on the dangers of mercury and cyanide use.
At Byewunyisa Gold Mining Company in Budhaya Sub-county, the miners had removed their gumboots and were handling the tailings with bare hands, despite the fact that they had just used cyanide to get the gold particles.
The story is not any different from situation at Nsango B mining site where children are engaged in washing crushed iron ore with mercury. Recently, Dr. Tom Okurut, the executive director, National Environment Management Authority (Nema) revealed the use of mercury by miners exposes them to contract diseases like lung and kidney problems.
MINING POLICE The inspection report observes that miners have been sensitized against the use of mercury and environmentally friendly mining, there is very little change and recommends stringent enforcement mechanism. “Government should increase security in all gold rush areas including the establishment of Mining Police to enforce compliance,” the internal report recommends.
Of recently, the government has established units in police to hand specific tasks. For instance, there is the oil and gas protection unit and environment protection unit among others, and therefore the ministry wants a specific unit for mining to enforce compliance with good mining practices.
Report by Edward Ssekika and Collins Hinamundi. Additional information by Beatrice Ongode.
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