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Uganda: Oil Governance and sober heads

  • SOURCE: | qwesa2big
  • Analysis

    As the year came to a close, the acrimonious debate over Uganda’s nascent oil industry did not appear to show any sign of abetting. President Yoweri Museveni’s tongue lashing against some MPs, NGOs, and “some agents of foreign interests” whom he accused of trying to derail the oil production programme in the country, capped a tumultuous and eventful year for the oil sector.

    Undoubtedly, the rancor particularly between civil society organizations and Parliament on one hand and President Museveni and the executive on the other, is expected to be extended into the New Year. The one unfortunate failing in the whole oil debate over the year was that of each side taking extreme positions at the expense of building consensus.

    The President’s obviously extreme stance was evident when he accused those opposing him on the direction the oil industry is taking of being “agents of foreign interests.” With suggestions of possible bribery, Museveni poured scorn on the Parliamentary Forum on Oil and gGas (PFOG) – a bipartisan group of MPs lobbying for transparency in the oil sector, which he described as “confused” and “spreading lies acting on behalf of external interests.”

    Neither did his tart attacks spare Kampala Bishop Dr Zac Niringiye and NGOs such as the Advocates Coalition for Development and Environment (ACODE), which have been at the forefront of championing the campaign for transparency and accountability in the fledgling oil sector.

    On the other hand, those on the opposite side have claimed that President Museveni and his government “cannot be trusted” when it comes to oil issues because he has consistently been found wanting in matters of public accountability. To an uninterested observer, it is absolutely counterproductive for the government to claim that everyone who is not on its side “is a negative force being sponsored by foreign interests.” On the other hand, it is a little imprudent for the critics to say that they “don’t trust Museveni” when it comes to the oil resources.

    As a matter of fact and drawing on examples from elsewhere, nobody can be trusted when it comes to the extractive industry. Industry analysts say foolproof and watertight checks and balances are extremely crucial when it comes to the oil industry. Otherwise, one would only be setting the stage for the resource to be a “curse.”

    Already, with high levels of animosity, it appears like the negative description of oil as “a curse” is becoming a reality long before the country even sells one barrel of the oil. Never before under Museveni’s 26-year tenure has there been such acrimony, disharmony and mistrust between Parliament, the Executive and civil society actors like we have seen in the past 12 months. Yet, examples from other countries show that when it comes to the extractive industry, the assumption that ‘if one is not on our side then one is against us’ is the beginning of social upheaval.

    Consensus building

    Where countries have advanced because of their natural resources, the various antagonists have built consensus by making concessions and building trust. The opposite has happened in countries – and they are the majority – where the extractive industries have engendered social conflicts, war, political upheaval and environmental degradation. In the extractive industry, one stakeholder can’t win all the time. There have to be concessions and consensus.

    But the government must also be cognizant of the fact that oil has brought about misery, dictatorship, corruption, ethnic conflicts, massive and irreparable environmental degradation and even loss of lives in some countries. In Africa, almost every one of the oil-producing African countries whose oil industry is older than 10 years has experienced political upheaval, civil strife and the so-called ‘Dutch Disease’ – a paradoxical situation whereby the natural resources end up becoming an economic setback to a country.

    President Museveni should accept that these are legitimate concerns for any serious citizen, legislator or civil society actor who cares about the welfare of citizens and the country at large. Long after Museveni and his government have gone, everyone’s children and grand-children – including his own – will suffer from the consequences of any bad decisions that could be made now. It’s therefore imprudent of us to assume that we are immune from the risks associated with being an oil producing country.

    Luckily, for us, we are not going to ‘re-invent the wheel’ as it were because there are many countries that have gone ahead of us and which have important lessons for us to learn from.

    Lessons from Ghana

    Ghana, whose oil industry is almost of the same age like Uganda, has important lessons for us and more so since their legal and institutional frameworks were designed in view of lessons learnt from the mistakes of other countries that have suffered the effects of the ‘resource curse’ for decades. While oil in Ghana was discovered in commercial quantities in 2007 a year later than Uganda, production started in December 2010. With about 120,000 barrels per day of crude oil from its Jubilee field, total oil revenue receipts in 2012 topped about $340 million, and about $900m since commercial oil production started in 2010.

    In devising its legal and institutional frameworks, Ghana’s policy makers borrowed heavily from best practices in various countries such as Norway, Trinidad and Tobago and Botswana  are countries that have developed functional laws to ensure foolproof legislation to govern oil and gas exploration and production, as well as the revenues that accrue from it.

    Another innovation by the Ghanaians is the decision to have independent oversight into the industry by the creating the Public Interest and Accountability Committee (PIAC), a statutory 13-member committee with membership drawn from organized professional bodies, think tanks, pressure groups and traditional institutions, among others.

    The body serves as a platform for public debate on how petroleum revenues are spent but also most importantly it also monitors compliance with the law by the government and other public institutions. It publishes its findings in regular reports. Its latest report provided comprehensive information on how oil revenues were managed and identified lapses that have to be addressed by the government and other stakeholders.

    The country’s Revenue Management Act clearly outlines mechanisms for collecting and distributing petroleum revenue. The money goes into one particular fund before any disbursement is done, which was deliberately done to ensure proper monitoring of receipts and expenditure. It specifies what percentage of the money received from oil sales is for funding the budget, what is to be set aside in reserves for posterity when the oil is no longer flowing and what should be invested to generate more revenue. Also, the country has put in place a Heritage Fund, meant to ensure that the country’s oil wealth is saved to benefit the future generations.

    The Ghana Civil Society Platform on Oil and Gas (CSPOG) is a highly respected body and is well regarded by all stakeholders including the government and oil companies, and issues periodical reports on the performance of the industry, which draw urgent attention to and make recommendations on pertinent issues in the sector.

    In 2003 – long before it became an oil producer in 2010, Ghana signed on to the Extractive Industry Transparency Initiative (EITI), a global effort to end lack of transparency and accountability in the generation and use of extractive sector revenues. Also noteworthy is the fact that the Ghana National Petroleum Corporation (GNPC) has been in existence since the early 1980s – long before the first drop of oil was pumped from the ground.

    This important public body is responsible for the licensing and distribution of petroleum-related activities, and replaced the Petroleum Department in the Ministry of Fuel and Power. In 2005, Parliament passed Act 691, which mandated the National Petroleum Authority (NPA) to take charge of all the upstream aspects of the industry.

    What is clear from the Ghana experience is that unlike in other African countries such as Nigeria and Equatorial Guinea where oil has been more of a liability than an asset in as far as the common man is concerned, Ghana’s Executive took a deliberate decision to take sort of a back seat on matters concerning the oil sector and put everything in the hands of institutions. Also, the citizens, represented by civil society groups and professional bodies, are playing an active role.

    Uganda will definitely ignore these lessons at her own peril. Instead of bashing it as retrogressive force, there is no escaping the reality that President Museveni’s government needs to empower and set up modalities for working with Uganda’s Civil Society Coalition on Oil and Gas (CSCOG) as a ‘watchdog’ that keeps an eye on the goings on in the sector. The mentality that those who call for transparency are “saboteurs” is too radical and won’t take us farther than continuous bickering and rubbing of shoulders, which will not give investors the market confidence they desperately need to set up their investments. In that case everybody loses.

    On the other hand, MPs under their CFOG umbrella should get on with their job without digging into extreme positions because the proper legal framework will evolve through the continuous process of amendment and review in response to changing or unanticipated situations on the ground. While civil society groups and donors should not be too arrogant and disrespectful of the Executive, they should remain firm and assertive in their legitimate demand for accountability, transparency and responsible governance of the oil industry.

    At the end of it all, building consensus and winning trust is all that matters not just now as we set up the legal framework but even in the future when the oil productions starts in earnest. This is because even in highly developed countries like Norway and US, the lingering fears and anxieties are always there that a century-old legacy and the welfare of the future generations could be eroded by the multi- faced challenges posed by the oil boom.

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