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Govt loses millions of dollars in gold royalties

Uganda lost more than Shs 10 billion in royalties from undeclared gold trade last year.

According to the auditor general's report for 2016 – 2017 financial year, only 16kgs in gold exports were authorised while Uganda Revenue Authority records showed that more than 8,000kgs were actually exported.

Gold mining in Karamoja

Gold mining in Karamoja

Mining regulations require that minerals obtained under a mineral right or under a mineral dealer’s license may only be exported under an export permit granted by the Commissioner at the Directorate of Geological Surveys and Mines (DGSM) in the Ministry of Energy and Mineral development. However, according to the auditor general's report, figures obtained from URA revealed a number of anomalies.

The DGSM issued Gold export permits for only 16.281 kilograms compared to records from URA, which indicated that 8,691 kilograms of gold valued at USD 339.09 million were exported from Uganda in the financial year 2016/17,” the report says.

The country, the report concludes, lost revenue of between USD 3.39m to USD 16.95m (Shs 12 billion to Shs 60 billion) in royalties from the undeclared gold imports and exports, depending on the rates applicable: 1 percent for imported and 5 percent for locally mined gold.

Another anomaly noted was that the gold exports of an unidentified exporter were supported by export permits from the Ministry of Tourism, Trade and Industry instead of DGSM, which was contrary to the Mining Act, 2003. Moreover, there was no evidence of payment of royalties on the exported gold.

Although, according to the report, DGSM admitted that that the exporter did not make declaration of gold exports to them, claiming that it had a tax waiver from the Ministry of Finance, there was no evidence of such a tax waiver.

The report notes that not only the government but also landowners are missing out on mining royalties. Land owners were not paid the prescribed 3% of the royalties, amounting to more than Shs 300 million last year.

The practice denies the landowners the revenues arising from use of their land, which potentially can affect the relationship between mineral rights holders and landowners,” the report concludes.

The auditor general advised relevant authorities to investigate the discrepancies in order to recover the lost royalties.