The economy starts the second half of the financial year with almost half of the export revenue sources shut as gold processors and export continue to withhold their goods.
The exports were suspended in July this year after the government started implementing a new tax measure on the commodity.
The new tax regime resulted from the Mining (Amendment) Act 2021, which replaced the Mining Act 2003, introducing a levy of 5 per cent on the value of a kilogram of processed gold exported, and 10 percent on unprocessed gold shipped out of the country.
The levy was aimed at increasing government revenue, considering that it was becoming the top export, while the higher levy on unprocessed gold is aimed at discouraging the exportation of unprocessed minerals so as to optimize the benefits.
Exports in Uganda are generally not taxed by export permits and customs processing charges are usually charged on the exporters on a sector-by-sector basis, the reason the gold exporters are protesting the levy.
The Ministry of Finance, Planning and Economic Development says that last month, President Yoweri Museveni directed a halt on the implementation of the levy until a final position by the government is reached.
The government, through the Ministries of Finance and of Energy and Mineral Development, have formed a technical committee to draft the position agreeable to both sides, but the fate of the tax, for now, lies with the parliament.
“Consultations have not been concluded, including with Parliament on how this matter will be treated,” said Apollo Munghinda, Principal Communications Officer at the Ministry of Finance. He could not tell when the parliamentary process will end.
The exporters say heard about the directive of the president, but have never received a communication, either in copy of the directive, or from any of the two ministries. With just about four months to the tabling of the 2022/23 national budget to parliament, the issue could be headed for the next financial year. The miners in Uganda say the levies were bound to see increased smuggling.
Deusdedit Beinomugisha, the head of the Western Uganda Small Scale and Artisanal Miners Association says that mining and export have continued through irregular channels, which makes government lose a lot of revenues. By the time of the suspension of exports by processors, in July, exports had hot 2.2 billion dollars a year, while in 2020 export earnings totalled almost 1.8 billion dollars.
Munghinda said that currently, the revenues to the government, as well as export earnings, are not yet compiled for this year. Most of the gold processed in and exported out of Uganda is imported from neighbouring countries, with the most official figures coming from Tanzania at about 750 dollars a year.
However, over the last five years, production has sharply increased and some analysts think more gold is smuggled in from the Democratic Republic of Congo and South Sudan, in areas where international peace initiatives say mining and trade in gold is illegal.
This is because, in these areas, especially Eastern DRC, armed groups control the mines and use the proceeds to finance wars and atrocities against civilians. But some reports indicate that a significant amount of raw gold comes into the country from as far as Venezuela.