Oil: A Glimmer of Hope on the Ugandan Economy

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As a dual citizen of Uganda and the United States, I often find myself comparing the two countries and noticing many differences. Usually, the developed United States radiates a more positive vibe, due to its powerful economy and sound governmental system. On the contrary, the frustrating helplessness associated with the developing Uganda can be attributed to the overwhelming poverty amongst its citizens.

However recently, a glimpse of hope shined from the equator; several oil companies from Europe and Asia that had been drilling exploratory wells, including Tullow, Total, and CNOOC, reported that Uganda has an estimated 6.5 billion barrels of oil within its country limits (Jeong). According to the World Bank, with the fourth-largest oil reserves in sub-Saharan Africa, Uganda has the opportunity to develop into a middle-income country within 25 years (Jeong).

With Russian company RT Global Resources as the majority owner, Uganda is planning to build an oil refinery near the source in order to produce the oil. While this oil discovery could be a catalyst to the growth of the Ugandan economy, I am skeptical of its outcome. My skepticism is due to the tremendous amount of corruption within the governmental system, stemming from the leader, President Yoweri Museveni.

President Museveni has been in power since January 1986, ranking him eighth on the list of longest ruling presidents in the world. At the time when he entered power, the Ugandan constitution allowed for a maximum of two 6-year presidential terms. In order to afford himself several extra terms in office, Museveni has changed that law twice (Oguttu).

You might wonder, how is this possible? How does one man have so much power to change laws as he pleases? President Museveni has manipulated other members of his political party, the National Resistance Movement or NRM, by putting them into positions of power with a sole expectation: loyalty. For example, the Parliament of Uganda has 375 seats; members of the NRM party occupy 263 of those seats (African Elections Database). With such a majority, it is clear how Museveni can never lose a vote on a law in his favor.

According to the Human Rights Watch, Museveni rewards these loyal politicians with financial enrichment. Several times during his tenure, several government officials, including a former prime minister, have been accused of embezzling money from within the system. Each of these times, Museveni has graciously offered to pay their legal fees in attempt to salvage the situation (Human Rights Watch).

It is unclear, however, whether these funds have come from his pocket or the country’s. Once again, you might wonder how this is unclear? It is unclear as the president and his counterparts have disregarded the Ugandan law requiring them to disclose their personal financial assets. By doing so, it brings forth uncertainty in what is actually their money.

Given the shady history of Uganda’s current leader, I am concerned with the legitimacy of plans regarding oil production, exportation and sales. The plans state that the country intends to keep a portion of the refined oil within Uganda, supply the neighboring countries, such as Kenya, Tanzania, Rwanda and Burundi, at a lower investment fee, and export the rest through a Kenyan port in Lamu.

With the majority of the oil leaving the country, being sold as a good, it is not clear how these profits are going to be reinvested within Uganda. The government’s plan focused on infrastructure improvements, such as roads. However, money has been set-aside for this purpose previously without results being seen.

The roads in Uganda are terrible. They are covered with potholes and lack proper drainage systems. If history repeats itself, it is clear that these plans are illegitimate. In fact, I am unsure whether or not the full sum of money profited from oil sales will even be seen before the government officials skim off the top.

My second concern stems from the history of Uganda as a country. Unfortunately, being on the African continent, it carries the stigma of a destitute country. The common man perceives the Pearl of Africa as a country that cannot do much for itself without assistance from more powerful, developed nations.

Truthfully, the country has over-relied on foreign aid, leaving it vulnerable to those countries that assist. Between 2003 and 2012, Uganda received roughly $16 billion in aid, ranking as the thirteenth-highest aid recipient in world (Bergo). Often, the developed countries give aid knowing they gain an upper hand on a lesser nation.

Knowing this, it is unclear to me whether or not countries could potentially use aid as leverage within the oil business. They could demand that Uganda sells them oil at a discounted rate per barrel, given all of their assistance to the Ugandan economy. At this point, the Ugandan government is stuck, due to their financial dependence on others.

How can the government ensure the countries resources will not be exploited by the superpowers of this world, in order to gain a cheap oil source? This is a vital question that needs to be analyzed, as this oil has the potential to grow the Ugandan economy. It will be a travesty if the Ugandan government cannot maximize the potential profits to the benefit of the country.

Lastly, with oil being a limited, non renewable resource, the Ugandan government must regulate how much oil is being refined, and at what rate this is occurring. It is very simple to lose track of this information with a steady flow of money coming in after sales.

Especially within this developing country, which does not often experience such a reality, the leaders may get carried away with what seems like great success, and inevitably lose power as an influential country on the regional and continental scale, if not the global scale.

It is also important to track the prices at which a barrel of oil is sold for globally. For example, at the time of the oil exploration, each barrel cost roughly $100 (McMahon). Today, each barrel costs a measly $30 (Bloomberg). Uganda would benefit much more from oil sold during periods of less global supply, as the demand would force the price to rise.

With proper tracking of these statistics, Uganda may show a steady profit over time, as oil is a necessary commodity of the lives we all live today. However, even with great profits, it is up to the government officials to ensure that the money is reinvested properly to benefit the economy. Sadly, I am unsure of the country’s current abilities to turn this glimmer of hope into a reality.

Works Cited

African Elections Database. “Uganda Presidential and Parliamentary Elections, 18 February 2011.” Commonwealth Election Reports (2011): n.p. Web. 1 Feb. 2016.

Bergo, Havard. “Has Foreign Aid Led to Economic Growth in Uganda? – GRI.” Global Risk Insights. N.p., 19 May 2015. Web. 01 Feb. 2016.

Bloomberg. “Energy & Oil Prices: Natural Gas, Gasoline and Crude Oil.” Bloomberg.com. Bloomberg, 1 Feb. 2016. Web. 01 Feb. 2016.

Human Rights Watch. “”Letting the Big Fish Swim”” Human Rights Watch. N.p., 21 Oct. 2013. Web. 01 Feb. 2016.

Jeong, May. “Uganda: Oil Brings Quick Cash, Dashed Hopes.” Aj Jazeera America. Al Jazeera, 30 May 2015. Web. 01 Feb. 2016.

McMahon, Tim. “Historical Crude Oil Prices (Table).” Historical Oil Prices. N.p., 1 May 2015. Web. 01 Feb. 2016.

Oguttu, Philip W. “You Are Wrong Mr President, Ugandans Want Term Limits.” Daily Monitor Uganda. Monitor, 13 Aug. 2015. Web. 01 Feb. 2016.

Tendo Mutema is born and raised in Cincinnati, Ohio, with strong Ugandan influence from his parents, Drs. George and Nandi Mutema. He is currently a freshman at Dartmouth College in Hanover, New Hampshire, where he is a member of the Dartmouth Rugby Football Club.

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