Tullow pays expatriate Shs9m daily for a year

Kampala

Tullow Uganda paid a one-man consultancy firm about Shs9 million per day for one year to teach its officials about “organisational effectiveness”, an investigation by this newspaper has revealed.

Local firms could have done the work done by the South Africa-based consultant at a quarter of the cost, industry sources say. The oil company then paid another foreign firm Shs2 billion to evaluate the work done by the first consultant.

A lot of the expenses incurred by oil companies fall under “recoverable costs” that the oil companies will claim back from Uganda when the oil revenue starts flowing in but a Tullow spokeswoman said yesterday that the costs involved in both cases were borne by Tullow Group, not its local outfit.

“Kevin Consult services are cost borne by the Tullow Group and therefore not cost recoverable in Uganda,” Ms Cathy Adengo said in an email to this newspaper yesterday. “As an international company we reserve the right to utilise these type of services within our own business as a private company.”

Our investigations reveal that Tullow paid Shs1.6 billion every six months to Kevin Light Consultancy based in Cape Town and Johannesburg. The oil company then hired another company, Montrose Associates, and paid it Shs2 billion to evaluate its corporate social responsibility programmes in Uganda. Ms Adengo said Montrose, which is still working for Tullow in western Uganda, was also paid by the head office.

On contracts
Companies routinely hire firms to help them with team-building and organisational strategy sessions, but Tullow did not offer local firms a chance to bid for the contracts, despite the presence of local skills, and against the company’s declared goals of supporting local firms and businesses.

Mr Fred Kabanda, the head of the Oil sector Regulatory Unit at the Petroleum Exploration and Production Department (PEPD), told Daily Monitor single-sourcing, in which a preferred firm is hired without competition, is only allowed for small contracts or very specialised services that are offered by only a few companies around the world.

“Services that are done locally and regionally must be advertised in the media because we want to give opportunity to our people to also tap into the oil sector,” he said. “There really must be strong justification for single-sourcing.”

PEPD allows the oil companies to single-source contracts worth $5,000 (Shs13 million) or less. There is no evidence that the training contract was ever advertised. Apart from paying his training fees, Tullow also offered Mr Light a chauffeured company car, bought his teaching materials, and put him up at luxury apartments in Kampala.

Mr Michael Niyetegeka, a private consultant with Cemm Group, a local firm, said there are companies in Uganda that can offer the same services at less than a quarter of the fee paid to Kevin Light Consulting. “The question is whether there was an advert calling on Ugandan firms to apply but if there wasn’t then that is unfortunate because it doesn’t allow competitiveness,” he said.

In an earlier statement to the Daily Monitor, Ms Adengo said: “Most of the things happened some time back and the company has since streamlined its operations” as a way of addressing the issues going forward. Although Uganda’s oil sector is still several years away from production, recoverable costs claimed by the oil companies are at $589 million (Shs1.5 trillion) with Tullow claiming $406 million (Shs1 trillion) of that.

Mr Kabanda told the Daily Monitor that employing competent local firms would be cheaper and, by reducing the amount of recoverable costs, increase the amount of oil money that will be available to Ugandans.

Urgent need
The Association of Uganda Oil & Gas Service Providers, a local pressure group that lobbies on behalf of Ugandan firms, says the revelations highlight the need for more transparency in the sector.

“The association does not ask for preferential treatment but for fair and competitive bidding for all services and jobs available in the industry,” its spokesperson, Mr Emmanuel Mugarura, said via email. “Some services should be ring-fenced for only Ugandans to help grow the local business with a multiplier effect.”

The association has also queried the employment of expats in positions where there are qualified, suitable and cheaper Ugandans. For instance, Tullow single-sourced the services of Ms Pamela Uwakwe, the wife of the former Irish ambassador to Uganda, to work as a social enterprise consultant at $12,000 (Shs31 million) per month.
Ms Uwakwe was transferred to the Tullow London office after her husband’s tour of duty in Uganda came to an end.

Industry sources also said the company employed, without advertising, a one Trisha Oussen with a salary tag of $8,000 (21 million) per month. It is not clear whether Ms Oussen, who was part of the local team supposed to increase participation of local firms, had a valid work permit, as PEPD officials, who vet all expats in the industry, had no record of her.

Agreed practice
Mr Kabanda told this newspaper that the agreed practice is that oil companies should only employ foreigners after failing to get a suitable Ugandan to fill the post. “We require that adverts of the different jobs are put out in the media. When they don’t get anybody responding, that’s when we approve expatriates,” he said. “Where Ugandans are got but not good enough, we ask the companies to recruit them as understudies and after two or three years, allow them to take over from the expatriates.”

In response to the employment queries, Ms Adengo said yesterday: “It is important to note that for the employees mentioned, their support was also not cost recoverable to Uganda as they supported the social investment arm. In addition, our employees are hired on merit based on the required level of experience and value they bring to our company and the position.”

Oil firm issues response

“Tullow Oil Group has invested over $12 million in infrastructure and community development programmes within the Lake Albert communities and nationally since 2009. In 2013, Tullow will commit in the order of an additional $2.5 million that will benefit Uganda.

This social investment is a discretionary and voluntary investment which Tullow has made year on and in accordance with the company’s social investment criteria and accounting for community needs.

It is not subject to the terms and conditions of the Production Sharing Agreements in Uganda. Therefore the cost for Montrose is a cost to the Tullow Group and not Uganda. As an international company, we maintain a right to use highly qualified companies to assist with our business.

Given the considerable funding which Tullow has committed over the past four years, it is prudent for the company to review the effectiveness of such investments, as would be done for any large investment programme. It is therefore the prerogative of Tullow Oil Group to review our investments in a manner consistent with our corporate requirements.”
Ms Cathy Adengo, Tullow Oil Uganda spokesperson.

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