Gloria Mugambe, Head of Uganda EITI’s national secretariat, outlines the priorities for EITI implementation and reflects on the role of transparency in Uganda’s developing extractive sector.
Since the first announcement of Uganda’s oil discovery in 2006, the public’s perception of the sector has fluctuated from excitement, to expectation, impatience, cynicism and finally resigned acceptance that expected gains from oil will not be realised soon. Yet, recent progress indicates that a decision on the production and extraction of Uganda’s oil may be drawing closer.
Fast-forward fourteen years, and after long-standing commitment, Uganda became the 26th African country to join the EITI in August 2020. The news was welcomed by a wide spectrum of Ugandans, including government officials and civil society, who had championed the EITI cause for many years. Many described the move as “long overdue”.
The Minister of Finance, Planning and Economic Development, Hon. Matia Kasaija, addressing members of Uganda’s MSG at their eighth meeting on 25 September 2020. Source: Ministry of Finance, Planning and Economic Development, Press Unit.
Soon after Uganda’s accession to the EITI, Hon. Kasaija, Uganda’s Minister of Finance, Planning and Economic Development, emphasised that EITI implementation in Uganda would help to identify and address existing challenges in the oil, gas and mining sectors.
He also stated that joining the EITI comes at an opportune time for Uganda. The Final Investment Decision (FID) on the country’s oil project is expected by June 2021, which will spur significant activity in Uganda’s petroleum sector.
Petroleum and mineral resource development in Uganda
Uganda is an emerging oil producer. The country’s petroleum reserves are currently estimated at 6.5 billion barrels of oil, of which 1.4 to 1.7 billion barrels are projected to be recoverable.
In addition to engaging in commercial crude oil production, the government of Uganda intends to build a refinery with the capacity to process 30,000 to 60,000 barrels of oil per day. It also plans to construct a 1,445 km pipeline through Tanzania for its export. In September 2020, the government signed an agreement with Total E&P Uganda for the East African Crude Oil Pipeline (EACOP) project.
Uganda’s oil is located in the west of the country, in the Albertine Graben of the Western Rift Valley. Source: Wikimedia Commons.
Uganda is also endowed with minerals of economic interest including gold, copper, energy minerals and gemstones. Construction minerals such as sand, clay and limestone have also become significant contributors to economic growth. These resource have contributed to increased Foreign Direct Investment (FDI), rising from USD 5 million in 2003 to over USD 800 million in 2017.
The significance of EITI implementation for Uganda
Implementing the EITI is important for Uganda, as the sector is poised for growth. In his speech in September, Minister Kasaija noted that EITI membership would enhance transparency and streamline oversight in the mining sector. Its importance to the petroleum sector would be in its role in the publication and public disclosure of contracts and revenues.
Membership of the EITI can improve the investment climate and strengthen tax collection. Since the discovery of oil in Uganda, the government has had to grapple with lengthy negotiations with oil companies, particularly on taxes. It is expected that the EITI will build trust among sector stakeholders by facilitating open and honest dialogue on the challenges and opportunities within the sector. It will also strengthen revenue management and accountability.
Informing public debate on the future of the sector
There is considerable public speculation and scepticism regarding petroleum development. Ugandans wish to understand when oil will be sold to international markets, what revenues will accrue to government, what terms have been agreed between government and international oil companies, and how revenues will be accounted for and used.
The transparency objective of Uganda EITI’s work plan is therefore central to uncovering details on the operation of the extractive sector, including contracts, licenses and production sharing agreements. The publication of this information will address mistrust and fears that natural resources will only benefit a few privileged Ugandans.
The EITI will also provide information that can improve revenue management and support collaboration among government agencies in managing and overseeing the extractive revenues. The Uganda Multi-Stakeholder Group will publish information relating to revenue collection and allocation and stakeholders will be able to engage in an informed and participatory manner. Institutional stakeholders have acknowledged the potential for poor inter-agency co-ordination and limited knowledge of the industry to hinder efforts to maximise extractive revenues.
Challenges and opportunities ahead
Uganda joins the EITI at an exciting and challenging time. The full impact of COVID-19 on the sector is still unclear. Market oversupply and concerns around climate change have also brought to the fore concerns around the energy transition. Uganda EITI will look to inform national discussions around these and other issues.
Uganda’s first EITI report is expected on 18 February 2022.The Ugandan MSG has embarked on implementation of its two-year work plan to June 2022. The work plan envisages activities that will help provide the country with a clear understanding of the status of the extractive sector, and how it can be improved. These include a study of the legal framework and fiscal regime for both mining and petroleum in Uganda, and the development of a policy and plan for contract and license disclosure.
The Uganda Multi-Stakeholder Group also intends to assess the revenue contribution of artisanal and small-scale mining (ASM), and to document the gender impacts of extractives with a view of improving gender participation and outcomes for women in the sector.
The challenges ahead are substantial. But EITI implementation presents an opportunity for Uganda do the right thing in the right way when it comes to the management of our natural resources. Some may choose to see the glass as half empty. I see it as half full.