Battle for Sukulu phosphates rages on

New documents filed in the High court's civil division present some interesting insights into the fight over the phosphates deposits at Sukulu in eastern Uganda, with one of the latest petitions asking court to quash a minister’s decision. 

In its final submissions drafted by Elison Karuhanga, Nilefos’ Minerals Limited lead counsel, the company has asked court to quash the decision by Irene Muloni, the minister of Energy and Mineral Development, which denied the company a mining lease.
Nilefos argues that in denying it a mining lease Muloni misinterpreted the Mining Act 2003.

“The minister, with great respect, treated a Mining Lease Applicant as though he were the Applicant for a location License (a small-scale mining project). Even an artisanal miner is given notice and ‘reasonable period’ to remedy defects and not a mere “six days,” according to the submission.

The fight over the Sukulu project has pitted the rich Madhvani family, which owns Nilefos, against China’s Guangzhou Dong Song Energy Group Company Ltd. At the centre of the dispute is the claim that government denied Nilefos a mining licence over the mineral-rich Sukulu hills even after the company had spent money while carrying out studies on the prospects of phosphates in the area, and showed interest to carry out exploration.

Instead, government decided to sign an agreement with Guangzhou for the undertaking of the project. Karuhanga argues that the law places limits on how different licenses can be rejected depending on their stage in the mineral development cycle.

“We submit that the Minister’s interpretation of Section.43 (4) and her application of it were unfounded. She neither applied the simple and express command of Parliament nor affected the clear and obvious purpose of the Act. Her decision, therefore, was illegal,” he said in his submission. 

Nilefos contends that by issuing a mining lease to Guangzhou Dong Song, Muloni was in contempt of court since in 2014 High court judge Yasin Nyanzi issued a temporary injunction restraining government from issuing a mining lease for Sukulu. This directive was, nonetheless, ignored.

Karuhanga accuses the minister of ignoring the directive of President Museveni, who asked government to compensate residents of Sukulu and provide Nilefos with security to complete the Resettlement Action Plan [RAP] and the Environmental Impact Assessment [EIA].

“The President and the entire executive are vested by law with honour, credibility and authority. My Lord, a directive of the President is therefore reliable and bankable. It is beyond the realm of reason that a minister of government can surmise that this directive of the President is irrelevant when given under his hand and consequently addressed to third parties who then rely on it to their detriment,” Nilefos contends.

On April 8, 2013, two months before the expiry of Nilefos’ retention license, then attorney general, Peter Nyombi, gave his opinion on the matter. He is said to have recognized the rights of the tenants as customary owners and advised Muloni to prepare a tripartite agreement, which would allow Nilefos to obtain surface rights and recognize the rights of the community as customary owners.

Karuhanga further asserts that there is enough evidence to show that Guangzhou, through ORLDAO, its subsidiary, paid $1.2m to “tip local officials” in order to obtain surface rights at the expense of Nilefos.

It is not clear what Guangzhou says of this allegation. However, through LIGOMARC advocates, Guangzhou says Nilefos’ application seeking a mining lease was rejected by the commissioner because it was submitted late and had errors.

“The record is very clear that the applicant did not have surface rights, EIA, RAP. Accordingly, it could not satisfy the condition of granting a mining lease,” Guangzhou states.

Nilefos believes Muloni, together with the Permanent Secretary, Fred Kabagambe Kaliisa, was biased in the manner in which the whole case was handled.

This is, however, where Nyombi differed. He said Muloni never committed any illegality in rejecting Nilefos’ mining application since Section 188 of the Mining Act clothes her with legislative powers to entertain administrative reviews from decisions of the commissioner.

The attorney general is of the view that the case should be thrown out since numerous companies have made it a norm to seek judicial intervention to halt multi-billion projects with great potential for developing Uganda’s economy purely on the basis that they have not been successful in their ambitions.

“My lord, the applicant [Nilefos] should not be allowed to stall a project of great economic importance only because of its sense of entitlement and belief it should be granted mineral rights over Sukulu area,” the attorney general argues.

High court civil division Justice Stephen Musota is yet to give the date for judgment. After government offered Guangzhou the thumbs-up to carry out the project, Museveni launched it in August 2014. The Chinese firm said it would invest more than $600m in the project.

They said the project would not only create more than 1,000 jobs but also earn Uganda Shs 1.6 trillion in taxes annually. A few days before last Christmas, government signed an agreement with Guangzhou, almost effectively ending Nilefos’ ambition to undertake the project. Now, government is looking ahead of what is to become of Sukulu.

According to government, when completed, the project would include a phosphate fertilizer plant with a production capacity of at least 300,000 tonnes per annum. There will be a steel mill with a capacity of not less than 300,000 tonnes per year. A power plant of 12 megawatts will also be set up and a sulphuric acid plant, with a capacity of 400,000 tonnes per year, will also be established.


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