The mining sector is playing an increasingly significant role in Uganda’s economy. Uganda has close to 27 mineral types in commercially viable quantities including iron ore, gold, copper, cobalt, uranium, marble, limestone, phosphates and graphite, among others. In the 2022 – 2023 financial year, mining contributed 2.2% to the national GDP, according to data from the Uganda Bureau of Statistics. Given the earning potential of the sector, the Ugandan government is focusing on attracting investment and improving regulatory frameworks to encourage sustainable mining practices. The government recently passed the Mining and Minerals Act, 2022 (the MMA) and thereafter, enacted the Mining and Minerals (Licencing) Regulations 2023 to operationalize the MMA.
Supervision of the mining sector
The mining sector falls under the oversight of the Department of Geological Survey and Mines in the Ministry of Energy and Mineral Development (the Ministry). The Ministry is headed by the Minister for Energy and Mineral Development (the Minister). In addition to the Ministry, mining activities also fall within the ambit of other regulatory bodies such as the National Environment Management Authority, the Uganda Revenue Authority, among others.
Mining licenses under the MMA
The MMA classifies mining licenses into four categories based on the capital investment involved:
- Large scale – if the investment exceeds UG388,200,000,000 (approximately US $102,200,000);
- Medium scale – if the investment ranges between UG1,164,600,000 and UG388,200,000,000 (approximately US $300,000 to US $102,200,000);
- Small scale – if the investment ranges between UG388,200,000 and UG19,410,000,000 (approximately US $100,000 to US $5,100,000); and
- Artisanal mining – if the maximum investment is UG388,200,000 (approximately US $100,000).
Applications for mining licenses are made through an online portal, the Mining Cadastre and Registry System (MCRS). The MCRS also allows applicants to view the status of their application in real time and perform other business processes such as searches.
Participation of non-Ugandans and investment vehicles
Mining, prospecting and exploration licenses can only be granted to corporate entities registered or incorporated in Uganda. Such corporate entities can be either partly or wholly owned by non-Ugandans. Large and medium scale mining licenses can be granted to foreign owned entities that have no Ugandan shareholding, provided that they register a branch or incorporate a subsidiary in Uganda.
Artisanal and small scale mining licences, on the other hand, can only be granted to Ugandan citizens or entities that are 100% controlled by Ugandans.
Investment climate
Uganda has investment-friendly laws and policies. Save for anti-money laundering controls, there are no restrictions on capital inflows, the repatriation of profits or the exchange of foreign currency. In addition, the tax laws provide for incentives such as import duty exemptions on plant and machinery imported by licensed mining companies and packaging materials for minerals that are to be exported.
Local content
Applicants for mining licenses must give priority to the employment and training of Ugandans. They are required to create succession plans for the replacement of expatriate employees with Ugandans. To ensure compliance with these employment requirements, a licensee must, within 12 months of the grant of a mining license and every year thereafter, submit its plan for the employment and training of Ugandans to the Minister for approval.
Holders of mining licenses are also required to give preference to goods produced or available in Uganda, services rendered by Ugandan citizens and companies owned by Ugandans. They have to develop a plan for the procurement of goods and services available in Uganda and in particular, within the area of operations (unless the goods or services are not available in such area). This plan must be submitted to the Minister within 90 days after a licence has been granted. In addition, they must file an annual report on the implementation of the approved plan with the Minister in the manner prescribed by regulations.
Where certain goods and services are not available in Uganda, a licensee must give priority to goods and services sourced from within the East African Community or a Member State of the African Union.
State participation in mining enterprises
The MMA allows the state to take an ownership interest of up to 35% in any large or medium scale mining license it grants. If the state exercises the option to take up a stake in a mining license, 15% must be granted at no cost while any stake exceeding 15% must be paid for. The 15% interest is not subject to dilution by future increases in capital of the holder of the licence. This, however, does not apply retrospectively to licences already granted before the MMA came into force on October 28, 2022. The Ugandan government is in the process of establishing the Uganda National Mining Company which will manage the state’s interests in mining licences.
Like elsewhere in the world, ESG concerns are at the forefront of the mining sector in Uganda. The MMA creates specific obligations for mining companies and other laws such as the Climate Change Act and the National Environment Act may also apply to specific project activities.
Regarding licensing, each applicant for a license must demonstrate how their mining activities will affect the environment and formulate a plan to remedy any negative effects. The licensee should also have a plan for coexistence with local communities and ensure that its employment plans take into account gender and equity.
The licence holders must pay royalties to the central government, which are shared among the central government, local governments and owners or occupants of the land that has the minerals to ensure equitable distribution of earnings from mineral resources and economic benefit for the local communities where the mining activities are taking place.
Conclusion
The recent legislative changes to the mining laws of Uganda provide a robust regulatory framework for the mining sector in Uganda. This is expected to create an enabling and organized environment for investment which will in turn increase government revenue and promote the development of the communities from which the minerals are extracted.
For more information on this topic, please contact the authors; Pearl Nyakabwa and William Wepukhulu.
