High exports of gold baffle BOU officials

Just where do Uganda’s gold exports come from? Which companies are mining and exporting this gold?

Who are the buyers of this gold?

Finding the answers to these questions, leave alone the clues, is the latest puzzle that  has baffled officials at Bank of Uganda after new figures showed that gold exports jumped by more than 700 per cent over the first 10 months of this year.

“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,” Adam Mugume, the executive director for research at Bank of Uganda, told the Observer this week.

To make sense of the numbers, Mugume argues that Uganda must be processing a lot of imported gold and then re-exporting that. However, that is not the case with very little processing happening at the moment.

“We are trying to understand what is happening,” Mugume said.

What is known though is that the trade in gold remains shrouded in secrecy. Institutions such as the Uganda Bureau of Statistics have struggled to capture the exact figures to reflect the trade in gold.

While the secrecy around gold trade has been an issue for more than 10 years, the latest number add further mystery to this whole story.

Official figures from Bank of Uganda (BOU) show that the country earned at least $300m (Shs 1tn) from gold between January and October, slightly lower than what was got from coffee, the country’s main cash crop export.

This represents a leap of more than 740 per cent if compared to what was earned last year, where total gold exports were $35.7m. Uganda earned around $340m in coffee exports over the last ten months.

The factors behind the jump in gold exports depend on who exactly you want to believe. For example, the background to the budget for the year 2016/2017, a paper that shows government’s plans in terms of revenues and expenditure, notes that the increase in non-coffee exports shot up in the year to March 2016 due to “the improvement in mineral exports, particularly gold, following the lifting of the ban on the export of [unprocessed] minerals.”

Experts and researchers have a different perspective to this whole gold trade. Their reason – there is simply too much smuggled gold out of the mineral-rich Democratic Republic of Congo coming into Uganda.

In January 2015, the UN group of experts named Ugandan companies as being heavily engaged in illegal gold trade. It said illegal gold was sold in secret offices in upscale areas like Kololo, Muyenga, Kanjokya, Kamwokya, and Clement hill in Nakasero.

“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,” the UN report said.

The main families involved, according to the UN report, are Machanga Ltd’s Vaya family, and UCI’s Lodhia family. Another key player is A.P. Bhimji Ltd, run by the Bhimji family.

An OECD baseline survey, released in May 2015, showed that since 2011, it appeared to be that Congolese gold is now smuggled both into and out of Uganda.

It added that the 2013 increase in export taxes on Ugandan gold has provided a further incentive to smuggle, and is another reason why the country’s official gold exports have declined so steeply.

Gold from other countries is officially re-exported from Uganda and is subjected to a tax of 0.5 per cent of its declared value. But this was increased to one per cent in 2013. The tax rate for gold produced in and officially exported from Uganda was increased from three per cent to five per cent in 2013.

Recent reports also shade more light on the underhand tactics that dominate the trade in gold. In August, the political commissar, Felix Kulayigye, was suspended after his alleged involvement in a gold scandal.

This month, the Observer reported of a Kenyan gold dealer who has petitioned President Yoweri Museveni accusing senior security officers of complicity in conning him and his colleagues of Shs 800m at the Bugolobi upscale suburb of Kampala.

BOU officials have reasons to get concerned. The International monetary fund has often said that the trade in precious metals, and particularly gold, has strong links to illicit financial flows and money laundering.


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