Uganda: Oil Deals - Where Are the Jobs for Ugandans?

Oil and gas matters are back on the agenda after three crucial agreements were signed by Ugandan and Tanzanian authorities, as well as French oil giant Total, the majority shareholder in Uganda's oil fields and China National Offshore Oil Corporation (CNOOC).

The agreements signed on Sunday April 11, 2021 at State House Entebbe by President Museveni, Tanzania's President Samia Suluhu Hassan and the chief executive of Total, Mr Patrick Pouyanne, pave way for the eventual Final Investment Decision (FID), a point at which major financial commitments should be undertaken by the oil companies, in this case Total and CNOOC.

According to the Minister of Energy and Mineral Development, Dr Mary Goretti Kitutu, the conclusion of the remaining three key agreements is a major requirement for the announcement of the Final Investment Decision. She also noted that there is no document that will be signed called "FID". This is because the project launch is a demonstration of the commitment the respective governments and oil companies have for the projects.

By signing the Host Government Agreement (HGA), the Shareholders Agreement (SHA) and Tariff and Transportation Agreement (TTA) after years of ping-pong, the oil companies and government will proceed with the approval and award of contracts to the main Engineering, Procurement and Construction (EPC) contractors. This will enable the construction work for the projects to proceed, beginning with the construction of $3.5billion East African Crude oil Pipeline (EACOP) that will go through Uganda, ending up at Tanga Port in Tanzania.

The development phase is projected to attract between $15billion and $20 billion into the country's economy before commercial production begins over the next four years when the government and the oil companies estimate that the first oil will flow, with the actual construction starting this year. However, other processes are already ongoing including the acquisition of land for the pipeline.

But how prepared are ordinary Ugandans to reap the benefits from the oil boom considering that majority derive their livelihood from subsistence agriculture?

According to the National Labour Force Survey (2016/17), about seven in every 10 Ugandans are engaged in agriculture, doing subsistence farming with hardly any surplus for the market.

The few Ugandans already in the monetised economy (31 per cent) face the high cost of doing business, which limits their effort to create wealth. This is complicated by the fact that about half of the economy operates informally.

As a result, oil and gas sector experts, independent policy analysts and industry watchers are afraid that the benefits resulting from the agreement signed about a fortnight ago at State House Entebbe, may bypass the majority of ordinary Ugandans plying their trade in Micro, Small and Medium Enterprise (MSMEs) sector.

Selective benefits

When interviewed for this article last week, the Makerere University School of Economics lecture and the former advisor, Ministry of Finance, Planning and Economic Development, Dr Fred Muhumuza noted that the benefits resulting from the heavy investment in the development stage of oil and gas sector will not benefit just anyone.

"Most Ugandans will benefit through the National Budget through revenues collected from the oil and gas sector and channeled into the budget," says Dr Muhumuza.

He continued: "The oil revenue that will be injected into health, education and agriculture sectors will be the only way for everybody to benefit from the resource unless you are driver, a professional welder, an engineer or an accountant and the like, it is unlikely that many people will benefit directly in this sector."

According to Economic Policy Research Centre (EPRC) senior research fellow Dr Madina Guloba, about 68 per cent of Ugandans according to Uganda Bureau of Statistics depend on subsistence agriculture. If organised, they can benefit from the sector.

She said: "There will be need for nourishing food and here is where the communities and farmers can benefit from. But they will have to be organised."

Broadly though, Dr Guloba, is also of the view that at the country level, there is no reason why Ugandans should not take up services in driving, machine operations, engineering in various fields and pipeline maintenance among other jobs.

"These are jobs Ugandans can take up if the local content law is enforced," says Dr Guloba.

As for researcher Paul Corti Lakuma, the workers on the pipeline will not only need food, but also houses and schools for their children. That is how, he says, the money will trickle down to the ordinary people.

However, he stressed that the real benefits will be in targeted programmes.

Capacity issues

The critical questions Dr Guloba asks is: Do Ugandans have the various skill sets required in the development phase of the oil and gas sector?

In response, the chief executive officer, Stanbic Business Incubator, Mr Tony Okao Otoa, says more needs to be done in building capacity of ordinary Ugandans, including those engaged in agriculture.

Speaking last week during the signing of a partnership between Stanbic Business Incubator and the Federation of Small and Medium Enterprise (FSME), Mr Okao said not all those involved in agriculture will provide services during development stage which includes construction of the $3.5 billion oil and gas pipeline.

This boils down to standard requirements which many ordinary Ugandans are not aware of when being prequalified as service providers. This perhaps explains why the partnership with FSME signed in Ntinda could not have come at a better time.

"It is not too late to equip our people especially the farmers and those in Micro, Small and Medium Enterprise sector with the necessary skills required of local service providers. In no more than six months, they will be drilled in proper food standards, facilitate them in growing organic food to be supplied in oil and gas sector and go ahead to support them in standard certification. All these can be done so that our people are able to take advantage of the low hanging fruits that have been ring-fenced for them," Mr Okao says.

The same training will be extended to among others those involved in civil works, transport industry, hospitality industry and camp services. Just like the MSMEs involved in agriculture, the same treatment in terms of subsidising their standards certification will be accoded to them as well.

In his part, the executive director of FSME, Mr John Walugembe, noted: "Under this partnership with Stanbic Business Incubator, we shall help the small and medium businesses to professionalise because that is a requirement to tap into the abundant opportunities that oil and gas sector presents."

Oil jobs

Speaking to journalists last week at a press conference in Kampala about the key agreements for the oil and gas sector, Energy Minister Dr Goretti Kitutu said all companies that would like to supply goods and services in Uganda's oil and gas industry are required to register on the National Supplier Database (NSD) through the Petroleum Authority of Uganda website.

Similarly, Ugandans (individuals) who would like to work in the sector are encouraged to get onto the National Oil and Gas Talent Register (NOGTR), for easy access and visibility of the jobs in the sector. The NOGTR provides information on job specifications for existing opportunities in the oil and gas sector. It is the meeting point for companies and government agencies which seek to recruit human resource across projects in the sector and individuals who have the potential to be recruited.

Benefits

She said some of the specific benefits that will go to Ugandans will, among other things, include employment through direct employment of about 14,000 people by the companies, indirect employment of about 45,000 people by the contractors, and induced employment of about 105,000 people as a result of utilising other services by the oil and gas sector.

Of the direct employment, 57 per cent are expected to be Ugandans, which is expected to result in an estimated $48.5 million annual payment to Ugandan employees.

National Supplier Database

Speaking to journalists last week in Kampala about the key agreements for the oil and gas sector, Dr Kitutu, said all companies that would like to supply goods and services in Uganda's oil and gas industry are required to register on the National Supplier Database (NSD) through the Petroleum Authority of Uganda website.

Similarly, Ugandans (individuals) who would like to work in the sector are encouraged to get onto the National Oil and Gas Talent Register, for easy access and visibility of the jobs in the sector.

$3.5 billion

Investment. The worth of the East African Crude Oil Pipeline. The shareholder agreements cover the construction of the $3.5 billion pipeline designed to connect oil fields near Lake Albert to the Tanzanian seaport of Tanga.

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