What Does the Discovery of Oil in Kenya Mean for Uganda?

The oil debate in Uganda has been most spectacular in recent years. Available information indicates that the presence of oil deposits in Uganda was first confirmed in 2006, in the Albertine region, west of the country, by Heritage Oil, a British international oil and gas exploration, development and production company. Another discovery followed in Amuria District in Eastern Uganda early this year (2012). However, the parallel discovery of oil in the Turkana region in north-west Kenya led to a moment of dilemma. It, in the clear sense of purpose, demanded knowledge of the future prospects of oil exploration to the country, and other parties in the oil business.

Once the production capacity supersedes demand on the local, regional, and international market, the country’s bargaining power will lower greatly as much as the prices and work rewards. The situation compels company owners to relay off workers or even arouse conditions for industrial strikes and instability in the country, in response to the low work satisfaction. Also, there will be serious losses registered by parents, funding institutions, and government after failure to find the ultimate aim of retaining as much revenue as possible for prosperity of its people to compensate for the costs of training of its local expertise in oil production and management. The resulting economic confusion and backslash eventually threatens national security, which in return unsettles the political authorities. It will be under such circumstances that the discovery of oil will seem to be more of doom in effect than not.

The area’s indigenous population had genuine pride in having oil deposits amidst them. They had to quickly seek guarantees of percentage benefits for fast development and, probably, regain their glory, as one of the most economically powerful people in the country. Unfortunately, the pride has turned out to be illusive as the prospects of economic dominance spread into a wider regional of Africa. Some benefits so far obtained from oil companies are meaningful but may soon depreciate. Such benefits include: scholarships for higher education in oil and natural resources management, compensation monies, and health facilities. The concern for ensuring sustainability of these community-based programs may too cease. The same pride and disappointment was incidentally shared by the rest of the nation.

The already existing cancer of corruption has already spread into the nation’s oil economy. Ethics and integrity in every aspect of business operation are never issued to consider. Issuance of licenses to oil companies, land grabbing, poor system of awarding benefits (wrong people benefit) and oil governance leaves the nation aggrieved. These vices began damaging the oil production process from the start, which alone predicted failure. With the looming economic uncertainty and anxieties, the corrupt officials are made even busier with what they know best. That is, siphoning of oil revenues and demanding bribes from oil companies as much as they can, privately, before the sector collapses. The same officials had recklessly run the economy with a view of saving their political faces using country’s resources so that, later, they could compensate for the losses using the ‘pending’ oil revenues. Now, with oil wells discoveries elsewhere in the region, it yields even greater shocks to them and misery to the nation.

Regional dominance and the global master-player approach may be the country’s only savior in such circumstances. It could use those attributes to push through its economic interests. Luckily, at the moment, Uganda has a great deal of influence in the region, and internationally. It will only have to strengthen the existing balance of power and the state of affairs on the global scene. But while doing so, some countries may emerge to claim or reclaim regional leadership as well. For example, Tanzania was once a regional leader under Mwalimu Julius Nyerere (RIP): it may want to reclaim its regional position. If that happens, conflict of interests could result into regional security crisis, in which some flashes of wars would set new power positions and, ultimately, new economic positions.

And while Uganda’s regional influence counts most in winning and dominating the oil market in the region and global scene, it vividly has no expertise to push through its credentials as an oil exporter. It has to rely on foreign expertise at the moment. Even the current plan to install a regional refinery to guarantee maximum oil profits faces a huge challenge to the country. With much local and international disgust for political and economic corruption being mirrored to the donor countries, it may be very perplexing to the would-be foreign investors to trust the country’s business environment. Besides, a lot of options exist around the region and Africa in general. The so-called investors could be reluctant to invest in Uganda where no experience of successful oil production has ever been registered, where poor governance is reflected in oil production, and where the country risks security breaches, in preference for most predictably secure economies.

However, if the regional countries cooperate in matters of oil production, management, and trade under the East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA), stability of oil prices, and national economy could be ensured and sustained for the benefit of the populace. This is so because there would be freedom of movement, common decisions on prices and benefits, and preferential treatment to traders operating within the regions. As it is already the case, staff of oil companies will be moved to work anywhere in the region or the job applicants could choose to apply and work in any of the member countries. Generally, by so doing, the threat to peace and security of the regions, earlier highlighted, would be under check. The government of Uganda has already showed great wisdom in its preliminary work of facilitating regional integration and strengthening existing structures in those regional bodies.

It will be important as well to maintain a vibrant agriculture sector, without which even the oil works would not survive; as they would need food and energy to sustain work needs. The food must be one that is regionally produced to increase affordability and accessibility by the widest population. Understandably, if the booming oil business continues to offset food production, famine or high prices of food could be the order of the day. Besides, inflation will increase the cost of production and lower savings. It will thus be irrational to specialize in oil production and forget all about agriculture, which explains well our economic survival history.

Generally, for long the government of Uganda has neglected the development of renewable and appropriate technologies, and hardly has it put energies and financial resources in research and innovations. It only waits by the end of the road for individual citizens’ sweat and achievement to subsequently claim and consider it as its own; by arguing that it created the conditions of peace for that person or people to thrive.

It is widely believed that the discovery of minerals such as oil never goes without some form of colonialism manifested through the invasion of multinational firms in any such country. For some time the authorities have coincidentally expressed great hunger for them. Often the multinational firms are followed into oil producing countries by economic security agencies from their respective governments. And because these firms come from different countries, they begin to struggle for favours from indigenous authorities. If the day’s authorities run out of favor of any one of them, the affected country uses its military resources to overthrow the authorities in preference for one (usually the country’s local opposition) that will champion its economic goals. The likes of Democratic Republic of Congo (DRC) and former Sudan have already gone through a similar cycle.

Indeed the discovery of oil in Kenya creates a dilemma for Uganda. This calls for more sophisticated means to carefully manage the resource, so that it still fulfills the country’s hopes and prevent unnecessary economic and political shocks. Among them are strengthening efforts towards regional and international cooperation, and promotion of rational and pro-citizen or pro-nation foreign investment. While that happens it is important as well that the country remains aware of the important benefits in agribusiness investment, and in supporting research and innovations.