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

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

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

THE GOOD THAT CAN COME OF THE NEW UGANDA AIRLINES

I have fond memories of the Old Uganda Airlines. As a secondary school child, I took advantage of ticket concessions (my mother worked for Uganda Airlines) to fly to the UK to buy clothes and other goods for sale to my friends at school. These trips were a great adventure and served as a good foundation for the businessman I am today. It has been reported that the first two planes of the revived Uganda Airlines will be landing in the country within the month. The finance ministry has been presenting to parliament their needs to pay off deposits on the first two of six planes they are to take possession of in coming months. The project has its equal share of supporters and critics. I am a qualified supporter of the project. In business nothing is certain. We deal in probabilities. When getting into a venture we often must weigh the risks versus the returns of a project. If the risk of failure outweighs the potential profit we stay away, otherwise you are gambling...
Post a Comment
Read more

ARE WE HELPLESS TO DO ANYTHING ABOUT THE CARNAGE ON OUR ROADS?

Recently there was a horrific crash between a passenger bus and sand laden Isuzu truck on the Masaka-Kampala highway. To look at the pictures of the aftermath it is a miracle that only two were killed and 20 injured in the accident, which it is reported was a head-on collision between the two vehicles. We don’t go a week without news of a major accident on our trunk roads. I suspect that a combination of poorly maintained vehicles, improperly trained or inexperienced drivers, driving at break neck speeds are to blame. "A few months ago, there was a suggestion that the new paved roads were not properly designed and therefore causing the accidents, but I think that is a case of poor workmen blaming their tools.... If one was to buy this argument, what about the argument that we had fewer accidents when our roads were pot holed and it would take whole days travelling journeys that now take a few hours? So, we should we go back to our potholed roads? "Accord...
Post a Comment
Read more

A STITCH IN TIME

Last week the Bank of Uganda raised its key Central Bank Rate (CBR) a percentage point to ten percent from nine percent. This was the first increase in more than a year, a move prompted by BOU’s projection that price increases coming around the corner. Increasing oil prices, a weaker shilling and new taxes on mobile money services were cited as reason for this anticipated increase. We know that in the last year or so there has been a cash squeeze, money has been hard to come by. While the economy has been growing this has not been spread around evenly. It was hoped that if the economy can keep growing we can all begin to feel the joy. The Bank of Uganda has helped on this front by lowering its CBR from a high of 21 percent about seven years ago when inflation hit record levels. This allowed more borrowing by the private sector which has helped keep our economy ticking. But just when the economy was beginning to gain traction BOU has slammed on the brakes. We may ...
Post a Comment
Read more

LET US GIVE SMEs A CHANCE

Something is wrong when most of Ugandan business is shut out of the government procurement process. This is happening in Uganda today. Micro-, Small & Medium Enterprises (MSMEs) account for 90 percent of the private sector. These account for 65 percent of national output (GDP). On the other hand 75 percent of our now sh32trillion national budget is earmarked for public procurement but the MSMEs’ share of this action is only 15 percent. It does not take a rocket scientist to see that such numbers are behind the huge inequalities in our society and why the majority of us do not have hope of a better and brighter future. Thankfully this is not an insurmountable problem. If MSMEs had access to more opportunities accruing from the national budget the benefits to themselves and to the nation as a whole would be huge. These would include increased production which would lead to job creation, raise incomes at household levels, leading to reduced income ine...
Post a Comment
Read more

THE MUKWANO I KNEW

We have lost the greatest Ugandan entrepreneur of our time, Mr Amirali Karmali, more popularly known as Mzee Mukwano. I have known Mzee Mukwano for more than 40 years and most of what I am today is due to him. And I am not alone. "He has helped countless people through school – as he did me. Helped countless more in business – as he did me. And he has been a steadfast friend and source of support to countless more – as he was to me.... I first met Mukwano around about 1977. My mother was the secretary for the chief of operations at Uganda Airlines, a man I knew only as Hamid. Mukwano had come to charter the Uganda Airlines’ Hercules plane and I happened to be around the office then. He was a short man, an unassuming man, but clearly a serious businessman who would charter the plane to bring in goods that were in high demand here. He run a popular whole sale shop in Nakasero – Egesa Commercial Agencies, a beehive of activity and the go-to place for anythin...
Post a Comment
Read more