For Online E-newspaper
The East African : Aug 2nd 2015
40 The EastAfrican BUSINESS AUGUST 1-7,2015 Uganda’s new oil cont≥acts: Issues of t≥anspa≥ency and the envi≥onment COMMENTARY GEORGE BODEN “What should be considered given the problems that other oil-rich countries have faced?” and its people. On July 1, the government U published a list of 19 companies that have expressed an interest in bidding for its oil blocks. Some of the companies will sign deals worth billions of dollars in highly sensitive areas, including national parks and along the DR Congo border. Based on years of investigat- ing oil operations in developing countries, Global Witness has serious concerns about the potential environmental and security consequences of allowing oil extraction to take place in fragile areas like Murchison and Queen Elizabeth National Parks and nearby areas. The publication of the names of companies and the map of new oil blocks is a welcome step towards transparency in a sector long characterised by secrecy. In theory, this should help the government to select the best companies to partner with. The contracts handed out are a marriage of sorts; once entered into, these deals can last 30 years or more. So, who are these companies, and what should be considered given the problems that other oil-rich developing countries have faced in the past? The current licensing round ganda is on the verge of making some big decisions for its economy, its environment has not attracted the biggest oil companies. Of the oil companies already operating in Uganda, only Tullow appears to have come forward, while the remaining applicants are a mix of small and medium-sized outfits. Low oil prices and lack of capital, coupled with difficulties that companies have experienced in Uganda over tax and production licences, appear to have deterred the oil majors from exploring fields in Uganda. So the list of applicants includes a number of companies without long histories, making informed selection more difficult. There are three important things that any government should consider as it goes about selecting from the companies it invites to bid. First, the government must assure itself that the companies have the technical and financial capacity to explore for oil, and it needs to know where the financing will come from. A problem on the internation- al oil scene is the phenomena of companies that sign deals with no intention of exploring for oil, then sell them on at a profit. As such, governments do not maximise their profits. It is also important for gov- ernments to select companies with no history of corrupt practices. One company on Uganda’s list is Oranto Petroleum from Nigeria. Tullow workers at a rig in Buliisa, western Uganda. Picture: File In 2007, the company’s chair- man authorised a payment to Liberian parliamentary officials, deemed a bribe by the auditorgeneral, in order to secure oil contracts. Second, protecting Uganda’s highly sensitive and bio-diverse Albertine Graben, where the majority of exploration is taking place, should be paramount. If these areas are to be opened up, the government should select companies with strong environmental track records, technical capacity and public reputations to protect to ensure that the risk of environmental and social harm is minimised. Global Witness is particu- larly concerned by the decision to open up the Ngaji block in Queen Elizabeth National Park adjacent to Congo’s iconic Virunga National Park. Virunga has been the subject of a major international campaign exposing the activities of British oil company Soco International and calling for the park, a Unesco biosphere and home to some of the last remaining mountain gorillas, to be protected from oil extraction. True owners Third, the government should collect and publish the names of the true owners of all companies bidding. That is to say, they should name the actual human being who will profit if a deal is signed. Companies do not always have to name their shareholders in secrecy jurisdictions like the British Virgin Islands or the Caymans. This can obscure the real owners of a company, making it difficult to determine whether there is a conflict of interest. Collecting and publishing the true owners will help to avoid impropriety in the awarding of contracts. So far, the government has acted transparently by publishing the list of interested companies. This transparency must be maintained as the process continues. The government should explain why it has shortlisted those companies and how it gauged them. It should also publish the contracts so that people can see the deals. Uganda suffers from chronic corruption. It is vital that corruption does not seep into the oil sector too. While Ugandans must trust educated government technocrats to make complex decisions on their behalf, they should be able to scrutinise the decisions that they make. Oil could be a blessing or a curse for Uganda; transparency is a vital part of making sure it doesn’t become the latter. Geo≥ge Boden leads the Global Witness Uganda campaign, looking at oil secto≥ development and t≥anspa≥ency Cent≥al Co≥≥ido≥ states seek funds fo≥ p≥ojects By ALEX NGARAMBE The EastAfrican CENTRAL CORRIDOR member states are finding it difficult to attract private investors to finance prioritised infrastructure projects because of the huge financial outlay and the delayed return on investment involved. This puts the governments under pressure to either finance the projects from their budgets, or mobilise donors to fund the activities. These financing issues were raised last week during the 4th Central Corridor Transit Transport Facilitation Agency (CCTTFA) regional task force meeting to review the Presidential Round Table (PRT) resolutions and finalisation of an implementation plan. “What private investors want is to put The Northern Corridor single-gauge railway project is already under way. Picture: File money in projects that make quick returns, but projects like railways are long term and this is partly why the private sector is shunning these projects,” said George Rukara, Assistant Commissioner of Water and Rail Transport Regulation in Uganda’s Ministry of Works and Transport. The five Central Corridor member states are Rwanda, Uganda, Tanzania, Burundi and the Democratic Republic of Congo. Unlike Tanzania, the other Central Corridor members are landlocked and any efforts to access to the sea would facilitate trade. Drawing funds from their coffers would strain regional governments given that some have a tight budget for domestic expenditure and the Central Corridor projects have not been included in this year’s fiscal budget. Member states have the huge task of secur- ing funds to finance more than 10 new joint development projects that have been prioritised and will be jointly owned and funded. The projects are to enhance intra-regional trade by lowering the cost of doing business between member states. More than 60 per cent of Rwanda’s imports and exports go through this corridor, while the eastern Democratic Republic of Congo depends heavily on this route as well. The projects are in the energy, railway, road, aviation, ICT, trade facilitation and maritime sectors, and are estimated to cost millions of dollars. Mr Rukara said the burden of putting the in- frastructure in place lies with the government, and that private investors can only come in if governments privatise the services. In the aviation sector, for example, the coun- tries want the existing Bilateral Air Services Agreements amended to comply with the Yamoussoukro Decision. The amendment of transport laws would enable free movement of people. Although visa fees within EAC member states have been removed, Central Corridor members are still subject to visa requirements by the DRC. However, some technocrats say the projects are still in the initial stages and the financing should not be an issue at the moment. “We don’t want to be pessimistic at this early stage, because the member countries will go back and mobilise individually. If they can’t, that is when joint mobilisation of resources will be done,” said chairman of the Central Corridor stakeholders consultative meeting Nathan Gashayija. The Isaka railway project under the public private partnership is still looking for investors to help start the project.
Jul 26th 2015
Aug 9th 2015