Uganda’s gold industry has been plagued by illicit trade, prompting the government to introduce stringent measures to regulate the exportation and sale of gold.
This decision comes amidst alarming reports that much of Uganda’s gold exports, particularly to the United Arab Emirates, may be linked to gold illicitly sourced from neighboring conflict zones, such as the Democratic Republic of the Congo (DRC).
The Permanent Secretary of the Ministry of Energy, Irene Batebe, outlined the new requirements for those involved in the gold trade. “Only parties holding valid licenses — including mineral dealer’s licenses, mining licenses, or refining licenses — will be authorized to engage in gold transactions.”
These changes were made in consultation with the Uganda Revenue Authority (URA) and the Directorate of Geological Surveys and Mines (DGSM), two agencies with overlapping roles in overseeing the gold sector.
Gold has become Uganda’s most lucrative export, with figures showing the country exported more than $2 billion worth of gold in 2022.
However, discrepancies in gold production data between the DGSM and URA have raised alarms about the accuracy of reported figures.
While the sector is critical to Uganda’s economic growth, it has also been plagued by underreporting, particularly by artisanal miners who often bypass legal channels to sell their gold directly to local refineries.
The Central Bank of Uganda (BoU) recently began purchasing locally mined gold to bolster its foreign reserves and mitigate the risks posed by fluctuating international markets.
However, despite these efforts, a significant amount of gold produced by artisanal miners remains unaccounted for, depriving the government of potential tax revenue.
Local leaders from mining regions have expressed concerns about the government’s decision to waive royalties on gold mined by artisanal miners.
They argue that this policy, while intended to support small-scale miners, has deprived local governments of crucial revenue.
Moreover, the social and environmental costs associated with artisanal mining are often overlooked in these discussions.
In response to the growing issue of gold smuggling, Uganda has imposed a $200 export tax per kilogram of gold, alongside new regulations requiring exportation permits for gold originating outside of Uganda.
Importers must now provide proof of royalty payments from the country of origin and meet stringent purity standards for the gold to be eligible for export.
Additionally, an importation permit priced at $270 is now mandatory for anyone wishing to bring gold into the country.
Reports from international organizations highlight that Uganda remains a significant hub for the smuggling of gold from the Great Lakes region, particularly from the DRC.
In May 2024, Uganda achieved a milestone by attaining the Regional Certification Mechanism, a regional standard for certifying gold sourced from or transiting through ICGLR (International Conference on the Great Lakes Region) member states.
While the introduction of these regulations is a step toward greater transparency in Uganda’s gold sector, experts warn that the country must continue to address the complex challenges posed by illegal mining and smuggling.
The risks associated with the illegal gold trade extend beyond financial loss.
Illicit gold trafficking has been linked to a range of serious issues, including money laundering, environmental degradation, and even the funding of violent conflict.
A recent advisory issued by the U.S. government emphasized the potential for gold trade to inadvertently contribute to terror financing and other illicit activities unless adequate due diligence measures are enforced across the supply chain.
As Uganda continues to strengthen its regulatory framework, the effectiveness of these new measures will depend on the collaboration of multiple stakeholders, including local governments, mining communities, international agencies, and private sector actors.
The Way Forward
To combat illicit gold trade, Uganda must:
– Enhance Transparency: Ensure that all gold exports are properly documented and certified.
– Strengthen Regulation: Enforce stringent regulations on gold trade, including exportation permits and proof of royalty payments.
– Support Artisanal Miners: Provide training and support to artisanal miners to help them operate within the legal framework.
– Collaborate with International Partners: Work with international agencies and organizations to share best practices and address the global issue of illicit gold trade.
By taking these steps, Uganda can ensure that its gold wealth benefits its people and economy more equitably, while also contributing to global efforts to combat illicit trade.
