The Independent Uganda: You get the Truth we Pay the Price
COMMENT | ERIC ODONGO | It is no longer in doubt that Uganda is endowed with considerably vast amounts of minerals. Dating as far back as colonial times in 1925, when the oil potential was first documented, exploration has and continues to support mineral development in Uganda. According to the 10-fold growth strategy, agro-industrial development, tourism development, mineral-based development plus oil and gas (petrochemical industry), and then science, technology, ICT and innovation, including ICT and the creative industry (knowledge economy), all commonly referenced as ATMs, are the means to achieving a higher economic growth trajectory in Uganda over the next 15 years.
According to the Semi-Annual Budget Monitoring Report for FY 2023/24 on the mineral development programme, overall programme performance was rated as fair with a score of 60.9%. Among the interventions of this programme included the undertaking of a detailed exploration and quantification of minerals and geothermal, then the establishment and equipping of a dedicated exploration unit with access to functional laboratories. These activities were all above average in achievement. One of the major reasons for this rating was low funding of the programme and the dominance of artisanal miners in the sector, hence limiting sector efficiency. The recommendation, therefore, is raising funding in the sector, especially for this sub-programme.
Mineral exploration is the anchor of mineral development ambitions in any country.
Examples of mineral exploration funds around the world include the Junior Mining Exploration Fund (JMEF) in South Africa then Junior Minerals Exploration Incentive (JMEI) in Australia. Currently the abundant mineral potential in Uganda for which our growth ambitions are dependent on is not readily quantifiable. As noted earlier, the creation of a specified, dedicated exploration unit is a step in the right direction; however, the availability of targeted financial resources to support exploration activities remains a puzzle to be solved. Although budgetary allocations for mineral exploration and development have increased over time to UGX 51.2 billion in FY 2025/26, they are considerably the lowest in comparison to other locations of the Ministry of Energy, an indication of inadequate prioritization of exploration activities.
Exploration by its nature is capital intensive and financially very demanding, hence attracting less private sector participation. It is therefore left for the government to take the lead for exploration results to attract investment in mining activities. Although the mining company is now in place, funding gaps continue to obscure the full realisation of the mineral potential in the Ugandan economy. The reported revenue leakages in the form of uncollected taxes of UGX 68.842 billion from UGX 11 trillion of gold exports. Delays in the collection of mineral rent fees amounting to UGX 439 billion is yet another gap in resource management affecting this sector, as per the findings of the OAG in FY 2023/24.
Accumulating financial resources to support mineral exploration activities calls for the establishment of a mineral exploration fund. This fund can be financed through a levy of 1% on all mineral exports every financial year. Management of this fund can be vested to the Uganda mining company, which should complement private sector exploration initiatives but also help de-risk mineral exploration. Access to the fund can be in the form of shared financing of exploration activities, risk management through financial instruments like exploration guarantees and complete targeted initiatives to support exploration activities like tax incentives to private exploration firms, which are necessary in supporting investment towards exploration activities.
The establishment of the mineral exploration fund requires collaboration between the public sector, including URA, UIA, the Ministry of Energy, Uganda Mining Company and MoFPED, together with private sector players and non-state actors like the Chamber of Energy and Minerals and CSBAG, among others. These actors should collaborate and form a technical working group to expedite the constitution of this fund for the 10-fold growth to be fully realized.
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ERIC ODONGO, ECONOMIST AT CIVIL SOCIETY BUDGET ADVOCACY GROUP
