How Uganda's oil can be turned into a blessing

Feb 08, 2009 01:00 AM

by James Abola

When the media reported that a huge oil well had been discovered in Amuru District, a person who knows I come from that district asked how the oil can benefit a Mukiga from Kabale.
It is a valid question and it is a common question on the lips of many Ugandans too. Oil discoveries and extraction in Africa has many times provided textbook cases of how people in government fail to take advantage of development opportunities but Uganda could be different.

I cautioned the excited Mukiga that given the secrecy in which the oil exploration contracts are shrouded we cannot tell who owns the oil that has been found. I want to believe though that since the oil has been discovered in Uganda then it belongs to Ugandans.
There are a number of ways that oil can be made a blessing to Ugandans.

The first benefit is the feel good factor -- Uganda has been under the rubbish pile for a long time and it is good to be known for something positive. This was illustrated by the local leaders from Amuru who celebrated the oil discovery even though some of them did not know exactly where the oil had been found. But the feel good factor alone is not sufficient; we also need to kick in the business factor.
When Uganda's petroleum industry is fully developed it will introduce three new types of industries, namely: crude oil extraction, oil refineries and oil pipelines.

All these businesses offer employment opportunities but beyond that Uganda can have a policy requiring businesses in the oil sector to have a mix of government ownership, Ugandan public ownership and a stake for private ownership by strategic partners.
If given the choice I rather own the oil company than simply be employed by it and the government of Uganda can make this possible by requiring businesses engaging in oil extraction, refining and pipelines to float a portion of their shares to the public. Further to public ownership the oil businesses can offer corporate bonds on the Uganda Securities Exchange.

Apartfrom the direct oil businesses, the development of oil will introduce other related business opportunities. Ugandans who are too late to apply for licenses to prospect for oil should seriously look at the secondary opportunities. The oil companies in Amuru, Hoima and perhaps other areas will need contractors to supply them with massive amounts of equipment, hauling capabilities, logistical support, camps, environmental engineering, civil engineering, geotechnical assessments.
If you think these secondary opportunities are small then you need to read the story of Levi Strauss -- yes the company that sells jeans outfits. During the gold rush days in America in the 1850s Levi Strauss moved to California not to prospect for gold but to sell supplies to gold prospectors.

The third opportunity is how government will use the revenue from oil for infrastructure and social development. The history of oil in Africa, especially in Nigeria teaches us that it is wise to address social concerns in the areas where oil is produced.
In the recent O'level examination results Amuru District did not have a single female candidate who got a first grade which is the only way to acquire a qualification in oil industry disciplines like petroleum engineering and economics. Even now at the prospecting stage it is feasible to set up a social investment fund supported by the prospecting companies and this will only be done when pressure is applied on the prospector.

Mr Abola is the team leader for Akamai Global.

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