How Museveni’s Letter Crushed Madhvani’s Phosphates Plans
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Tags: Energy and Mineral Development, Phosphates, President Yoweri Museveni
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A letter written by President Yoweri Museveni offers a glimpse on how energy and mineral licenses and contracts are negotiated, awarded and sealed.
A 2013 letter, authored by President Yoweri Museveni, which The Observer has seen, shows how Irene Muloni, the minister of Energy and Mineral Development, was directed to award an exploration license to M/S Uganda Hui Neng Ltd, a Chinese company linked to Fang Min of Fang Fang restaurant.
The letter showed how Museveni holds the final card in commercial disputes. In May this year, the Inspectorate General of Government (IGG) authored a report, which implicated officials from the department of Geological Survey and Mines (DGSM) in fraudulently awarding an exploration licence for Tororo phosphates in Tororo to M/S Uganda Hui Neng Ltd, on the orders of the president.
Edwards Katto, the commissioner for DGSM, is reported to have blocked Frontier Exploration Ltd from lodging an application for the same project. The IGG concluded that Hui Neng’s licence was not only illegal but also irregular.
Museveni’s letter puts into perspective, the actions of DGSM and perhaps explains why Muloni didn’t administratively review Frontiers Exploration Ltd’s complaint. This letter followed a meeting President Museveni had with the company officials in which the latter expressed interest in developing the phosphates in Sukulu.
The letter highlights the president’s role in the award of the contract. The president’s letter is dated May 13, 2013. The letter, couched in ‘a directive language’ is copied to the vice president, then prime minister (Amama Mbabazi) and the minister of Finance, Planning and Economic Development.
Museveni wrote: “There is a Chinese group known as Guangzhou Dongsong Energy Group Company Ltd. They want to develop phosphates deposits at Sukulu into fertilizers as well as producing iron and steel from the magnetite deposits there. They also want to produce sulphuric acid and power. They also say that there are many other minerals such as copper, nickel, etc,” Museveni wrote.
The letter demonstrates how the legal process outlined in the Mining Act and the attendant Mining Regulations 2004 are ‘a mere’ formality, while the deals are sealed at State House.
Museveni wrote: “If these people are capable in terms of technology and finance, I strongly recommend that we give them a license to develop these industries. They say they also have the money to compensate the locals who have agreed to lease the land to them rather than sell it. The crucial thing is to check on their financial and technological capacity which should be done quickly and without wasting anytime,” Museveni wrote.
Museveni’s letter also shows the role of politicians, and not the technocrats, play in the award of mineral licences. For instance, in the letter, Amama Mbabazi, the then powerful prime minister, had also fronted Indian investors for the lucrative Tororo phosphates deal.
Museveni in the letter added: “The Nitin Madhvani group are not serious and you should not allow them to extort money from our Chinese investors because they have nothing to sell. The minerals are ours, not theirs. If they could not develop them, then, we take them back.
There was also another Indian Group from India that was working with Rt Hon Mbabazi. My principal private secretary (PPS) had rang Hon Mbabazi who now says those Indians are not moving. We, therefore, move with the Chinese, if they are able as said above. No more delays,” he wrote.
Nilefos Minerals Ltd, a company owned by Madhvani that had done substantial exploration work, was denied a mining lease by the minister after its exploration licence expired in 2013.
The Sukulu Phosphates Comprehensive Industrial Development project is expected to start large-scale production of phosphates fertilizers, steel products as well as sulfuric acid by 2018.
The industrial complex now under construction on a 600-acre piece of land will contain a phosphate fertilizer plant with a production capacity of at least 300,000 tonnes per year. There will also be a steel mill with a capacity of not less than 300,000 tonnes per year, a power plant and a sulphuric acid plant with capacity of 200,000 tonnes annually, among others.
ENTER IGG REPORT
The IGG in a 24-page report concludes that the tendering process of the phosphates mining project in Sukulu hills, Tororo district was marred by irregularities and illegalities.
The report observes that the M/S Uganda Hui Neng Ltd application process was done in one day and after being lodged in the DGSM, it was also processed in one day in what the IGG termed as “physical impossibility.’
The acting commissioner reportedly sent the file to Chris Rudigizah, the principal inspector of mines, with instructions, to “critically review and we expedite the grant of an exploration license for Sukulu with the earlier strong recommendation made by the president on this matter.”
However, three months later, on December 13, 2013, M/S Uganda Hui Neng Ltd sold the licence and transferred its interest to Guangzhou Dongsong Energy Group Company Ltd, a Chinese company that plans to set up an industrial complex in Tororo and process phosphates into fertilizers and other products.
The report, which was written in May, found that Hui Neng acquired an exploration licence through fraud and falsified documents, and recommends that the company should show cause as to why the licence should not be cancelled.
The IGG’s investigation followed a complaint filed in October, 2013, by Frontier Exploration (U) Ltd, accusing the DGSM of having irregularly and unlawfully prevented the company’s local representatives from lodging their application for the Sukulu exploration licence.
CONDITIONAL MINING LEASE
Government awarded Guangzhou Dongsong Energy Group Company Ltd, a mining lease on October, 29, 2014. The lease is operational for 21 years from the date of the grant. According to the lease agreement, which The Observer has seen, Guangzhou is supposed to put in place, environmental monitoring plans.
“The company should develop a suitable indigenous employment and training strategy and operational plan,” one of the conditions reads.
The company is also supposed to give preference in terms of employment to Ugandans, such as accounting, finance, technical, administrative, supervisory, managerial and executive positions to Ugandans, when they become available. To be specific, “25 per cent of senior management positions should be held by Ugandans within five years, subject to availability,”
According to the conditions in the lease, within 10 years from the grant of the lease, senior management positions should be held by Ugandans, while at least one of the topmost managers should be a Uganda within one year, but this has not happened.
The company is also supposed to effect technology transfers and it should make deliberate efforts to contribute to society, through corporate social responsibility.
The lease agreement contains 10 special conditions. Some of the special conditions include: commencement of mine development operations within one year from the date of the grant and commence production not later than 36 months (three years) from the date of the grant and fence off only areas where mining excavation and mineral processing is taking place, among others.
