What’s at stake in Uganda’s oil bills?
It’s been seven years since Uganda first struck oil. But the stuff still isn’t flowing and won’t be for a while, even though a landmark oil bill finally passed in December and many in the government are eager to start pumping.
If you’re part of the Ugandan equivalent of the ‘drill baby drill’ crowd – whatever they call their type in Kampala – what’s troubling is that the December bill, on the upstream sector, may have been easy compared to what’s next.
Two more oil bills need passing and a prickly refinery issue needs resolving before any Ugandan oil flows. Official estimates for ‘first oil’ have crept from 2011 to 2013 and now up to 2017. Infighting and gridlock seem to have paralyzed the government to the point that it’s fair to wonder whether production will even begin by the end of the decade. So why the holdup? What is at stake?
One of the oil bills currently up for debate – a broader public finance bill with a chapter on oil revenues – could essentially determine how much of Uganda’s oil money trickles down to the people. The other bill, dealing with the downstream sector, has a proposed oil refinery at its heart and is complicated by negotiations with international oil companies (see blog) about the size of the refinery to be built.
If the upstream bill offers any clues, debate is likely to drag on. That bill took two and a half years to pass after grinding debate over the powers of the energy minister. It got so bitter that when the dominant party in Parliament, President Yoweri Museveni’s National Resistance Movement (NRM), tried to push through a vote on the bill in November, the opposition stalled and eventually got out of their seats literally chanting ‘No Vote!’ ‘No Vote!’ until the speaker of Parliament abruptly and prematurely adjourned the session. A few weeks later, the bill passed after some NRM maneuvering kept the minister’s powers intact. Opposition to the apparent ministerial overreach is still simmering.
This doesn’t bode well for a speedy debate or happy outcome for the public finance bill. Parliament may again shake with the chants of the opposition.
Still though; some things the public finance bill has got right, in the eyes of best practice luminaries like Revenue Watch. It prohibits the use of oil revenues as collateral for public debt, so that the government can’t take on massive loans to help finance, for example, a new airport expressway for Kampala while telling lenders, hey, we got no money now but we’ll have oil gushing in a few years, why don’t you take some of that?
It also establishes a petroleum investment reserve ‘to support future generations’, in which a portion of oil revenues will be saved, invested outside the country, and used only once Uganda’s oil has run out.
But the bill doesn’t make any rules saying that the money has to be spent for this purpose. The intent of the investment reserve may well be ‘to support future generations’, but that could mean nothing if the intent is not made statutory. And can you guess who would manage and oversee the holding account into which all oil revenues (about $2 billion annually when production peaks) are to flow? And who would have final say over where money from the account is disbursed?
Pretty obvious by now where I’m going with this. If the bill passes the finance minister, appointed by and reporting to the president, would have oversight over the oil money coming in to the government, and the oil money paid out. Suddenly, the best practice provisions lose some of their teeth. One step forward, two steps back.
This is what’s so frustrating about the Ugandan government’s dealings with oil. On the one hand, it seems eager to please the foreign transparency and development types and says all the right things, for the most part, about international best practice and becoming more like Norway and less like Nigeria in how it runs the industry.
But beyond the loud calls for transparency and accountability and so on, when it gets to who makes final decisions on matters like contract licensing and revenue management, feel-good references to best practice are conspicuously absent. The ministers, the non-elected officials reporting to the president, take center stage.
The government seems adept at window dressing with carefully worded statements about the importance of good governance, Parliamentary oversight and the role of independent auditing bodies but, when it’s time to do business, it’s like none of that really matters. I’m not privy to the finance minister’s conversations with opposition MPs but he probably defends his authority by saying he has the best interest of the Ugandan people at heart, and why should Uganda entrust control over oil revenues to an independent body when he can do the job better?
It’s the same storyline repeated sequel to sequel that it’s almost banal. And there’s a darker side to it too. The December death of Cerinah Nebanda, a 24 year old MP, a day after she openly criticized the upstream oil bill and President Museveni’s handling of oil contracts, is mysterious at best. From what I understand the investigation is ongoing, but several opposition MPs have already accused the government of complicity in Nebanda’s death. These kinds of things are sickening and have Uganda looking much more like Nigeria than Norway after all.
We may never know what happened to the young outspoken MP. Unfortunately other things in Uganda, like the debate around the public finance bill, are more predictable. The opposition in Parliament seems ready to try to wrestle some power away from the minister, but the president’s party, the NRM, still runs the show.
Anyway the bill will probably take so long to pass and the oil so long to flow that by the time it does we’ll probably be in a post-carbon age, and the Ugandan people won’t even remember what benefits they did not receive. Let’s hope it doesn’t come to that.