04 February 2013

Will Kilembe Mines roar back to life?

After lying dormant for close to three decades, the future of Kilembe Mines Ltd, a once vibrant manufacturer and smelter of copper in western Uganda, still remains shrouded in uncertainty as attempts to revive it get mired in red tape and political interests.

The status of the mines came to the fore last week during the NRM Day celebrations in Kasese, when President Museveni broached the subject, saying “red tape” and “bureaucracy” in government was frustrating revival of the mines.

He pointed out that a group of Chinese investors had expressed interest in revamping the Mines but were being frustrated by technocrats.
The Daily Monitor has seen a letter the President wrote on October 14 last year introducing Gingko Energy Investment Company, a Chinese firm, to the ministries of Finance and Energy, saying the company “sounds genuine”.

Talking deals
The President said [his] “supporters” in Kasese had introduced a group of Chinese investors to him and as such, asked the line ministries to confirm the “capacity” and “engage” the company with a view to conclude the deal. The letter was copied to the Vice President and Prime Minister among others.

Sources close to the deal said a presidential assistant introduced the Chinese company to the President and that even if he had asked Finance to follow the law, technocrats are under pressure from “State House people” who are pushing the company to get the deal.
In his letter, the President says he had been told that other groups (investors) had made inquiries about the mines and asked Finance officials to check the “capability” of all other applicants, make a shortlist and engage them.

The President also directed the officials handling the deal to involve the Public Procurement and Disposal of Public Assents Authority (PPDA) and the Attorney General.
Over three months later, the President, while addressing the just-concluded NRM Caucus in Kyankwanzi, again raised the Kilembe matter, this time blaming “timid political elements and indifferent, if not compromised civil servants” for the delays to revamp the mines.
He added: “Investment promotion means attracting people with money, entrepreneur skills and technical know-how. This is not a job of PPDA but Uganda Investment Authority working with privatisation Unit of Ministry of Finance.”

The President’s concern, however, runs in the face of other roadblocks. In October 2012, a Canadian company, CANAF Group, had sought a court order to block the privatisation of the mines.

The company, formerly known as Uganda Gold Mining Ltd, had also asked court to order the Attorney General and Kilembe Mines to enforce an order which necessitated Uganda Gold Mining to re-enter Kilembe Mines, seven years after abandoning the site. Uganda Gold Mining had also presented a claim of $15million (about Shs40b) as out-of-court settlement to drop interest.

In a ruling last Friday, the Commercial Division of the High Court dismissed the case with costs, offering the green light to the deal.
Justice Christopher Madrama Izama said: “The order sought would interfere with the privatisation process prescribed by Parliament on the basis of an agreement to which the government is not party. The state is entitled to carry out the privatisation process under the Public Enterprises Reform and divestiture Act cap 98 laws of Uganda.”

Stumbling blocks
It was because of the court injunction that the technocrats at Finance on November 29, 2012, wrote to the President informing him of the court case and their inability to proceed with the procurement process.

But other sources in the Energy ministry told the Daily Monitor that State House officials, who had apparently introduced the Chinese company to the President, travelled to China to carry out the due diligence.
The Privatisation Unit, however, reportedly rejected the due diligence report.
Last year, Energy Minister Irene Muloni wrote to the President backing the company, saying it would invest $100 million (about Shs266.1b) to revive production at Kilembe.

When contacted yesterday, the Finance spokesperson, Mr Jim Mugunga, said: “We are not under pressure to favour anybody, we are under pressure to ensure that we attract investment. The President has been clear on the need to revamp the mines and asked us to ensure this is done without further delay.”

The Daily Monitor also understands that after the “single-sourcing” idea was rejected, a Cabinet sub-committee on privatisation approved five shortlisted bidders for Kilembe Mines Ltd, including Gingko Energy Investment Co. and recommended them to proceed to the final stage of the divestiture process.

The bidders who will now be required to submit detailed technical and financial proposals are; Sino-Steel (China), Tibet-Hima Group(China), Konkola Copper Mines PLC (Zambia), Shree Minerals (Australia) and Gingko Energy Investments Co. (China). The shortlist is expected to be publically announced today.