First published by the ENACT Project

Gold has become one of Uganda’s top exports, but multiple questions surround this glittering trade. On 20 February, Uganda celebrated a year since it officially launched East Africa’s first gold refinery. Inaugurated by Ugandan President Yoweri Museveni in the lakeside town of Entebbe, the $15-million African Gold Refinery has since elicited a number of concerns.

A June 2017 report by environmental non-governmental organisation Global Witness titled Uganda: Undermined revealed that minerals from the Democratic Republic of the Congo (DRC) and South Sudan passed through Uganda on their way to international markets. According to George Boden, Uganda campaign leader at Global Witness, the 18-month investigation exposed “endemic corruption and mismanagement in the country’s fledgling mining sector”.

“The gold trade was worth $200-million to the Ugandan economy last year, but there are no official figures on where the gold came from, or where it is going,” he told CNN shortly after the report was released.

The exploitation of the country’s gold, tin and phosphate riches has seen exponential growth in Uganda’s mineral industry in recent years. With this has come expectations of employment opportunities and economic development due to higher tax revenues. These revenues should be used to improve education, healthcare and infrastructure.

However, the Global Witness report says “crooked officials and international investors are profiting at the expense of Uganda’s people, environment and economy”. The report further found that miners worked under unregulated conditions, and that the mining threatened the Bwindi and Rwenzori national parks, home to almost half the world’s remaining mountain gorillas.

A second report, submitted by the United Nations (UN) Group of Experts to the UN Security Council in August 2017, identified Uganda as a major transit route for the illicit smuggling of gold from the DRC to the United Arab Emirates (UAE). The UN Group of Experts traced the flow of gold exploited, taxed and trafficked by armed groups – particularly the FDLR (the Democratic Forces for the Liberation of Rwanda) and other militia groups operating in eastern DRC.

In June 2017, the Congolese Ministry of Mines estimated that 20 tons of gold from artisanal mining were smuggled out of the DRC every year. Uganda serves as a strategic transit hub linked with dealers operating in the UAE. The UN report says Dubai is the main destination of unwrought gold sourced from artisanal miners in the DRC. It says gold smugglers use loopholes in the UAE control system, where the ‘law does not consider smuggling activity to be a crime’.

Uganda Bureau of Statistics data for 2016 confirms the findings of the two reports regarding the country’s limited local gold production. The Ugandan government also confirmed this to the UN Group of Experts in a June 2017 letter cited in the report.

However, online statistics from the Bank of Uganda show that the country’s official gold exports increased from 11kg in 2014, worth $237,000, to 1.1-tons in 2015, and to 8.8-tons, worth $340-million, the highest ever recorded, in 2016. This makes gold the second largest export after coffee. From January to April 2017, Uganda officially exported 2.9-tons, already surpassing the record for the whole of 2016.

In his 2017 report, Uganda’s auditor-general revealed inconsistencies between gold export permits issued by the country’s Directorate of Geological Survey and Mines, which were only 16.3kg compared to 8.7-tons valued at about $340-million recorded by the Uganda Revenue Authority in the financial year 2016/17.

The figures above suggest that official gold exports from Uganda grew exponentially after the launch of the African Gold Refinery, owned by Belgian national Alain Goetz. According to official projections of the refinery, which had been in operation from 2014, it expected to export more than 10-tons of gold in 2017.

This suggests that either the gold exports from Uganda had always been largely under-reported; or it originated from outside the country based on the knowledge that only small quantities are produced locally by artisanal miners, and on the findings of the UN report.

According to the UN report, Ugandan officials don’t deny that gold is smuggled from the DRC to Uganda, attributing it mainly to the porosity of the borders. Moreover, it is known that only small quantities are produced locally by artisanal miners. This seems to confirm that smuggled gold and illicit exports might, at least in part, have contributed to the exponential growth of the country’s gold exports.

If it is true that criminal networks in Uganda act with impunity in an ongoing illicit gold trade, they are likely to benefit from links to armed groups in conflict zones of eastern DRC and South Sudan. According to the UN report, the groups involved in the smuggling of gold in turn facilitate access to Congolese artisanal gold, and the flow into the international supply chain of this conflict gold, which is mined under appalling human rights conditions.

To curb this threat and contain the smuggling of gold across these countries, those responsible must be deterred. To this end, individuals and corporate entities implicated in the illicit gold exports by the UN report must be sanctioned.

Further deterrence would be achieved by tightening controls and harmonising laws in the UAE, Uganda, Congolese and other countries that are likely to be involved. This would include working with international transport policy agencies to streamline the transportation of unwrought gold. DM

This article was first published by the ENACT project. ENACT is funded by the European Union (EU). The contents of this article are the sole responsibility of the author and can under no circumstances be regarded as reflecting the position of the EU

Duncan E Omondi Gumba is Regional Co-ordinator East and Horn of Africa, ENACT project, ISS Nairobi