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.