Skip to main content

OIL: WE NEED TO GET OUR ACT TOGETHER… YESTERDAY


(Published February, 2017)

We are on the cusp of an important period in the history of this country and whether we can derive maximum advantage from this will depend on our capacity to put aside petty rivalries and come together as the business community.

Over the next three years at least $20b or almost the size of the entire economy will be spent in readying us for first oil. This money will be spent on building infrastructure in the oil bearing areas of western Uganda, on our side of the oil pipeline to the Tanzanian port of Tanga, on the oil refinery and any number of things that will be needed to support oil production.

About $3b (sh11trillion) was spent during the exploration phase of which less than three in every ten shillings  or about sh3trillion went to local contractors and suppliers. But this happened over eight years.

This despite our local disorganisation and ignorance of the industry and its dynamics.

However we should not be content with taking pennies off the table. You do not go to the river to fetch water with a teaspoon.

The question then becomes how do we prepare to take advantage?

Not to belabour the point but the exploitation of Uganda’s oil and gas resource is going to be the biggest investment opportunity in this country’s history and for a long time to come.

The exploitation phase should have served as a rude awakening of how deficient we are in capacity to play a major role in the sector.

Just as an example preliminary estimates are that we will need at least 2,000 trucks of certain specification to service preparatory work. An audit of our internal capacity showed that we could only marshal a tenth of the required number as a country, trucks which meet the industry’s health and safety standards. As if that is not each truck will require at least a three man crew, drivers with international driving certification. Our local numbers in term of drivers was worse than our deficiency in vehicles.

These shortfalls show up at every level of engagement that we would be interested in in a meaningful way.

The Private Sector Foundation of Uganda (PSFU) of which I am chairman has been studying this issue long and hard.

We are glad that the basic legal framework for promotion of local content has been embedded in the law and the regulations have been drafted pending discussion and approval. They are not perfect and maybe even fall short of what we want but they are a good start, something we can work with.

The real challenge as stated above is our lack of capacity.

In that direction PSFU is looking to rally all potential suppliers and contractors, build a data base which beyond just identifying them will among other things document their capacities. The database will also outline what the members are looking for – equity partners, debt financing, joint ventures or any number of permutations of their interest in the sector.

One thing we have learnt is that for all our businessmen it cannot be business as usual. We need to regularise and formalise our business if we are to supply the sector, work in the sector or even be attractive to potential partners.

To help in that direction too we have funds under the Businesses Development Services (BUDS) that can help our business improve their internal capacities, sponsor the building of stronger industry networks and facilitate lobbying in order for us to rise to the next level.

This effort will be useful not only in establishing this data base but in strengthening our ties as private sector players.

This is important. We should not take it for granted because the oil is in our country we will get a fair shake from the established industry players. Billions of dollars have been committed to this project and plans are being drawn up to exploit our oil resources with or without our meaningful participation.

We know that government has agreed on very favourable terms for the country in the Production Sharing Agreement (PSA). There is more they can do but they may need some nudging to strengthen local content laws and regulations.

That is government. We too have a responsibility to maximise how much of these funds stay within our borders.

It will take hard work, a changing of our business culture and a willingness to work together to even stand a chance. But this what we have to do to seat at the table. The truth is time is not on our side and the faster we get going the better.

Labels:

Comments

Post a Comment

Popular posts from this blog

HOW TO RECOGNISE A PONZI AND NOT FALL VICTIM

Another Ponzi scheme has come crashing down around the ears of hundreds of “investors”. Unsurprisingly. In its recent reincarnation poor Ugandans were lured into a scheme where they bought computer tablets. This entitled them to a monthly pay off, $100, and a Christmas bonus for their children. In this case the unsuspecting investors -cum -victims were being given a share certificate. Meaning you accept to take the part of the risk in this project. Which was inadvertently reducing their burden of risk and liability for the issuing company. I leave that area to smart lawyers to handle.   As is always the case with these things, it’s not quite clear where the pay-out will come from. A common characteristic of these schemes is that you might get initial payments before you starting missing a few and the stories begin. The promoters of these schemes or scams often use the money from the latest entrants to pay the older “investors” until one of two things happen. Either...
Post a Comment
Read more

BEWARE OF THE CON MAN

I read with a mixture of horror and sympathy for the victims of the latest Ponzi scheme gone bad in town. Last week a company, Global Cryptocurrencies Ltd, collapsed and along with it went billions of shillings, by police estimates, of their clients’ money. The company working out of an obscure office on Namirembe road, managed to rope in all manner of clients with the promise of magical returns – 40% a week! I have been in business for most of my life, if I could be guaranteed 40% week I would sell everything I own and jump in with both feet. Or maybe not. And this is why. They say if anything is too good to be true, it is. If you can get an annual return of 40% on your investment you will be doing extremely well. So if you put in a million shillings in your business and walk away at the end of the year with sh400,000 after taxes you have found a good thing, and I would like to be your friend. I have seen my share of scam artists and con men. Below are my fast an...
Post a Comment
Read more

KEEP UP PRESSURE ON CORRUPTION

There has been a flurry of activity surrounding corruption in recent weeks, with a few public officials caught red handed taking bribes. The public deprived of services because of a few greedy individuals are understandably gleeful.  However they are also those who are a bit sceptical, wondering whether this campaign will last or will peter out along the way. It is heartening to see that President Yoweri Museveni has put his full weight behind the latest attempt and provides a positive signal to all parties concerned. He should be supported by every well-meaning Ugandan so that this drive does not fizzle out in a few weeks. I choose to be optimistic about this anti-corruption drive, because rolling back the endemic that corruption has become, is one of the first steps we need to take towards attaining middle income status as a nation and for any other meaningful development we hope to see in the future. We see it in our daily lives. Beyond the moralit...
Post a Comment
Read more

THE KEYS TO OUR HEALTH ARE WITHIN OUR REACH

I prefer to speak about business. But it is obvious to me as it should be to everybody, that the fruits of business can’t be enjoyed without good health. As we progress in age we need to take care of our health more than before, focus on prevention because our bodies can no longer bounce back from illness as fast as they used to. The other day I happened upon a Facebook video from Dr Luke Coutinho, an Indian doctor who treats cancer patients. He made a wonderful video that moved me -- “Four things people with cancer have in common.” Look it up. Coutinho, in the video said that when he looked at the data from hundreds of patients, from all over the world, that had been treated at his facility he found four commonalities. The first one he said was chronic constipation. He explained that constipation, infrequent bowel movement, means the body is retaining toxins that should not be there. These toxins then find their way back into our bodies and provide the environment fo...
Post a Comment
Read more

OIL IS COMING BUT LET US NOT FORGET OUR GOLD

The country is operating on a time table that first oil will be seen in 2020. There is a lot of frenetic activity around building supporting infrastructure, getting investment approvals, ensuring local participation and any number of other things to ensure readiness the moment the oil starts gushing down the pipeline to the coast. And so we should. I was intrigued the other day to read in the Kenyan press how Kisumu County, just across Lake Victoria from us, has set upon an ambitious project to ensure egg and poultry meat self-sufficiency for the county within the next few years. Under the plan Kisumu County will train 100 farmers every month over the 12 month pilot period. The intended aim is to be able to satisfy the county’s demand for 25,000 broilers and 75,000 eggs daily. Whereas I would prefer that this was private sector driven deal, I like this plan for a number of reasons not least of all that it shows leadership by the county and secondly, it relies o...
Post a Comment
Read more

SPORTS AS AN ANALOGY FOR BUSINESS

Like everybody else I know, my spirit was lifted by the success of our athletes at the World Athletics Championships last week. The diminutive Halima Nakaayi showed the heart of a lion, sprinting over the last 100m of the women’s 800m event to snatch victory from a more favoured American runner. It was so uplifting to watch. Subsequent stories about the challenges she has had to overcome to get where she is now were testament to the determination of the woman. Joshua Cheptegei’s victory, while no less inspiring, had a different quality to it. Cheptegei was the man to watch going into the event. He won previously at the Commonwealth Games last year and the in the just concluded Golden League. He was a silver medalist in the 10,000m at the last World Championships in London, pipped to the tape by the now retired Mo Farah. Cheptgei still had to battle the Kenyans and the Ethiopians all the way. But as a favourite he lived up to expectations, which sometimes is more diffic...
Post a Comment
Read more

FINANCING OUR ENTREPRENEURS, A CHALLENGE WE CANNOT IGNORE

In recent weeks the issues of financing for business has been in the news, in one form or the other. We have seen the challenge a past minister is facing with having to hang onto his home. The case is in court, so we can’t discuss its merits and demerits, just to say he may have fallen prey to some predatory practices, with the lender skirting dangerously on the edge of the law. Across the border in Kenya a cap on bank lending rates has been repealed. Three years ago Kenya’s parliament passed a law restricting lending rates to two percentage points above the rate at which the central bank lent money. In reaction banks pulled back their lending to businesses, depressing the economy and prompting the reversal. So now banks can “properly” price their loans, often to the discomfort of small and medium sized businesses. The two incidents are related and speak to the availability and cost of credit. In my business career I have benefitted immensely from credit. It is next...
Post a Comment
Read more