Researchers from NRGI caution against Uganda’s pursuit of production sharing agreements for the mining sector, highlighting potential risks and the need for capacity building. The National Mining Company is being established to manage government interests, with ongoing concerns about the effectiveness of PSAs based on global experiences. Stakeholder dialogues focus on optimizing Uganda’s mineral wealth while ensuring clear governance structures and operational roles.
In Uganda, scholars from the Natural Resources Governance Institute (NRGI) have raised concerns regarding the government’s negotiation of a production sharing agreement (PSA) with the Sarrai Group for the management of Kilembe Mines. This caution is significant as the National Mining Company, responsible for overseeing government interests in the mining sector, takes shape. Economic analyst Thomas Scurfield noted that while PSAs are prevalent in the oil and gas industries, they remain uncommon in mining.
The PSA framework, typically used to regulate the relationship between host nations and international corporations in extracting resources, has recently been incorporated into Uganda’s Mining Act. NRGI researchers, including Dr. Paul Bagabo, have highlighted lessons from 58 countries to guide Uganda as it establishes the National Mining Company. These insights were shared during a stakeholder engagement event aimed at ensuring equitable value addition in the mining sector.
Dr. Bagabo warned that adherence to the PSA model could expose the government to unexpected challenges in benefit-sharing from mineral resources. He emphasized that, aside from copper, which has international demand, other minerals face marketing difficulties, stating, “We really need to sit down and think.”
Furthermore, Dr. Bagabo suggested that Uganda lacks the necessary infrastructure for processing and marketing ore, recommending the need for capacity development before fully committing to PSAs. The NRGI report references other countries’ experiences, indicating that the efficacy of PSAs can vary significantly, with nations like Egypt transitioning away from this approach.
During the report presentation, Thomas Scurfield explained that governments could structure PSAs differently, potentially opting to receive physical minerals directly. This would shift the responsibility of marketing these minerals to the National Mining Company, necessitating capabilities in transport, warehousing, and contractual negotiations.
In response, Dr. Gerald Banaga-Baingi of the Ministry of Energy and Mineral Development refrained from commenting on the PSA recommendations, stating that the objective of the National Mining Company is to optimize Uganda’s mineral wealth. Banaga-Baingi promised to review the report for applicable recommendations as the company, recently established, approaches its 100-day milestone.
The board of the National Mining Company, led by Chairman James Mukasa Ssebugenyi, includes members carefully chosen for effective governance. This month, the company advertised key leadership positions, including a CEO and senior management roles. Engineer David Sebagala remarked that while some of the NRGI report’s recommendations are valuable, others may not be suitable. He highlighted the importance of maintaining clear roles between regulators and the operational functions of the National Mining Company.
Under the new Mining Law, the government is entitled to a 15% stake in large-scale mining ventures, a choice to be exercised based on project viability. Sebagala clarified that this stake increases to 30% under certain conditions, with potential collaborations and investments for promising projects. He confirmed the National Mining Company’s commitment to enhancing its involvement in gold mining and value addition processes.
The concerns raised by researchers regarding Uganda’s potential adoption of production sharing agreements in the mining sector underscore the need for careful deliberation. With suggestions to build capacity prior to entering such agreements, it is essential for Uganda to draw from global experiences as it establishes its National Mining Company. The ongoing dialogue among stakeholders emphasizes a cautious approach to ensure that Uganda’s mineral wealth translates into tangible benefits for its economy, promoting effective governance and operational clarity within the sector.
Original Source: www.independent.co.ug
