Eviction of peasants will promote a ‘hollow economy’ in Uganda
Posted Tuesday, October 8 2013 at 01:00
We must now redirect the same excitement and passion demonstrated over development of the oil and gas industry to an evenly spread-out mining industry with more diverse economic multiplier effect.
On October 4, the Daily Monitor quoted President Museveni to have advised international mining firms and local investors not to yield to local host communities’ demands for compensation, but seek government intervention to facilitate expeditious eviction of such hard-nosed peasants opposed to development of the mining industry in the country.
The remarks were made at a Mineral Wealth Conference organised by Uganda Chamber of Energy and Minerals.
I seek to rebut the President’s ill-advised understanding of the economics of the mining industry in Uganda. It is no secret that the current government’s obsession with the oil and gas industry is as old as the NRM government leadership itself.
During this time, a lot of attention was paid to the promotion and development of the oil and gas industry, which fortuitously resulted in the validation of its commerciality in 2006 and has since attracted international oil companies such as CNOOC, Total and Tullow. Oil Plc. The country has thus been able to craft what is currently lauded as the best fiscal policy, regulatory and institutional framework in East Africa, autonomy, transparency and accountability, allegations of corruption notwithstanding.
However, within the same timeframe, the mineral arm of the resource sector was neglected, irrespective of the fact that the country is neither short of commercial mineral reserves nor mining activities. According to UBOS records, the mining industry has consistently underperformed all the other economic sectors with a paltry average of 0.04 contributions to our fiscal GDP in the last 10 years.
Is resident eviction then the best government policy strategy to attract Foreign Direct Investment into the sector? At best this strategy will succeed in attracting the same breed of ‘foreign’ speculators with no guarantees to the President of possessing the financial and technical capabilities to jump-start the sector. Former state minister Isaac Musumba is better suited to advise our President this far.
What I can guarantee though is that you will not have majors like BHP Billiton and Rio Tinto scrapping for a piece of our mining blocks in an economy that places foreign profit interest before the socio-economic welfare of host communities in remote regions. These companies have long learnt that to acquire a social license to operate and safeguard investor interest and mining projects, you need more that political guarantees to be safeguarded against sovereign risk.
‘Fly-Over-Effects’ and ‘Hollow-Economies’ (McKenzie, 2011) in natural resource economics literally means the economic devoid created by the tendency for international mining companies to execute mining projects deceitfully and without any attempts to promote local host community participation in the value chain of mining projects life cycles. Such practices are not only dreaded by modern shareholders in mining companies but have proved detrimental to the success of many global mining projects.
A modern paradigm shift in mineral project development has shifted towards building skills of host communities, promotion and standardisation of local business enterprises to participate in supplying mining sites with services and goods. Prioritisation of local workforce recruitment, working with community leaders and local governments to build local infrastructure, recreation, health, education and other social amenities. Such initiatives and strategies would guarantee sustainable development of the mining industry in Uganda.
We must now redirect the same excitement and passion demonstrated over development of the oil and gas industry to an evenly spread-out mining industry with more diverse economic multiplier effect. Stakeholder dialogue with peasants in crafting and implementing an efficient fiscal, policy and regulatory framework is the most suitable solution.
Mr Binyina is the Executive Director, Africa Centre for Energy and Mineral Policy. firstname.lastname@example.org