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

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

UMEME A RECOGNISED SUCCESS BUT …

  Recently the World Bank did a survey of the power utilities on the continent. Of the 39 utilities surveyed only two, in Uganda – Umeme and in Seychelles, were able to cover their operating costs and capital expenditures – maintenance and expansion of the grid. The report went on to point out that only 19 or about half of the surveyed utilities were able to meet their everyday costs like salaries. Essentially most of our power utilities on the continent are technically bankrupt. This has far reaching ramifications for the industry as a whole. When you, the client, pays your bill, Umeme then passes money up the line to pay the transmission and generation companies. If Umeme does not collect the revenues due to it or does not price the power at an appropriate rate, the pain will be felt up and down the sector. The transmission company would not be able to maintain and extend its network and the generation company would not be able to generate efficiently or build new
Post a Comment
Read more

GIVE OUR TRAFFIC POLICE A CHANCE

Last week during an investor interaction   Kampala Capital City Authority (KCCA) officials called on police to stop overriding traffic lights while directing traffic. KCCA argues that the traffic lights are large investment and it makes no sense for police to countermand them. In a classic case of “The importance of the river was not known till it dried up” on Friday the traffic police desisted from directing cars at the traffic lights leading to the worst traffic snarl-up in the city’s history. People were stuck in traffic jams around the city for hours and long into the night. Maybe it was the unhappy coincidence of the traditional Friday traffic and pre-Christmas excitement but without the traffic police directing traffic it was a mess. They made their point. It of course points to the bigger issue of a revamping of Kampala’s road network, which has remained   largely the same since independence but with an exponential increase in cars in the last three decades.
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

LET THE UN BASE SAGA BE A LESSON TO US

I have watched with much interest as the issues of the UN base in Entebbe have played out in recent days. At the beginning of the month it was reported that the UN secretary general Antonio Guterres, had signed off on a new structure, The Global Services Delivery model, that it was suggested would see Uganda losing the Regional Service Center in Entebbe (RCSE) to Nairobi. Under the new model the UN would have three key centers in Hungary, Kenya and Mexico. In response to a letter by President Yoweri Museveni, Guterres assured him that the RCSE would remain in Entebbe. Though some functions will be relocated to Nairobi in the short term, in the middle to long term he sees the role of RCSE expanding and growing in importance. The new development takes effect from 1 st July this year. According to their website the RCSE serves more than 20,000 personnel on the continent, does administration and communications support for thousands more around the world and has an
Post a Comment
Read more

REAL ESTATE DEVELOPMENT CAN BE KEY IN OUR TRANSFORMATION

I have been around long enough to see real estate development, or maldevelopment, lead to the sprawl that is Kampala today. From atop the Skyz Hotel in Naguru, one can see as far as Mukono to the east, Entebbe to the South and Bombo to the north. At night the lights from traffic, streetlights and from residences makes it a sight to behold. But we were here in 1986 when Kampala’s outer limits were Kibuye roundabout, Rubaga, Wandegeya, Ntinda and Nakawa. The NRM did the smart thing and removed restrictions – rent controls, on real estate and spawned a real estate boom that has led to the dramatic expansion of the capital city’s boundaries to what they are today. During the same period the government’s National Housing & Construction Company (NHCC) has not kept pace with private developers, be they individuals or companies developing a few dozen units. "Official statistics suggest that there is a 550,000 deficit of acceptable quality housing in Uganda of
Post a Comment
Read more

CRYPTOCURRENCIES ARE COMING, ARE WE READY?

In the last few decades in Uganda we have seen the currency become so worthless a large part of the population resorted to barter trade – exchanging goods for goods. Then the currency stabilized and we enjoyed having money in our pockets. Our money habits continue to evolve. Increasingly we don’t need physical cash to do our business.  Debit cards, mobile money and e-banking services are pushing us fast towards a cashless society. And now we are moving into a more intangible space – cryptocurrency. "As I understand them these are digital currencies, generated using encryption techniques, that also verify fund transfers. Also that no central bank is involved in creating or regulating these currencies... The more widely known cryptocurrency, Bitcoin was launched in July 2010 and its fate has been at best back ground noise to many of us, if at all. it has registered some limited attention but mainly for   speculative gains. In recent years it has seen jumps
Post a Comment
Read more