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Could your new business venture in mining take you to Uganda?

With such prolific mineral resources, one could have imagined the existence of a national mining company/agency to regulate the sector and operate as a local investor on behalf of the State. But, this is not the case. The country did not have a national mining company over the last decades. Also, prior to 2022, according to the previous mining code or law, mining rights were assigned on a no-tender basis but merely based on a first-come-first-served basis.

In the aftermath of COVID-19 and the current Ukrainian conflict, Uganda decided to change some of its economic approaches. The government is now willing to provide a safe investment environment for international investors while increasing the mobilizing of public resources to support the national economy.

In so doing, in February 2023, the current minister of energy and minerals announced the setting up of a national mining company that will aim to take equity stakes of up to 15% of all medium and large-scale mining operations in the country. This decision is part of wide-range new reforms under the new mining law enacted in 2022. Another major provision of this new law is the creation of an online procedure for the mining license application coupled with a tender process.

What do these two couple changes in the new mining law mean for international investors?

On one hand (obviously), from 2023, no investors will ever hold a 100% stake or shares in any medium to large-scale mining operations in Uganda (the ownership impact). Additionally, this will translate into a decrease in profits or margins since investors will now keep their profit shares based on their own shares which can only go up to 85% (the financial impact).

Nevertheless, money is not the only core benefit of any transaction. The 15%-rule will improve and guarantee a stronger collaboration between the State and investors. Government participation in a private business venture is now capped. This will prevent situations of uncertainty where the government might be tempted to ask for significant equity based on public interest and/or the profitability of the activity. Investors who need clarity and certainty may now partner with Ugandan authorities under transparent terms—at least on the shareholding side.

On the other hand, they add a significant layer of competitiveness and transparency. The abolition of the first-come-first-served rule was a significant deterrent to attracting other investors tempted to penetrate a market where their competitors were initially present. Now, a mining license will be granted based on international procedures (competitive tender and bid). For newcomers (investors), this will mean an always-existing possibility to join the market. For existing investors, it will be a constant incentive to deliver quality work and remain competitive in a market where they could be outdone at any time by new investors.

Moreover, the new online process will offer transparency in the entry market requirements and admin while saving considerable registration time often existing in a physical process. International investors will now be able to complete their registration process worldwide and track their applications remotely without spending extra costs to cover their flights merely to satisfy administrative requirements.


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