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Exposed: How Corruption Is Killing Uganda’s Mining Sector

Corruption, mismanagement and political influence are undermining investment in Uganda’s mining sector and threatening people and environment, Business Focus reveals.

The Global Witness report released on Monday (June5, 2017) indicates that pervasive corruption in Uganda’s mining sector allows crooked officials and the investors they partner with to profit at the expense of the country’s economy, people and environment.

An 18-month investigation shows that it is almost impossible to do business in the mining sector without paying bribes or drawing on high-level political connections.

Named ‘Undermined’, the report obtained by Business Focus exposes how well-connected individuals – including those with close ties to the President – appear to trade political influence for financial gain.

From low-level officials to senior political figures, many of those involved in the sector are ready to bend or break the rules.

“Corruption in the Mines Department at the DGSM is systemic and goes from some junior officials all the way to the top. Global Witness has discovered that it is routine for investors to pay certain Directorate employees a fee to ensure that mining applications meet all requirements. Not all staff might be involved, and some feel coerced to participate and do so reluctantly,” the report reads in part.

It adds: “However, in one instance certain staff have seen personal opportunity in the scam and have set up a company for the explicit purpose of facilitating license applications.”

Commenting on the report, George Boden, Uganda Team Leader at Global Witness said in a statement: “This evidence is damning – Uganda’s mining sector is built on a parallel economy that strongly favours abusive companies and corrupt elites over its people and environment. The appalling mismanagement of the sector will alarm investors, human rights advocates and environmental campaigners alike.”

“We’ve got evidence of deals awarding mining licenses in UNESCO World Heritage sites, companies run by twenty-somethings from London given licenses in a matter of days, and children working with dangerous chemicals in high-risk gold mines. Individually, the cases are deeply shocking. Together, they make a resounding case for immediate and far-reaching reforms.”

‘Undermined’ has documented numerous cases that relate to the above concerns, including: Mining exploration licenses have been granted in almost all of Uganda’s environmentally protected areas, including the world-renowned Bwindi and Rwenzori UNESCO (United Nations Educational, Scientific and Cultural Organization) World Heritage sites. Part of the famous Virunga ecosystem, home to the world’s last remaining mountain gorillas. This also poses a major threat to Uganda’s tourism industry, which is critical to its economy and the government is busy promoting internationally.

It adds that miners, including children, work in dangerous and largely unregulated conditions and are exposed to toxic substances like mercury every day. Poorly dug mine shafts collapse regularly, causing death and serious injury.

The report details that mining rights are routinely granted to people or companies with no qualification to exploit them. For example, African Panther Resources gained control of a tin mining concession in South Western Uganda while owned and directed by two twenty-somethings from London with no apparent experience of mining. They were awarded an exploration license for the site in just three days, a turnaround which one Department of Geological Survey and Mines (DGSM) employee described to Global Witness as “impossible.”

“The company was only in their hands for seven months. Before and after that period the company was controlled by Christopher Eibl, CEO of the major international Swiss commodities investor Tiberius Asset Management, and his business partners. The changes in ownership appear to be a clear attempt to hide their identity during the period in which the company received its license,” Global Witness says.

In one of many examples of legal but exploitative tax avoidance, African Gold Refinery (AGR), whose employees have close links to the president, declared exports of gold worth over US$200 million but paid only half a million dollars in tax, the report reveals.

A former employee with connections to the President of Uganda revealed how he helped arrange the tax exemptions for the company, which is processing gold from across the region, including South Sudan and DRC. The company has failed to disclose the origin of the gold or provide evidence of supply chain due diligence, raising concerns that this gold could be fuelling conflict and human rights abuses.

“Uganda is at a crossroads: managed properly, its mineral wealth could create jobs and generate much needed revenues. But if this level of corruption and mismanagement is allowed to persist, only political elites and the corrupt will profit. Meanwhile Ugandans continue to lose land and livelihoods, reputable companies hold back investment and the environment suffers,” concluded Boden.

Efforts to get a comment from Energy Ministry and other key government agencies were futile as officials couldn’t speak out before scrutinizing the report. However, an insider at Ministry of Energy admitted that there are loopholes in the existing mining law that has allowed issues raised in the report like corruption take place.

“Speculators have used the weak mining laws to dubiously get money from investors,” the source said, adding that the mining law has already been reviewed and will soon be tabled before Parliament.

The source insists that the new policy that will culminate into a law will help avoid the issues raised in the report.

For child labour, the source still blamed it on weak labour laws, but said Ministry of Labour was best placed to talk about it.

“Artisanal miners are currently unregulated and we can’t do much about them,” the source said, adding that child labour is rampant in areas where artisan mining is taking place.

Details of the report here; https://www.globalwitness.org/en-gb/campaigns/oil-gas-and-mining/uganda-undermined/

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