Is Uganda ready for a transparent oil sector?

By Winfred Ngabiirwe

As Uganda moves towards achieving her middle income status, the National Planning Authority is capturing every single important statistic to fill the indicator column in their table. The oil, gas and mining sector is propelling Uganda to the middle income status as well as overall achievement of the country’s 2040 vision.

Having discovered oil in 2006, a number of important steps have been accomplished by the country, particularly in establishing a sound legal and policy framework. To this end, we have a national Oil and Gas policy (2008) as well as the laws on exploration through transportation to how revenues from oil will be managed. On August 30, the Ugandan government granted Tullow Oil five production licenses while Total was awarded three. This brings the number of production licenses issued to nine after Uganda had offered one to the Chinese National Offshore oil company (CNOOC).

But what one is asking is how much money Uganda has earned from the oil sector for the last 8 years or so and what that money has been used for. How much of this is kept on which account? The few times the oil-money issue has been discussed is when Uganda won a dispute 435M against Heritage Oil company and another case of $ 472 against Tullow Oil. However, after these media reports, there have not been many questions asked on why there were disputes in the first place and how Uganda can fix the loopholes so that we don’t get more of such cases in future because such cases are costly. We have also not discussed whether these monies have actually been paid and what the money have been used for.

The world bank report (2015) indicates that Uganda’s GDP currently stands at USD 26.37 billion with GDP value representing 0.04% of the world economy.  As a country, we predict GDP enhancement when oil production starts. With the issuance of nine (9) oil production licenses to oil investors, Uganda’s chances of earning from the oil sector are increasing by day.

TRANSPARENCY

What we need is a more transparent and accountable sector ensure that resource wealth is managed for the benefit of the whole nation. There are a number of initiatives such The Extractive Industries Transparency Initiative (EITI) that create more transparency in financial dealings between extractive companies and governments. This a global voluntary initiative operates on the principal that countries declare income they earn from their extractive industries and that the companies operating in those countries also declare the payments they make to host governments. It is seen as an effective tool against corruption in the extractive industry. So far 18 out of 48 member countries are from Africa and include Tanzania, DRC, Nigeria and Ghana.

In 2008, the National Oil and Gas Policy adopted by cabinet signalled the country’s intent to join EITI. Despite repeatedly expressing its willingness to join EITI, government has not taken any concrete steps towards doing so even as the country progresses towards oil production. As indicated earlier, there are laws on how oil revenues will be managed. Such laws include the Public Finance Management Act, 2015. There are other anti corruption agencies such as Office of Auditor General. However, these laws and institutions have a number of shortfalls and therefore do not wholly protect anticipated oil revenues from misuse. For example although the Public Finance Act 2015 contains a provision which requires government to publish incoming revenue receipts, it does not specify how reported receipts will be disaggregated, nor does it require companies to publicly disclose the payments that they make to the government.

Joining such an initiative would go a long way in preventing revenue mismanagement, resulting into improvements in the tax collection process. Since Tullow Oil and Total are already EITI implementing companies, Uganda government’s work in that regard is already cut out. This Kisanja Hakuna Mchezo can only be meaningful if there is improved transparency that supports economic and political stability. For oil companies ,such disclosure requirements help protect those that act within the law from being undercut by other firms that may use secrecy as a means of gaining unfair advantage. Without transparency in the oil sector, Uganda’s vision is but a dream