Researchers from the NRGI voice concerns over Uganda’s adoption of production sharing agreements (PSAs) in mining, citing potential risks and challenges. With ongoing negotiations for Kilembe Mines, caution is warranted as the National Mining Company seeks to develop capacity in mineral resource management. Effective governance and strategic decision-making are critical for maximizing Uganda’s mineral resources.
In Uganda, researchers have expressed concerns regarding the recent adoption of production sharing agreements (PSAs) in the mining sector, particularly as the government negotiates with the Sarrai Group for Kilembe Mines. This caution comes from the Natural Resources Governance Institute (NRGI), which indicates that while PSAs are commonly used in oil and gas, they remain uncommon in mining, potentially exposing the country to unforeseen challenges.
Thomas Scurfield, an Economic Analyst at NRGI, underscores the inherent risks associated with PSAs in mining. He notes that while these agreements can facilitate the legal relationship between governments and international companies, the unique circumstances of Uganda’s mineral sector warrant careful evaluation. Comparatively, Dr. Paul Bagabo emphasized the urgency for Uganda to develop capacity in mineral storage, valuation, and marketing prior to engaging in PSAs. This development is crucial in avoiding potential pitfalls associated with these agreements.
The NRGI report reveals that various countries such as Azerbaijan, DRC, and Myanmar have navigated PSAs in mining; however, Egypt has shifted to a royalty tax regime, reflecting the evolving nature of benefit-sharing structures in the industry. Recommendations from the report aim to assist Uganda in establishing a robust National Mining Company that can effectively manage its mineral resources.
Dr. Gerald Banaga-Baingi from the Ministry of Energy highlighted the government’s intentions in establishing the National Mining Company to maximize the nation’s mineral resources. He acknowledged the report’s insights and emphasized the need for comprehensive analysis before implementing any recommendations related to PSAs. Moreover, the National Mining Company is actively seeking to fill executive and senior management positions to ensure effective governance and operation as it moves forward.
Senior Inspector Engineer David Sebagala articulated that the new Mining Law automatically grants the government a 15% stake in medium to large-scale mining licenses issued post-2022, with the option to further increase this stake to 30% where beneficial. This flexibility allows government involvement where projects show promise, fostering an environment for potential partnerships and collaborations within the industry.
In conclusion, the shift towards production sharing agreements in Uganda’s mining sector raises significant concerns regarding its implementation and efficacy. Experts recommend cautious deliberation to enhance Uganda’s capacity in managing mineral resources effectively before pursuing PSAs. The commitment of the Ministry of Energy and the new National Mining Company to maximize benefits signifies an effort to navigate the complexities of mining governance, aiming for informed and strategic decisions in the future.
Original Source: www.independent.co.ug
