Researchers from NRGI caution Uganda against adopting production sharing agreements (PSA) in mining, as they present risks not encountered in the oil sector. The National Mining Company is being established to manage government interests, amidst discussions on optimizing mineral benefits. Experts stress the need for capacity building before implementation, while the Ministry of Energy emphasizes careful governance in its operations.
In Uganda, researchers from the Natural Resource Governance Institute (NRGI) have expressed concerns regarding the government’s negotiations for a production sharing agreement (PSA) with Sarrai Group for the management of Kilembe Mines. Although PSAs are typical in the oil and gas industry, they remain uncommon in mining, leading to speculation about their appropriateness for Uganda’s mineral sector as the National Mining Company, tasked with overseeing the government’s mining interests, is being established.
Economic Analyst Thomas Scurfield indicates that while PSAs serve as a legal framework in the oil sector, their recent inclusion under the new Mining Act may introduce risks and complications not fully understood by Ugandan authorities. Dr. Paul Bagabo, a leading researcher at NRGI, cautioned that the government might underestimate the difficulties in managing and sharing mineral benefits, especially as only copper has significant international market value.
Dr. Bagabo emphasized the need for Uganda to develop its capacity for mineral processing, marketing, and valuation before pursuing PSAs. He cited international examples wherein countries like Azerbaijan, DRC, and Myanmar have faced challenges or even abandoned similar agreements in mining. He advocated for a careful review of Uganda’s strategy concerning PSAs as the government seeks to maximize benefit from its mineral sector.
In response to these insights, Dr. Gerald Banaga-Baingi of the Ministry of Energy highlighted the National Mining Company’s aim to optimize mineral resource management. He noted the importance of evidence-based evaluations and assured that the selection of the board was conducted with care to ensure effective governance.
The new Mining Law creates a framework whereby the government can obtain a 15% equity stake in new medium- and large-scale mining operations, with an option to increase this to 30%. Senior Inspector of Mines, Engineer David Sebagala, reiterated the government’s intention to maintain clear boundaries between regulatory roles and operational responsibilities as the National Mining Company evolves. The company is also exploring opportunities for mergers and joint ventures to enhance its mining initiatives.
The article underscores the significant hesitations expressed by experts regarding the suitability of production sharing agreements in Uganda’s mining sector. Researchers urge the government to bolster its capabilities in mineral processing and assess the effectiveness of PSAs carefully. The Ministry of Energy aims to maximize benefits from mineral resources through the National Mining Company. The ongoing dialogue and the establishment of robust governance structures will be crucial as Uganda navigates its mining future.
Original Source: www.independent.co.ug
