Government seeks Shs2.6bn tax waiver as Kilembe Mines winds up for new investor
Auditor General flagged the unpaid mineral rents; MPs question timing of the write-off request
The Ministry of Energy and Mineral Development is asking Parliament to write off Shs2.6 billion in tax arrears owed by Kilembe Mines Limited, as the state-owned company winds down operations to hand the historic copper concession to a new mining consortium.
State Minister for Minerals, Sidronius Okaasai, presented the request to the Committee on Finance, Planning and Economic Development on Wednesday, explaining that the arrears accumulated from unpaid annual mineral rents dating back to the period when Kilembe Mines Limited held the mining licence.
Under Section 189 of the Mining and Minerals Act, Cap. 159, mining companies are required to pay annual mineral rents to government before a mineral right is granted, and thereafter every year until the right is terminated.
Kilembe Mines Limited’s exploration licences expired in 2022, but the outstanding rent obligations were never settled.
The non-payment was first flagged by the Auditor General in a report for the year ended December 2024, which recommended that the ministry consider writing off the debt as uncollectable.
“The exploration licences expired in 2022; however, the arrears of the related annual mineral rent remain an obligation of Kilembe Mines Limited. We request the committee to allow us to write off this arrear as we process the transfer of licence to the new contractor,” Agnes Alaba, Commissioner for Geological Survey and Minerals at the ministry, told MPs.
MPs raise jobs, environment and timing concerns
Committee members did not wave the request through unchallenged. Sheema Municipality MP, Dicksons Kateshumbwa, pressed the ministry to spell out how it intends to prevent a repeat of the flooding that repeatedly disrupted operations under the mine’s previous concessionaire, Tibet-Hima, so that the incoming investor does not inherit the same problem.
Madi-Okollo District Woman MP, Joanne Okia, raised concerns about the fate of Ugandans currently employed at the mine once Kilembe Mines Limited is formally wound up.
The sharpest pushback came from Kassanda County North MP, Patrick Nsamba Oshabe, who questioned why the ministry was seeking the waiver while the winding-up process was still underway, and while Kilembe Mines Limited itself is not a party to the new production-sharing arrangement.
A concession with a troubled history
Kilembe Mines Limited, which is 99 percent government-owned, took over the mining licence after the collapse of a 25-year concession with Tibet Hima Mining Company Limited.
That deal was cancelled in 2017 after the Chinese-led consortium failed to meet its redevelopment obligations, a termination Parliament’s Committee on Environment and Natural Resources later found had been driven partly by procedural failures on the government’s own side.
Since taking back the licence, Kilembe Mines Limited has itself struggled to meet its copper-mining obligations, setting the stage for the current wind-up.
In 2025, government signed a new mineral production sharing agreement covering exploration, development, production and processing at Kilembe with a joint venture comprising Sarrai Group Ltd, Nile Fibreboard Ltd and Uganda National Mining Company Ltd.
The new consortium is expected to bring copper production back on stream by 2029.
What the waiver would mean
If approved, the Shs2.6 billion write-off would clear Kilembe Mines Limited’s books of a liability tied to a licence that has already lapsed, smoothing the administrative handover to the Sarrai-led consortium.
It would also mark the latest in a series of tax arrears waivers Parliament has granted to entities with government-linked or delayed-payment obligations, alongside similar write-offs approved for firms such as J2E Investment Corporation Ltd and M/S Nicontra Ltd.
For now, the committee has not yet ruled on the request. Its decision will determine whether Kilembe Mines Limited can be formally wound up on a clean financial slate, or whether the ministry will need to return with a fuller account of the arrears and the winding-up timeline before MPs sign off.
