KAMPALA – Over the years, it has been told that when Che Guevara was captured in the jungles of Bolivia, after nearly three years of pursuit, he realised that he didn’t stand a chance against his captors. This induced him to brassily sputter to the soldier ordered to kill him: “I know you have come to kill me”. “Shoot, coward…!” And those are believed to be his last words.
As a native who has been cornered by the system, and designedly shut out of the oil bonanza, I speak for many when I channel Che Guevara’s bluntness; in this regard, to the custodians of the resource [oil] when I say, “We’re screwed!”
For all that the government says, or is going to say; it’s my conviction that Uganda’s oil expedition is a ‘same letter different cast’ blueprint of how Nigeria and Venezuela’s narratives have been.
At the signing of the Final Investment Decision (FID) on 1st February 2022 in Kampala by Uganda, Tanzania; and the International Oil Companies (IOCs) — French Totalenergies, and Chinese CNOOC, pleasant speeches were made by all parties promising a Shangri-la of wealth and prosperity.
This brought back strong feelings of déjà vu in retrospect to Idi Amin’s speech in Kololo on 26th January 1971 after he had mounted a successful coup when he promised, “All foreign countries shouldn’t fear…” “We shall maintain good relations with all countries throughout the world”. Looking back, we know how that went.
The signing of the FID was preceded by gibberish utterances by the fat cats, “The FID will facilitate GDP growth by 22%…” jabbered the Minister of Energy and Mineral Development Ruth Nankabirwa.
What the two events [FID and Amin’s kick-off speech] have in common is that they’re both going to have a bitter lasting effect on Uganda because of their deceptiveness.
From the get-go, it’s evident that the potential of the resource has been exaggerated. The revenues, jobs, cheap fuel, infrastructure to be savoured accruing to oil, are all a mirage.
Nigeria, Africa’s biggest economy by GDP, also doubling as Africa’s biggest oil producer, has been producing oil before Uganda got her independence in 1962. The first shipment of oil out of Nigeria for export was in 1958.
It [Nigeria] produces over 1.8 million barrels of oil per day, and has four refineries with another on the way, and six crude types with the finest crude— bonny light. Bonny light trades at a higher price than the Brent crude on the energy markets on any given day.
Even with Nigeria’s impressive oil resume, it’s still taunted by poverty [nearly half its population lives on less than $2 a day], unemployment [33% as of December 2020, youth unemployment —53.4%], income inequality, and the like.
Fuel scarcity still persists in the country and the cost of fuel is high. It’s not unusual to spot long queues at fuel stations.
The government has put in place fuel subsidies to reduce the cost of fuel but they [subsidies] have instead had an adverse effect on oil revenues in the country.
So, Nigeria is skewed towards taking the advice of the World Bank and IMF by strongly considering the removal of oil subsidies because they cost billions of dollars [~31.5 billion between 2006–2020]. Money that could have been spent on an underfunded health sector. Economists anticipate the removal of these subsidies this year.
Adulterated as Nigeria’s leadership is, it has shown signs of accountability. For instance: The former Central Bank Governor Nigeria — Lamido Sanusi blew the whistle on a $20 billion oil scandal and it ultimately led to his suspension.
Likewise, former President Goodluck Jonathan and his oil Minister Alison Madueke have been indicted for bribery and corruption.
Uganda isn’t big on accountability/answerability and that means our situation is going to be worse than Nigeria’s.
The moral of the story is, whoever said oil production is a victory, needs to specify — pyrrhic victory.
In light of Uganda, its crude is sweet and waxy; meaning it will go for less on the energy markets because it’s coagulated, and an expense of heating it up to keep it liquid has got to be incurred by the buyer, making it even less attractive. Volatile energy markets and the net-zero push are going to diminish its demand more.
In short, expectations should be managed. I can assure all the oil enthusiasts that even with the production of oil, Uganda will undoubtedly import fuel in copious amounts, and its local price will not go down because the government won’t afford to subsidize fuel for Ugandans since it’s a costly and unsustainable venture. At best, oil is going to create an entitled oligarchy in the country.
Specifically, I have an axe to grind with the board awarding the oil contracts and Executive Director, Petroleum Authority of Uganda [PAU] Ernest Rubondo who at the authority’s annual briefing on 13th January 2022, announced that the contracts had been given to Ugandan companies. He went on to list GCC services as one of them.
GCC services is not Ugandan but an Emirates company headquartered in Dubai, their website confirms this. This is Uganda’s maiden oil endeavour; therefore, Ugandan companies should get dibs on these contracts. Why would a contract to provide catering services and camping facilities be outsourced to a foreign company?
It’s despicable to think that after 60 years of independence, no local company in Uganda and its partner Tanzania can take on this mantle! If the shoe was on the other foot, the Emiratis wouldn’t return the favour [they haven’t in the past]. What happened to all the talk of local content?
And then there’s the reality that natives are going to be limited to being roustabouts. The job requirements of the IOC’s are comical: ‘Experience of ten to fifteen years is required for the fleshy roles’; and it has got to be in the oil and gas industry.
Now, Uganda is just setting up an energy sector; where are the natives supposed to get this experience from, well knowing that energy sector roles are always preserved for nationals the world over?
It’s morally befitting for the IOC’s to tone down on the job requirements, just like the Government of Uganda compromised on the capital gains tax claim; and ‘take one for the team’ by training locals for the supervisory roles.
This will in no way affect the quality of the work but buy the IOC’s goodwill; Lord knows in the energy business goodwill is everything and can be a valuable currency in the face of future uncertainties. And the oil and gas industry is made of those.
Otherwise, the oil companies are going to fly in expatriates to take up these roles at the expense of willing and able countrymen. And valuable neighbourliness.
For all the fanfare the FID has been accorded, it’s shameful that labour laws have not been highlighted; in consequence, leaving the plight of workers in jeopardy.
I was once privy to an incident involving one of the companies that has been recontracted by PAU concerning workers and their pay. The company in question made their workers sign contracts but went back on their word and tried to short-change their workers of their salaries.
This they did by paying them less than agreed. The workers retaliated by threatening a strike and confiscating company equipment. Only then, were they fully paid.
I am appalled that the parties awarding these contracts didn’t do their due diligence and have chosen to let bygones…
It’s an open secret that many workers sign contracts, but on breaches, are afraid to exercise their rights or take legal action because they are timid and desperate. Companies prey on this.
Right now, it’s only ethical and humanitarian to accord the locals full service, advantage and grace; because when the curtain falls, it’ll be them left behind to deal with the aftereffects of oil production — toxic waste, contaminated waters; harsh climate, genetic altering defects; and so forth.
Personally, as one who has been denied entry into the El Dorado of oil: I’m salty as a jilted lover; and wish nothing but misfortune on the whole Ugandan oil adventure.
Mark Kidamba is an Independent Financial/Investment Analyst.