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Government losses Shs 61bn in fraudulent gold exports – Auditor General


Government lost up to Shs 61bn in fraudulent exports of gold, a new report by the Office of the Auditor General has revealed in a 2016/17 audit report. In the report, the Auditor General discloses fraud in gold exports which has led to the loss of government revenues.

“During the financial year 2017, the country lost revenue ranging from $ 3.39m to $16.95m dollars [Approximately Ug14bn to Shs 61bn] in royalties from the undeclared gold exports and imports,” the report reads in part.

The Mining Regulations 2004, require that minerals obtained under a mineral right or under a mineral dealer’s licence may only be exported under an export permit granted by the Commissioner at the Directorate of Geological Surveys and Mines (DGSM) in the Ministry of Energy and Mineral Development.

However, in the report, the Auditor General notes that comparison of gold exports recorded by the directorate with the exports figures declared to customs and excise department of the Uganda Revenue Authority (URA) indicates a big disparity.

“DGSM issued gold export permits for only 16.281 kilograms, compared to records from Uganda Revenue Authority, which indicated that 8,691 kilograms of gold, valued at $ 339m [approximately Shs 1.2 trillion] million were exported from Uganda in the financial year 2016/17,” the report reads. This means 8,674 kilograms of gold was exported without expert permits, centrally to the law.

According to statistics from the Bank of Uganda, Uganda’s official gold exports has increased from 11 kg in 2014 to 1,118 kg in 2015, and to 8,751 kg, the highest ever recorded, in 2016. However, Bank of Uganda has often questioned the source of the gold that is reportedly exported.

“Our concern is where this gold is coming from. It could be that it is imported may be from DRC, South Sudan and re-exported but import figures don’t show that,” Adam Mugume, the executive director for research at Bank of Uganda, recently told local media.

Instead, gold exporters obtained permits from the Ministry of Tourism, Trade and Industry as opposed to being issued by DGSM, which was contrary to the Mining Act, 2003.

In the report, the Office of the Auditor General also queried an explanation from URA officials that exporters were offered a tax waiver by the Ministry of Finance, there was no evidence to this effect.  The Auditor General noted similar fraudulent schemes in his previous audit reports.

He advises both URA and Directorate of Geological Survey and Mines to expedite investigation of the discrepancies with a view to recover the prescribed royalties.

Unpaid rental fees

In addition, the Auditor General also faulted the Directorate for failing to collect annual mineral rental fees amounting to Shs 2.7bn.  The Mining Act requires exploration and mining companies to pay mineral rent fees annually.

“I noted that Shs 2,7bn in rent fees was outstanding. The failure to collect annual mineral rent fees by the Directorate may lead to loss of government revenue,” the report notes.

Edward Ssekika