Independent Financial Analyst (PHOTO/Courtesy).
KAMPALA – In an effort to flaunt her economic heft in these downtimes, and to prove her financial recovery to the world, Uganda has been waxing poetic about the revenue it’s getting from Gold.
On account of that, the media is flooded with headlines and dripping with figures; playing to this narrative much to the excitement of the gullible public, and chagrin of the brahmin.
Insofar as governments have been known to launder their image by tampering with facts and figures, it is critical to digest this information with a pinch of salt and dive deep into the matter to come up with a more factual account.
It was recently reported in a local newspaper that Uganda earned 8 trillion shillings ($2.24B) from Gold which is almost half of the total export earnings for the period between June 2020 to May 2021.
These claims were earlier corroborated by the Uganda Bureau of Statistics (UBOS) which put Gold and gold compounds at 35.5% of formal commodity exports ahead of coffee at 12.3% for 2019. These are bold claims by UBOS considering Uganda is Africa’s second-largest coffee exporter.
The Gold sector is daubed with too many numerical irregularities caused by anomalies in the reporting of the numbers by different government departments, therefore, bringing into question the authenticity of these reports.
This prompted Dr. Fred Muhumuza a former economic advisor to the Ministry of Finance to say: “The sector is mad, the statistics are literally the beginning point of saying, ‘we don’t know what we are dealing with’”. This he stated at the Citizens Convention on Mining in 2020.
In-display of the contradictory statistics is a layout of reports from the Directorate of Geological Survey and Mines (DGSM), Bank of Uganda (BoU) and Uganda Bureau of Statistics (UBOS).
For the year 2016, DGSM reported Gold exports as per permits issued in kilograms as: Q1 (68.50), Q2 (14.16), Q3 (2.0) and Q4 (13.30) with a grand total of 97.96 kilograms and a value of 12,028,714,110 UGX ($3.394m).
In the same year [2016], BoU in the composition of exports for Gold, recorded the following volumes in kilograms: Q1 (2,288), Q2 (2,030), Q3 (2,362) and Q4 (1,959) with a grand total of 8,639 kilograms.
Multiplied by that year’s average price for a kilogram of gold—$48,417 totals over $418m which translates to 1.4 trillion Uganda shillings at the average dollar rate in 2016 of 3,417 UGX.
When BoU’s export values of Gold are reconciled with DGSM’s values for 2016, there’s over 1.4 trillion UGX ($414m) whose origins cannot be accounted for.
The same irregularities are captured in 2017/2018 reports by the two organs.
Under the value of exports as per permits issued for the Financial year 2017/2018, DGSM reports 57.410 kilograms of Gold at a gross value of 8,374,699,688 UGX ($2.363m).
For the same financial year, 2017/2018, BoU records the following values for Gold in kilograms from 1st July 2017 to 30th June 2018 (794, 650, 596, 1,011, 326, 736, 935, 453, 593, 823, 944 and 692) arriving at a total of 8,499 kilograms; which if multiplied by the average price of a kilogram of gold that year— $44,445 gives a grand total of over $377m. The average price for an ounce of gold that year was $1,260, and 35.274 ounces make a kilogram.
UBOS places the following annual production values for Gold against the following years in Uganda shillings: 2016 (1,396,000,000), 2017 (501,000,000), 2018 (1,000,000) and 2019 (1,000,000).
It[UBOS], continues to list annual gold production in tonnes as: 2016 0.011 (11kgs), 2017 0.004 (4kgs), 2018 0.012 (1.2kgs) and 2019 Nil.
The asynchrony between these government organs, casts doubt on their submissions and conjures smells of the proverbial rat!
The only logical explanation for these numerical disparities lies in the United Nations reports on the illicit gold trade in the Great lakes region.
UN Security Council report S/2021/560 reads: “Large smuggling from Ituri to Uganda continued while Gold exports from Uganda increased by 29% in 2019 totaling around 36 tons”.
Another UN security council report S/2017/672 goes on to say, “According to online statistics from BoU, Uganda’s official gold exports increased from 11kgs in 2014 to 1,118kgs in 2015, and to its record highest ever in 2016”. This increase the report says; coincided with the opening of Uganda’s first Gold refinery.
These concerns have been raised despite Uganda being a signatory to the Lusaka Declaration of 2010; that was set up to smother the laissez-faire movement of contraband in the Great lakes region.
To demystify this head-scratcher, it is best to hop in a time machine and go back to the year 1965 when Uganda was embroiled in her maiden executive Gold scandal.
Baptized the Gold scandal of 1965, Parliament was thrown into a frenzy when Daudi Ochieng, then representative for Mityana, raised concerns that Idi Amin a colonel by rank, had returned from Zaire, now Congo with a cache of gold, coffee and Ivory; even stashing his bank account with copious amounts of money.
To this, Amin admitted saying, “Nyati a revolutionary in the neighbouring Congo gave me twenty four thousand pounds for their revolution”. Daudi Ochieng continued to demand justice for this issue but President Obote met his claims with continuous filibusters.
This fight carried on to the following year— 1966 because Daudi Ochieng continued to apply pressure. It led him[Ochieng] into claiming that Obote had received £50,000 of the consignment. This fuelled hostility with Buganda (Daudi Ochieng was a party member of the Kabaka Yeka party) and led to the suspension of the constitution and to Obote declaring himself Executive president.
At the height of this fracas, there was a general consensus that Gold had been infiltrating the country long before the matter got tabled in parliament by Daudi Ochieng.
A similar scandal relating to Congo’s Gold rocked Kenya in what is now known as the Goldenberg scandal. During the years 1991-93, a company — Goldenberg International was registered to deal in Kenyan minerals (gold, diamonds) under the guise of existing substantial quantities of these minerals in the country.
The company was given hefty amounts of cash and subsidies to boost its operations. It was later uncovered that the said minerals were smuggled from neighbouring Zaire (now Congo) to Kenya and later sold as Kenyan Gold.
This scheme involved: Politicians, central bankers, businessmen, and others of the same kind —costing Kenya 10% of her GDP ($850m) in 1991 alone.
According to IMF and World bank reports, it set Kenyan taxpayers back by £400m with some reports putting the figure at $1B.
The Goldenberg scandal is the largest fraud against a country’s treasury and the biggest gold dupery on the African continent!
This history signals an active fraudulent gene in East Africa with a hard-on for Congolese Gold starting with the higher-ups.
The effects of unexplainable gold quantities being captured and included as Ugandan exports are:
It paints a false image of the structure of Uganda’s economy because Gold is currently considered a major export of Uganda and yet UN reports indicate otherwise. What’s more, BoU, UBOS cannot account for these mammoth Gold volumes ‘showing or not’ in their databases.
A lot of revenue in the form of taxes is lost because gold smuggled into Uganda isn’t taxed.
Gold export figures directly affect the GDP values of Uganda inflating them and by that painting a bogus image of the actual state of the economy.
Just like it was with the Goldenberg scandal, technocrats start to allocate funds to further boost this ‘well-performing sector’[Gold] only for these monies to end up in their pockets.
For example, in the Ministry of Finance’s National Budget Framework Paper for FY 2020/21 to FY 2024/25, Mineral Development and Energy was allocated 3 trillion UGX (9.2%) of the budget for FY 2019/20 and 2.4 trillion UGX (8.2%) for FY 2020/21. Discernibly, Gold exports have a lot to do with it.
This unlawful gold trade has given Uganda a dark image and raises questions on a lot of our resources that have been flagged as conflict resources [UN reports make mention of Cocoa being smuggled into Uganda]. This scares away bonafide investors who wouldn’t want to taint their image.
By and large, Gold is a gift and a curse depending on how it’s handled. It has fuelled wars, cost lives and brought down empires and great men. It’s good to remember that the supply of gold can only go up and by nature of its chemical composition, cannot be used up —it stays in the same form.
For that reason, all the gold ever mined throughout the existence of mankind still exists on this planet in some way, shape or form, unlike other commodities that get consumed like oil.
It therefore defeats logic, that human lives and systems that are delicate and fragile are endangered and destroyed for a resource whose supply is only going to increase.
Mark Kidamba is an Independent Financial/Investment Analyst.
Twitter: @m_kidamba
