Are concerns about Uganda’s increasing gold exports justified?
Uganda’s primary exports have historically been from the agricultural sector, namely coffee (their principal export), tea and fish, however the services sector has recently claimed top spot, now accounting for over 56% of Uganda’s total economy. Strict economic reforms have been a major driving force in ensuring strong economic growth despite instability in many of their neighboring countries and the global downturn.
The country does however also have significant natural resources, these include substantial mineral deposits, fertile soils and extensive, largely unexploited reserves of both natural gas and crude oil.
Huge gold exports surprise many official onlookers
In 2014/15 gold exports in Uganda were valued at $230,000 however the figure released for 2015/16 is showing a massive increase, in fact the most recent valuation of Uganda’s gold exports is $204 million, the highest amount since 1997/1998, making it their second biggest export after coffee.
Representatives from the Bank of Uganda are currently attempting to ascertain the details of exactly where this significant amount of gold being exported is coming from, as well as which companies are both mining and exporting it.
The executive director for research from the Bank of Uganda, Adam Mugume recently told the Observer, “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,”, “We are trying to understand what is happening,”.
The Bank of Uganda raises concerns
The gold trade is notoriously secretive making exact figures difficult to obtain, however Adam Mugume believes that in order to achieve such significant growth Uganda must be processing a huge amount of imported gold and subsequently re-exporting it, as unprocessed gold is worth significantly less than processed gold, however there is little evidence of this amount of processing happening at the moment. Other experts in the gold trade have suggested that the large increase could be as a result of smuggling, as they believe vast quantities of gold are being smuggled into Uganda from the Democratic Republic of Congo.
The United Nations completed a review in January 2015 and in their report they concluded that, “Gold continued to be smuggled from the DRC to Uganda and smuggled gold continued to be purchased by Kampala-based businessmen, including the directors of sanctioned entities Uganda Commercial Impex (UCI) and Machanga Limited,”, they later added that the recent export tax increase on gold in Uganda has further encouraged the smuggling trade.
The concerns raised by the Bank of Uganda aren’t unfounded, in fact the International monetary fund has in the past said that the trade in gold, as well as all other precious metals has been linked to money laundering and other illegal financial streams.
Good investment opportunity
Despite the concerns being raised by the Bank of Uganda, a state of the art refinery costing $20 million has recently been registered in the country by a Belgian backed Ugandan company. The operators are claiming that by using raw gold mined in Uganda and imported gold from both Tanzania and the Democratic Republic of Congo, they will be able to produce 200kgs of gold bars with a purity of 99.9% on a daily basis.
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