Sub-Saharan Africa's second biggest gold refinery, the Uganda-based African Gold Refinery (AGR) deals in big money - with its volumes of exports, according to informed sources, valued at over Shs. 2 trillion over the last two years. So it is not surprising that there are many powerful individuals and institutions pushing to get a bit of the action.
But the risks involved, for the individuals, government agencies, and the country, are equally great. It does not help matters that the man at the centre of it all; Belgian gold mogul Alain Goetz, is a controversial character in international gold trade circles and is under investigation by a United National experts on DRC and South Sudan, and two local anti-corruption agencies.
Alain Goetz is also involved in fights with some of the most powerful people in Uganda's mineral trade circles; including Banarbas Taremwa, who is an in-law to President Yoweri Museveni's brother, Gen. Caleb Akandwanaho aka Salim Saleh, and Richard Kaijuka; an advisor to President Museveni on mineral value addition. Taremwa and Kaijuka claim Goetz diddled them out of co-ownership of the gold company which they set up together. Taremwa is suing Goetz in the courts and Kaijuka, whom Goetz, sacked recently in a very public manner, is threatening to spill company secrets.
Goetz, who now owns AGR 100 percent, and Uganda have previously been fingered by UN investigators for dealing in Congo conflict minerals.
Goetz was named as a key player in the gold trade in 2009 by the United Nations Group of Experts appointed to investigate issues in Congo and in 2005, the International Court of Justice in The Hague ruled that Uganda should pay the DRC US$10 billion in reparations for plundering its gold and other natural resources.
President Museveni's brother Salim Saleh and other elites in Uganda have also severally been implicated by UN investigators for illegal exploitation of Congolese natural resources.
If the array of fights is mind-spinning, there is an even bigger puzzle; why is President Museveni so firmly defending Goetz, a controversial gold merchant whose dealing, experts say, risk dragging Uganda into the murky alleys of international trade in illicit or blood gold?
As recently as December 2017, Museveni directed the Directorate of Geological Survey and Mines (DGSM) to give AGR all the licenses it requires. Apparently, AGR had complained to the President that DGSM was frustrating them.
Museveni's directive is being seen as a snub in the face of several government agencies which claim to be trying to streamline the activities of AGR and Goetz to ensure that they do not pose a greater risk to Uganda as a country. Apart from the Directorate of minerals, Goetz and AGR are being investigated by the Inspector General of Government (IGG) over alleged malpractices; the Financial Intelligence Authority (FIA) over suspected money-laundering, and the government Department of Public Prosecutions (DPP) for possible prosecution in the courts of law over non-compliance.
At the centre of these investigations are three major questions: What is the source of Goetz's gold? How much does he export? Where does the money from the deals go?
Although Museveni has held some meetings to explain AGR and Goetz's dealings; the questions remain unanswered, according to informed sources.
The Independent understands that President Museveni, called a meeting with key private players from the Chamber of Mines and Petroleum to discuss issues surrounding AGR. The Chamber lobbies for investors in the mining and petroleum sectors. Early the same month, Museveni had met with sector investors at State House Entebbe and Goetz had complained that DGSM was frustrating the gold refining operation. That is when Museveni directed DGSM to give AGR all the licenses it requires.
But, either known or unknown to Museveni, the source of contention between the gold refiner-cum-exporter and DGSM stems from Goetz's slippery attempt to evade supervision by all government institutions - and their attempts to beat the investor into line.
Museveni has been keen to protect Goetz from when he launched the AGR facility in February 2017. At the time, he warned that officials who would not support the company would be dealt with 'harshly'.
Museveni intended to protect AGR, which is the first refinery in East Africa and the second largest in sub-Saharan Africa, insiders say, because he hoped the facility would increase the legitimacy of the gold trade in Uganda.
But accusations against Goetz suggest that the reverse could be happening.
For instance, in an on-going fight, AGR has allegedly snubbed directives by the FIA intended to prevent money laundering and promote transparency.
Uganda's Anti-Money Laundering Act conditions dealers in precious metals and gems to register with the FIA as accountable persons.
In accordance with this law, on 24 August FIA wrote to AGR directing the company to provide a copy of their operating licence and to register with them as an accountable person.
When AGR did not respond, FIA wrote again making the same demands on Sept. 25. AGR ignored this request too.
When AGR delayed to respond, FIA boss Sydney Asubo wrote to the DPP on Oct.11 requesting for the prosecution of AGR for flouting the law.
FIA issued these letters to ensure the company complied with international anti-money laundering laws. Non-compliance, in 2014, landed Uganda on the Financial Action Task Force (FATF) watch list of risky countries.
Danger to Uganda
FATF is an inter-governmental body established to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
To be on the FATF's list of risky countries makes a country unattractive to international investors and lenders.
The FATF only removed Uganda from the list in November last year but cases like AGR's alleged crimes could reverse this gain. It is possibly why Asubo and other government agencies are cracking the whip.
According to the International Monetary fund (IMF), trade in precious metals, and particularly gold, has strong links to illicit financial flows. A study on gold trading and export in Kampala by Gregory Mthembu-Salter, Phuzumoya Consulting, revealed that gold dealers in the DRC and Dubai have often claimed that Kampala-based traders purchase gold with illicit funds for the purpose of money laundering.
Insiders say FIA has evidence, which raises concerns over money laundering and illicit financing.
When AGR responded to FIA queries on November 7, 2017, the company declined to furnish FIA with the required details.
Instead, AGR noted that Uganda's anti-money laundering law does not oblige them to comply with its requirements and that FIA has no jurisdiction to compel them to comply with its directives.
AGR noted in its response to FIA queries that the law being cited only obliges mineral dealers and that it would be erroneous to assume that it (AGR) fits the description of a dealer given that it only refines the raw material into a finished product.
Uganda's mining law established in 2003 does not provide for a refining license. Basing on this, AGR argues that it is not obliged to disclose its dealings under the existing laws.
But government officials insist that AGR has a mineral dealers' license, which it received on January 2016 from DGSM.
The DGSM Commissioner, Edwards Kato, in a letter dated January 2017 to the global transparency body, Global Witness (GW) noted that that the DGSM "has not issued any export permits" to AGR. By implication, gold exports by AGR would seem illegal.
GW also quoted Taremwa, a former AGR director saying that some of the gold processed in the refinery comes from the neighboring DRC and South Sudan, which critics have jumped on to claim there is a risk of using the money from the gold sales to fund conflicts and foment human rights violations.
Richard Kaijuka, a founding board chairman, who the company fired this November, told The Independent that he has been raising these issues and suspects Goetz possibly fired him to keep the lid on, among others. Kaijuka has also expressed concerns over "gold sourcing in the region" which experts say should not be swept under the carpet.
Official data shows that on some occasions, Goetz has severally exported over 100 Kgs on a single day. Uganda's gold mines, critics say, cannot raise 10 kilos a week.
To get to the bottom of the puzzle, The Independent secured data from the Uganda Revenue Authority (URA) and DGSM.
URA data shows that between October 2015 and September 2017, AGR had traded in gold worth Shs. 1.16 trillion. Data from DGSM, on the other hand, shows that between July 2016 and June 2017, AGR had exported gold worth Shs 2.13 trillion.
Last year the Auditor General (AG) raised concerns about conflicting figures issued by the DGSM and URA. While DGSM assessed royalty and awarded export permits for only 93kgs of gold worth Shs11.8b, in the same period, the Customs and Excise Department of Uganda Revenue Authority indicated that 5,316 kgs of gold had been exported with a total value of Shs698 billion. Critics say this discrepancy could be because of under reporting.
The AG also raised concerns that while gold grew into Uganda's second largest export product after coffee in 2015/16, the royalties paid to government didn't reflect that growth.
During that year, the country exported 5, 1316 kgs of gold valued at about Shs700 billion, the bulk of which was by AGR. But for the same year, the AG noted, only Shs360m was collected instead of Shs41.88 billion going by the applicable rates of 1 per cent and 5 per cent for the imported or locally mined gold respectively according to Mining Act 2003.
Away from this are claims Goetz is concealing his operations by using multiple companies.
URA data shows that while AGR was the exporter in all cases, the gold came into Uganda through several names including Goetz himself, a one Jamal Nasir, a company called AGOR DMCC and another called GOETZ GOLD LLC. Both AGOR and GOETZ GOLD have links with Goetz.
Sources say the IGG and FIA investigations, which are on-going, were partly sparked by some of these discrepancies.
When The Independent raised these issues with AGR, the company said in an email response that there is someone behind the allegations whose intention is to damage AGR's reputation. The company had earlier, in a press statement, claimed that person was Taremwa.
"AGR is an industry providing services and not involved in the selling, buying or trading of precious metals," the company noted.
"AGR do have a Mineral Dealer's License as it is essential for various business purposes and it is one of the requirements AGR is submitting whenever there is an export.
AGR also noted it has mechanisms in place aimed at avoiding trading in conflict gold.
"Any customer has to fulfill our KYC (Know Your Customer) procedures by providing relevant information and their company legal documents," AGR noted, "AGR is doing due diligence of its suppliers in the same way as other foreign / international refineries are doing."
The company also noted that they have been competing with huge smuggling networks "as we are promoting the legal framework and legitimate supply chain thus smugglers are devastated on AGR's success and doing everything to suppress AGR".
"The question is; why is Goetz refusing to declare his operations and cooperate with these institutions according to the law if he has nothing to hide?" wondered Don Binyina, the Executive Director, African Centre for Mineral Policy (ACEMP).
Binyina, who is also the Chairman of the Audit Committee of the International Conference of the Great Lakes Region Protocol (ICGLR) against the Illegal Exploitation of Natural Resources, added that the ICGLR has long had concerns over the source of the gold refined at AGR.
Binyina said that because ACEMP founded and convenes the National Assembly of Artisanal and Small Scale Miners (ASMs), which brings all ASMs across the country, they have an idea of how much gold is produced in Uganda.
"ASMs are the largest producers of gold in Uganda," he said, "but these guys produce in grams. If you combined all their sites in Uganda, they cannot produce ten kilos of gold a month. That is why the source of the gold coming out of AGR cannot be Uganda."
Therefore, Binyina says, since the evidence shows that AGR is a gold exporter, they have a duty to declare the source of this gold.
"Otherwise," Binyina warned, "with all these fingers pointing at AGR, there is a real risk of turning Uganda into a transit route for illicit gold, which can threaten peace and stability in the region."
There are also concerns that given the past record, where Uganda is accused of plundering Congo, it is not hard to foresee Uganda slammed with international sanctions if these issues are not dealt with.
GW in its June report also noted that President Museveni, without following due process, directly influences the award of deals to investors, who sometimes turn out to be fakes, evade taxes, and abuse human rights and the environment.
For instance, President Museveni asked DGSM officials to offer a 25-year copper mining concession deal for the copper deposits worth $ 26 billion at Kilembe Mines to a Chinese consortium- Tibet Industry Company Ltd without following due process.
Years later, it emerged that the same company that was supposed to invest $175m into the facility, create over 3000 jobs and pay government millions in taxes and royalties, was incapable.
But because they bribed their way to the deal, proper due diligence was not done, it later emerged that they don't have capacity, they are unable to pay even $1 million a year in government loyalties and later on invest the funds required to revive the facility.
As a result, government has to go back to square one and get new investors four years later. The story of Kilembe is not very different from that of the Sukulu project. Last year, IGG conducted an investigation which revealed that the award of the exploration licence by DGSM to Dongsong Energy Group, another Chinese company, was fraudulent. Rather than allow the IGG to use her independence and take due action, President Museveni intervened, blamed her for disrupting the project and directed her to leave Dongsong alone.
Years later, the Sukuru project is yet to deliver the expected dividend and has been caught up in endless dispute with locals over compensation.
Critics also say because of such, investors are disregarding institutions and violating laws with impunity because they are assured of Museveni's protection.
Inside sources have told the Independent that officials from the FIA, IGG and DPP are working joint on the Goetz/AGR case and despite Museveni's protection, they agreed at a mid-December meeting that the DPP goes ahead and prosecutes AGR specifically for declining to provide a copy of their operating licence and register with the FIA. The IGG, meanwhile, is carrying out a broader investigation of Goetz/AGR operations.