President Museveni last week ordered for the suspension of Uganda Revenue Authority (URA) officials for “frustrating” Guangzhou Dongsong Energy Group Limited officials by reportedly refusing to clear their machinery at customs.
]Dongsong is the Chinese company developing the Osukulu industrial complex in Tororo District.
The $620m (Shs2.2 trillion) project will include a fertiliser manufacturing plant, expected to be commissioned later this year, and a steel plant to be added by next July.
In an August 14 letter to Finance minister Matia Kasaija, President Museveni described Dongsong as a “serious investor” who intends “to turn the waste of the steel factory into construction bricks, and also wants to import sewing machines for sealing the bags of fertlisers”.
“The useless URA crowd would have nothing of this,” Mr Museveni wrote.
Attack on URA
He specifically singled out one URA staff [Geoffrey] Olaka whom he ordered to be suspended forthwith, together with other staff found to be culpable.
“The URA staff, either out of ignorance, malice or corruption are tossing our investors endlessly—in this case for the whole of July 2018. Meanwhile, the machinery blocked at Mombasa is incurring demurrage charge,” the President noted. “Anybody who does not understand the mission of industrialising and modernising Uganda must leave URA.”
URA’s commissioner for public and corporate affairs Vincent Seruma acknowledged receipt of the letter and said “the matter is being handled administratively”.
Sources familiar with the matter told this newspaper that the President’s letter, although “somewhat misguided”, followed meeting at State House Entebbe on August 10 with Dongsong president LV Weidong who laid bare the company’s frustrations of getting into the country a consignment of machinery for the proposed fertiliser and steel plants.
Mr Weidong was in the country on a three-day visit for the launch of the Uganda-China Guangdong free zone where the Osukulu carbonatite complex in Tororo is located.
URA officials, according to correspondences and insider accounts, had hard pressed Dongsong to pay customs duties for the machinery to the tune of Shs4.5 billion.
However, Dongsong’s lawyers ABMAK Associates maintained that the company in 2014 entered into a mineral agreement with government, which provided for tax exemption.
In one July 24 correspondence to Finance ministry permanent secretary Keith Muhakanizi, ABMAK lawyers contended that accordingly,
“government undertook to engage other East African Community (EAC) partner states with the view to causing amendment to the 15th schedule of the EAC Customs Management Act, 2004, to exempt from import duty all inputs for direct and exclusive use in mining and mineral processing operations of the Sukulu project.”
Dongsong’s lawyers also alluded to President Museveni’s earlier directive to the Finance minister in a December 12 2016 letter “to take steps to procure the exemptions of inputs from customs duties.”
About the law
The amendments to the EAC Customs Management Act are yet to be effected. The act came into force in 2004 and has since been amended twice.
As a result, URA officials, specifically Mr Okaka, in the various correspondences had only offered to clear a fraction of the of the machinery provided for under the law—in this case machinery and spare parts used in mining imported by a licensed mining company—and not the full consignment, which also includes automatic block making machines, air compressors, and sewing machines.
On August 10, URA commissioner for customs Dickens Kateshumbwa had offered to clear the machinery “provisionally” but indicated,
“note that customs will conclude on the final tax treatment on the matter after completion of your application for a facility availed to manufacturers under the free zone.”