African Gold Refinery, a Ugandan company, expects to process $1 billion worth of gold a year but is battling would-be smugglers turning to the precious metal to make easy money.

Gold is lucrative in this part of the world. Gold shipments by East Africa’s third largest economy surged to $204 million in the 2015/16 financial year, from $230,000 a year earlier, according to the Bank of Uganda.

“For the first time the country registered an increase in exports just on account of that one unit,” said Richard Kaijuka, Chairman of African Gold Refinery, in April in the capital Kampala. “It’s certainly a game-changer for the region. The outlook is looking good – without doubt.”

“The beauty about it is if this smuggling can stop, we are able to export. This unit alone can process $1 billion per annum,” Kaijuka said.

An Africa Gold Refinery employee prepares to melt gold (Photo by Joseph Burite)

While a 2014 government geological survey revealed significant mineral deposits, including gold, iron ore and uranium, Uganda has no commercial gold mining operations in place. The country relies on artisanal laborers who sell raw minerals to unregulated middlemen. About 24 firms currently possess gold prospecting licenses, none of which has a mining lease, according to a ministry of energy and mining cadaster.

Since launching operations in 2014, African Gold Refinery has seen significant flow of gold from neighboring countries, according to Kaijuka.

“Dubai has over 14 refineries and they don’t produce anything. Ours is to create a ‘mini-Dubai’ in this region. We have even got gold from West Africa, from the Democratic Republic of Congo, from Tanzania,” he said.

The formal launch of the refinery in February heightened concerns conflict minerals would find their way to the market, fueling volatility in the Great Lakes Region.

“Our fear was that having a plant in Uganda with all these minerals and our porous borders, where people cross and conduct a lot of smuggling in and out of the country, and sometimes we don’t know how much we have in the country and how much is going out. How much is coming in because of this smuggling? Our fear was that maybe some of it would fuel conflicts,” says Peter Wandera, the Executive Director of Transparency International Uganda.

“Government should begin listening to the stakeholders. Let the government be more transparent because issues of extractives have a lot of secrets around them. It should be more open to external views,” he says.

“The refinery is to add value to our exports,” says Irene Muloni, Uganda’s Cabinet Minister for Energy and Minerals. “We have even removed royalties so that people can export through the legal channels.”

A receiving desk for gold (Photo by Joseph Burite)

Muloni shied away from giving export targets for the current financial year.

Kaijuka, who is also the Vice Chairman of the not-for-profit, non-governmental Uganda Chamber of Mines and Petroleum (UCMP), says African Gold Refineries is based on responsible sourcing of its gold that it refines operating by the Organisation for Economic Co-operation and Development (OECD) guidelines.

“By going for responsible sourcing, it means we are eliminating those that are illegal. That’s the whole point,” he said. – Written by Joseph Burite