Why Uganda Should Begin Mining and Exporting its Diamond Reserves

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Uganda should reignite efforts to explore the possibility of mining the country’s under-exploited diamond reserves. Not only will the sector reap billions in revenue for the country’s government, but it could also create hundreds of employment opportunities across its value chain.

The discovery of diamond reserves was announced in 2014 as the country’s Geological Department also reported finding over 200 million tonnes of iron ore in South Western Uganda.

Since then, little has been done to push the sector forward.

An estimated 128 million carats of diamonds were produced from mines worldwide in 2016. Major producing countries include Australia, the Democratic Republic of Congo, Botswana, South Africa, and Russia. Worldwide reserves are estimated to be some 750 million carats.

Uganda’s economy can be boosted exponentially if it joins the ranks of other diamond-producing countries.

“We have over 200 million tonnes reserves of hematite iron ore in South Western Uganda and 60 million tonnes of magnetite iron ore in the south eastern part of the country and still have huge potential for exploration,” said Francis Natukunda, a Senior Geologist at Uganda’s Department of Geological Survey and Mines.

Speaking at a two-day South African trade and investment seminar in Kampala at the time, he said an area survey revealed potentially huge diamond deposits around areas of Lake Kyoga.

Natukunda noted however, that if the iron ore is extracted, it would not be exported, but rather used domestically to fuel demand for steel in the construction industry.

This is due to the fact that Uganda banned iron ore exports in 2012.

Uganda’s mining history dates back to as early as the 1920s when work began at Uganda’s South West region where tin and tungsten deposits were discovered. In the following decade, gold mining began near Kenya’s Busia are, which borders Uganda.

And in the late 1980s, laying of roads led to increase in demand for construction material. The National Mining Commission was formed in 1988.

In 2015, Uganda’s government announced the discovery of 116 million tonnes of iron ore worth $15.6 billion. At the time, the country’s Ministry of Energy and Mineral Development said the deposits were discovered and quantified following a series of airborne geophysical surveys.

Limitless Potential

The country’s more recent 2018 discovery of diamonds has possibly reignited interest in the precious gem’s potential for the small East African nation.

From as early as 2014, Uganda’s government has been confident that the potential for diamond mining exists in several parts of the country. At the time, the country’s Minister responsible for mineral development Peter Aimat Lokeris told a forum in Cape Town, South Africa that investors were welcomed to prospect for diamonds and other minerals in the country.

According to Uganda Investment Authority, the discovery diamonds in occurred during prospecting for gold in Buhweju and a few small diamonds were found at Kibale in 1938 and Butale in 1956. More deposits have since been found in other parts of the country in recent years.

Uganda’s mining industry reached peak levels in the 1950’s and 1960’s when the sector accounted for up to 30% of Uganda’s export earnings.

However, political and economic instability experienced in the country in the 1970’s and the recent global economic slowdown led the sector to decline drastically. Currently, the energy sector’s contribution to total GDP, at current prices, was the lowest in the 2009/2010 Financial Year with a share of only 0.3%. It should be noted therefore that the decline is not a result of resource depletion but rather due to the bad governance at one time but recently due to poor world prices of cobalt and copper, among others.

Revitalizing Uganda’s Mining Industry

Diamond mining could help revitalize Uganda’s mining industry. In fact, the country could join the ranks of the largest diamond producers in Africa, which include South Africa, Angola, Botswana, Namibia and the Democratic Republic of Congo (DRC).

According to a report from Paul Ziminsky Mining Analytics, mined diamond production in 2017 is estimated to be 142.3 million carats worth $15.6 billion, which would be an 11.5% increase in carat volume produced over 2016 and a 9.9% increase in total value produced.

The top 10 largest mines in the world by value produced are estimated to represent 58% of global production. De Beers’ Jwaneng mine in Botswana is ranked number one, and is estimated to independently produce 15% of the world’s diamonds in value.

De Beers is an international diamond exploration company with operations across various parts of the African continent.

Uganda’s mining industry shrunk over the past 30 years, dropping from 6% of GDP in 1970 to 0.5% in 2010.

The nation’s mining sector is a mix of officially registered mining companies and artisanal small-scale miners.  Artisanal small-scale mining (ASM) produces more than 90% of metallic, industrial and building minerals; providing livelihoods to almost 200,000 individuals.  However, ASM is under regulated and hazardous, due to the use of mercury in small-scale gold production.

A law known as the 2004 Mineral Act provides incentives to mining investors, with royalty fees for base and precious metals set at 3%. Uganda should showcase the potential of its would-be diamond mining industry to local and international investors.

Executed properly, diamond mining could be the game-changer Uganda needs to become a more dominant player in East Africa, possibly surpassing the likes of Kenya and Rwanda.

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