Companies and individuals importing gold for refining in Uganda for re-exportation, must classify its origin in an effort to stop the trade in conflict minerals. According to the Central Bank, the order is one of the efforts to understand the source of the country's bulging gold exports.
Gold exports have expanded enormously since the opening of Africa Gold Refinery (AGR) in 2016. A year before, the country had only exported gold worth $35.7 million (Shs 132 billion). It immediately jumped to $339.5 million (Shs 1.2 trillion) when the refinery opened.
In the 12 months to February 2019, the country exported gold worth $549 million (Shs 2 trillion), according to BOU records. This is the first time the country has exported more gold than coffee, a key cash crop. However, a week ago, the Uganda police seized a gold consignment from Venezuela at the Gold Africa Refinery in Entebbe. The consignment has since been returned after Uganda's attorney general William Byaruhanga said AGR had lawfully imported the gold. Venezuela is under USA sanctions.
The order also comes on the backdrop of a report by the United Nations which said that the UN had confirmed Kampala was a recipient of smuggled gold from the Democratic Republic of Congo (DRC), an accusation that has hang over Uganda's neck for decades.
The December 2018 report by the United Nations Security Council Expert's Group showed that it was not yet compulsory for importers to show the origin of their gold, fuelling trade in conflict minerals from countries like Democratic Republic of Congo and South Sudan.
"The Group found that Ugandan authorities lacked a coherent policy to combat smuggling. The Group also found that Kampala-based gold exporters did not have an efficient system to avoid the contamination of their supply chains with illegally traded gold from the Democratic Republic of Congo," the UN report said.
The International Conference on the Great Lakes Region Certificate, another form of certification supposed to show the origin of minerals, is not yet compulsory in Uganda. For this reason, the UN said in December, "two Kampala-based gold exporters explained that this was the reason they did not request those certificates from suppliers from the Democratic Republic of the Congo."
The new order, after the December UN report is that, "refiners and importers must classify country of origin," said Dr Adam Mugume, BOU executive director for Research. He said the central bank did not know the origin of the bulging gold exports.
But according to Bank of Uganda officials, the refinery meant that the dealers could import gold from all over the world, although the UN seemed to suggest it could have inadvertently fuelled smuggling.
"The refinery is for the entire world. The dealers can bring in gold and refine it to 99 per cent to almost what we call gold bars. It comes all over the world," Mugume said.
Industry watchers say that even with the call for classification, the government is likely to run into trouble with the enforcement since gold is an area dominated by artisanal miners, who at times carry the precious metal across the border via loose entry points. Another refinery; Bullion Refinery Ltd opened in the country last year and it means appetite for gold importers can only go higher.
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