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Gold reserves will boost Uganda's economy'

24 October 2020


Uganda has been urged to widen its capacity to absorb refined gold in the country by looking to build its gold reserves at the Central Bank, among other things.


Sharon Tem, the acting chief executive officer of African Gold Refinery (AGR), said gold reserves at the Central Bank come with benefits such as increase in their value, and that Uganda would be in a better position if it further supported the gold refining industry with specified legislation.


"Yes, President Museveni has always supported African Gold Refinery, but we need to take it forward and have the necessary legislation in place and then we can absorb this gold," she said.


Tem was speaking at a recent mineral wealth conference organized by the Uganda Chamber of Mines and Petroleum. AGR has been one of the main sponsors of the conference since 2015.


Globally, central banks hold gold reserves as a means of backing their currencies. Simply put, gold reserves are held as a security to pay depositors. A country with high gold reserves boosts investor confidence in the market, which, ultimately, leads to more business decisions made.


Uganda's neighbor Tanzania is expected to be the first East African country to lead the way in building its own gold reserves. It is nearing completion of its gold refinery, from which it is expected to produce gold reserves for its central bank. In Uganda, the central bank backs up its currency with foreign exchange reserves, largely in United States dollars. Like gold, the dollar is said to be a safe haven during times of financial stress.


If Uganda is to build its gold reserves, Tem advised that the country ought not to rely on foreigners to extract its gold, saying there is need to build local capacity.She said the Ugandan government "should sponsor the surveys [exploration] of its gold and extract it itself. Once we own the gold, then it is easier to build up the gold reserves".


The AGR acting CEO said that once Uganda builds up gold reserves, the discussion should then move towards bullion banking, where commercial banks start trading in metal assets.Once the Central Bank has capacity to absorb more gold into their reserves, then we can take the conversation to bullion banking."


Subsequently, Tem added, manufacturers can move to hedging upon gold instead of land or machinery, to get bank loans for industrialization, which in the end greatly boosts the economy.


Chris Lubangakene, the assistant commissioner laboratories at the Directorate of Geological Survey and Mines, agreed with Tem."With the emergencies of gold refineries in the country, it is high time we started talking bullion banking within the country. [There is also a] need for a bill to regulate refineries," he said.



"Most of the refineries are exporting raw gold, which is really unfortunate. But this can be worked on. It is work in progress," he said while appearing at a recent talk show ahead of the conference.


"The gold sector is managed by international standards. There are standards like those in the London bullion market, and also guidelines from the Dubai sector.


"If all the licensed refineries in Uganda are following those standards, and are not smuggling raw gold on airline seats, then we shall be getting much more export earnings from the sector," said Woods.

Meanwhile, Tem said that AGR has a huge capacity to produce gold bars.She, however, said that most of refined gold they produce is exported out of Uganda because the local market is not sufficient to consume large quantities."If Government can embrace metal banking; if the Central Bank can absorb and back up metal banking and introduce it across the commercial banks - even as a reserve asset - we will not need to export gold."We need to have the capacity to absorb the gold that the refinery is producing daily."AGR recently made its first set of gold coins, with the company stating that it will soon produce gold bars and jewelry.