Uganda: Gold exports thrive under the radar

By Musinguzi Blanshe

Posted on Wednesday, 15 February 2023 15:58
An employee holds a 1kg gold bar at AGR (African Gold Refinery) in Entebbe
An employee holds a 1kg gold bar at AGR (African Gold Refinery) in Entebbe, Uganda, October 4, 2018. REUTERS/Baz Ratner

The Bank of Uganda recorded zero gold exports in the 2021/22 financial year. In the previous financial year, Uganda had exported gold worth $2.2bn. Is such a steep decline plausible? Not according to the experts...

A recent report by the auditor general released in January shows Uganda exported gold worth USh6.9trn (roughly $1.9bn) as per the current exchange rate in the financial year when the central bank had no data. Instead, tax evasion and sanctioning of gold dealers are pushing the lucrative trade under the radar, analysts and traders tell The Africa Report.

From July 2021, Uganda slapped a 10% tax on all unprocessed gold exports and 5% on all processed gold. As gold dealers protested the tax, gold export records disappeared from Bank of Uganda statistics.

The Uganda Revenue Authority did not collect gold taxes or make public any information on the value and volume of the precious minerals imports and exports. While the revenue authority publishes an annual statistics report capturing import and export revenues, gold never features in the reports.

“A total of UGX 340bn in taxes had not been collected from gold exports valued at UGX 6.962trn for the year under review,” noted the Auditor-General, pointing a finger at the revenue authority. “Management attributed non-collection to the Minister’s (minister of finance) statutory guidance of staying the implementation of the 5% export levy.”

No documented processes

The report further reveals that there were no documented processes on how the importation and exportation of precious minerals should be handled by customs officials. “The processes are not embedded in the customs business compendium despite precious minerals being of high value, exposing the authority to a risk of loss of revenue.”

Exportation of gold was being processed manually, with only two entries captured during the year under review, the report said.

Uganda Revenue Authority spokesperson Ibrahim Bbosa tells The Africa Report that gold is taxed like any other commodity but there is never a break down of all goods because it would be too much work. “The reason you don’t see specific itemised reporting on things like gold is because gold pays export levy…basically what we report is an export levy and we don’t break it down for all the goods.”

He says the taxman has all the details of how much gold has been exported and the taxes that are due. At an appropriate time when the government makes a final decision on the stayed tax, he said, the revenue authority will recover the tax. As to why gold exports are being processed manually, he said they are in the process of digitising their “entire systems”.

Revenue leakage

Failure to stick to its law would earn the country millions of dollars in gold tax, according to Bwesigye Don Binyina, the executive director of Africa Centre for Energy and Mineral Policy, which shows the government is seeing revenue leakage in Uganda’s mining sector. “I always say as a country we are so obsessed with oil and we have taken the eye off the ball in minerals,” he says.

To fend off powerful gold dealers, Binyina says Uganda should put in place coordinated systems. “We need coordination between Uganda Revenue Authority, central bank, office of the auditor general, and the ministry of energy in monitoring all gold and minerals that come into the country and are re-exported get taxed.”

Binyina also argues that most gold refineries in Uganda are operating under trade-free zones meaning they almost pay nothing in taxes. Government, he says, should not have walked back on the tax proposal. He says they have advised the government countless times that the mining sector “is an extremely rich area where you don’t need to accord people tax exemptions“.

Sanctions to blame?

The export figures disappeared from records after the US Treasury Department sanctioned African Gold Refinery (AGR) along with Belgian gold businessman Alain Goetz–the company proprietor who claims to have sold it–and several other companies linked to him for involvement in illicit gold trade.

Goetz and his network of companies, the US treasury department said, were involved in smuggling “more than 90% of DRC gold” through Uganda and Rwanda, where it is then often refined and exported to the United Arab Emirates. Goetz was in December last year also sanctioned by the European Union and by extension his home country, Belgium.

In a recent interview with The Africa Report, Goetz, who continues to say he was unfairly targeted, argued that sanctions were forcing traders to go underground for fear of being targeted with unjust criticism. “Many businesses are going to start hiding for fear of facing the same fate of being falsely accused.”

Opting for black market operation, Goetz claimed, is an “easy mechanism to shift the blame and conceal the reality”.

But Binyina disagrees. He says Goetz is a different case of a dealer who has operated in complete disregard of the best practices.

When he chaired the International Conference on the Great Lakes Region (ICGLR) mineral audit committee in 2018, Binyina told The Africa Report the committee invited Goetz because evidence coming from DRC showed he was getting gold supplies from militias within eastern DRC and thus driving the conflict.

The committee asked Goetz to follow traceability systems that had been put in place and ensure the source and origin of his gold were certified. “He never committed to doing it…I think Alain Goetz’s claim that these sanctions are putting gold dealers underground is just escapism,” Binyina says.

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