A steady increase in gold exports has raised concerns about Uganda continuing to serve as a strategic transit route for gold smuggled from the restive Democratic Republic of Congo, Chimp Corps report.
The UN Group of Experts on DRC had previously documented the decline in official gold exports from Uganda after 2007, when sanctions were placed upon top gold smuggling companies -Machanga and UCI.
According to online statistics from the Bank of Uganda, Uganda’s official gold exports had increased from 11 kg in 2014 to 1,118 kg in 2015, and to 8,751 kg, the highest ever recorded, in 2016.
From January to April 2017, Uganda officially exported 2,938 kg, which puts it on a pace to beat the 2016 record.
Additional data from 2016, published by the Uganda Bureau of Statistics, confirmed previous findings regarding the country’s limited own gold production, facts also confirmed in the Government of Uganda’s letter to the Group in June 2017.
According to Government, the discrepancy between export and production values results from “undocumented domestic gold production.”
However, UN investigators said in their annual report that “Uganda remained a transit hub for gold produced in other countries, such as DRC.”
While Uganda’s gold export revenues have increased in recent years, observers have warned of illicit gold trade propping up rebel movements in DRC.
Gold in the financial year 2015/16 became Uganda’s second largest export product after coffee.
However, the Auditor General expressed alarm about the minimal collections from royalties.
“Accordingly, government should have collected between Shs6.98b and Shs34.9b in royalties using the applicable rates of 1 per cent and 5 per cent for the imported or locally mined gold respectively,” the Auditor General’s report reads, in part.
The report further indicated that the management assessed royalty and awarded export permits for only 93kgs of gold worth Shs11.8b.
“However, collaborative reports from the Customs and Excise Department of Uganda Revenue Authority indicated that 5,316 kgs of gold had been exported with a total value of Shs698b,” the report reads.
During the period under review, the Group received testimony from several sources based in Bunia, Butembo and Kampala, all of which are involved in gold trading.
They confirmed previously reported patterns of smuggling.
The UN Group interviewed eight people involved in the gold sector in Bunia, three of whom were also active in Butembo.
They informed the Group that they still had business relations with the directors of the sanctioned entities United Commercial Impex (UCI) and Machanga Ltd.
In Kampala, the Group also met with a civil society actor and three Congolese nationals who served as intermediaries between Kampala-based gold traders and those in Butembo and Bunia.
The three intermediaries confirmed that the Director of Machanga Ltd was still a regular buyer of gold from the Democratic Republic of the Congo.
The same sources also mentioned Sameer Bhimji, stating that he competed over the same Congolese gold suppliers with Machanga Ltd.
In December 2016, the Uganda Revenue Authority confiscated undocumented gold in Bhimji’s house where gold worth billions of shillings was recovered.
This gold was later handed back to Bhimji under mysterious circumstances before exporting it to Dubai.
Meanwhile, UN investigators revealed that the revival of official gold exports from Uganda coincided with the 2016 opening of the country’s first gold refinery, African Gold Refinery (AGR) owned by Alain Goetz.
AGR senior management said they were expecting to export more than 10 tons of gold in 2017.
This suggests that gold exports from Uganda had always been largely underreported.
When the Government of Uganda provided statistics to UN in 2014, official exports were less than 15 kg in line with the aforementioned Bureau of Statistics data.
For the same year, the United Nations Commodity Trade Statistics Database (UN Comtrade) published exports of one ton.
The UN said it AGR could contribute to a “cleaner gold trade” in Uganda.
During a meeting in May and subsequently in a letter in June 2017, AGR told UN investigators that the company to date “does not have the capacity to map the actual physical flow of each and every gram of gold”.
AGR senior management said there was a need for additional, internationally agreed procedures to fulfill this requirement.
However, while UN is not aware of any illegal activity of AGR to date, it believes that it is “highly possible that gold smuggled from the Democratic Republic of the Congo could occasionally permeate the company’s supply chain.”
UN said it requested a list of AGR suppliers but had not received it and took note of the willingness of AGR to first require “proper consent” of their suppliers.
“This information would help to ascertain if certain suppliers were involved in fraudulent trade with smugglers from the Democratic Republic of the Congo,” reads the UN report seen by ChimpReports.
“The Group saw a copy of an agreement signed by AGR and CEEC, in which the two parties acknowledged that gold was smuggled from the Democratic Republic of the Congo to Uganda. Furthermore, it includes a commitment to work closely in the fight against smuggling according to international and International Conference on the Great Lakes Region regulations.”
The Uganda government does not deny the smuggling of gold from the Democratic Republic of the Congo to Uganda but attributed it mainly to the “porosity of the borders.”