Uganda’s oil scandal

Non-Ugandans may not realize that our country makes a lot of money from oil. The recent discovery of a massive new oil field in the Albertine region of the country is raising the stakes. All citizens are supposed to benefit from the sale of these resources, but this is not always the case.

Ugandans are growing more dissatisfied with the way oil deals are being carried out. Many people in civil society organizations and the media are decrying the absence of a proper oil policy, particularly the lack of transparency about oil-related transactions and how the resulting money is put to use.

Nobody foresaw that the discovery of oil in Uganda might be monopolized by President Museveni’s right-hand men. But that’s what has happened. (The photo above shows the president entering Parliament a few days ago with Speaker Rebecca Kadaga.) A number of senior government officials, right up to the prime minister, have been accused of pocketing millions of dollars in bribes from the oil companies.

Ugandans are not happy with the situation. The most frequent sentiment I’ve been hearing from people in Kampala boils down to this: "We have plenty of oil, but fuel prices are still going up. Why?" Some say that the President’s reluctance to pursue corrupt individuals in the oil sector shows that he is using the oil sector to reward his followers.

When the first oil discoveries were made in 2006, Ugandans had high hopes. Oil wealth, they assumed, could help to revive the nation’s economy. But it hasn’t worked out that way. You could argue that the flow of black gold has actually made things worse by aggravating conflicts of interest and political instability. I would attribute this to the inadequate institutions and poor resource governance that characterize Uganda. There are many reports that the discovery of oil has actually led to people losing access to the resources on which they depend on for their livelihoods and food security.

Recently, one of my journalist friends visited Hoima, an area where Tullow Oil Company is carrying out oil exploration. What he found there can be described as the complete absence of corporate social responsibility on the part of Tullow. He concluded that the locals, and in particular those whose existence depends on local lakes and rivers, have suffered a lot. He documented how many people have been driven off their land. Some have received compensation, others have not.

Most of the affected individuals live in villages. They are poor, but rather than benefiting from the discovery of oil near their homes, their livelihoods are ruined. Where others see business opportunities, these villagers end up as the losers.

In Kampala as well as in northern Uganda, many Ugandans are skeptical whether they will ever see any benefit from the oil resources. Civil society groups have condemned the manner in which transactions are being carried out. They argue, among other things, that the deals often result in environmental problems whose costs are not paid by those who cause them. A BBC report quotes a Tullow manager’s response: "In our view, not only the legislation, but our practice as a company ensures that there are no issues with respect to environmental management."

There are many aspects of the oil industry that have been left unexplained. Laws regulating the industry are weak and poorly enforced; the details of deals in the sector are often kept secret; the government and the oil companies have failed to disclose signed Production Sharing Agreement (PSAs); and, perhaps most worrisome of all, there are many allegations of oil companies bribing ministers and other government officials.

During the heated parliamentary debate in October 2011, documents were revealed alleging that Tullow Oil bribed Prime Minister Amama Mbabazi, Foreign Minister Sam Kutesa, and former Energy Minister Hilary Onek. Onek, who was accused of receiving about 17m Euros ($23m; £15m), strongly denied the allegation.

Meanwhile there are cases of oil companies continuing to operate on expired licenses. There are also cases where licenses have been issued without competitive bidding.

On October 11, 2011 the Parliament of Uganda passed a number of resolutions designed to clean up the sector. The parliamentarians demanded a stop to all deals until new laws can be passed, a review of existing contracts, removal of all ministers suspected of receiving bribes from oil companies pending full investigation, and so on.

Yet the government ignored Parliament’s resolutions and moved ahead with signing new Production Sharing Agreements with Tullow Oil, failed to introduce new oil bills, and has allowed the implicated ministers to stay in office and to preside over the signing of new oil contracts. Many Ugandans understandably remain puzzled about who is really profiting from our oil resources.