Without oil laws in place MPs are just wasting time

The paradox of oil. When an oil bonanza is discovered in a struggling African country, the instinctive assumption is that it can only be a good thing; that it will result in a rapid improvement in the lives of the people; that suddenly there will be money for hospitals and vaccines and schools and roads; and, even more than that, everyone will be rich, says John Ghazvinian.

If there is anything we should learn from the unfolding oil debate, it is not our indifference to the challenges ahead but the stark reminder to the fact that even after we discovered oil six years ago, we are still operating in darkness — a recipe for self-indulgence which is synonymous with the curse of oil wealth in other countries.

Wikileaks has been unfolding hidden secrets of the world powers from the leaked US cables which have so far made many politicians quake. But most importantly, in the unfolding oil saga, where senior ministers have been accused of pocketing bribes from foreign companies, the curtains have been removed for Uganda too.

Though the question on whether the ministers accused of picking bribes should step aside or not remains unresolved, the truth is that all is not well in the oil sector. However, to get to the bottom of these corruption accusations, a Parliament’s seven-man probe committee chaired by a former minister started its work this week in a three-month stint that appears more of a wild-goose chase than a serious anti-graft exercise.

Chasing shadows
While it is obvious that the probe committee could be chasing shadows in this investigation, for the probe committee to focus on bribery allegations labeled against ministers when we don’t even have oil laws in place, will be diverting us from the real monster in the oil sector. Let’s face the reality here; the truth is that the alleged bribes ministers took will never be recovered, yet billions of dollars expected from Uganda’s oil remain susceptible to abuse.

Clearly, our “sweet and waxy” oil should be for the life and not for the death of our people as the case for resource cursed nations like Nigeria, Sudan, Iraq, Congo, Sierra Leone and Liberia. For all these countries, the conflict is either about oil or diamonds. As for Uganda, I agree we need to ensure that ministers and other individuals alleged to have received bribes pay for their sins if found guilty but we cannot afford to forget so easily that the discovery of oil in Africa has been, almost without exception, a disaster for the host countries.

Our leaders should know that prevailing over the resource curse requires laws and institutions that foster transparency and accountability. Unfortunately, most of the required institutions provided for in the Oil and Gas Policy of 2008 are not yet in place. For instance, according to the game plan, the Ministry responsible for oil and gas was meant to handle the policy aspects while the missing institutions were to handle the regulatory and business/commercial aspects respectively. The regulatory functions were supposed be handled by the Petroleum Authority of Uganda (PAU) while the business/commercial aspects were to be handled by the Uganda National Oil Company (NATOIL). Whether the proposed fiscal institutions will function effectively and independently is another conundrum.

To manage the oil sector, Uganda currently uses the 1985 Petroleum Exploration and Production Act, as amended in 2000 and the Mineral and Gas Policy. However, most of the provisions in the 1985 Act are inconsistent with the 1995 Constitution yet new laws need to be drafted to protect the country from getting fleeced by oil dealers flocking the sector. The Income Tax Amendment Act (ITA) of 2010 was recently enacted to cater for taxation of petroleum operations though it’s also inadequate.

Without these laws in place, there will be consequences. This is why even the $3.2m we have so far received since 2006 from oil deals cannot be seen —we have consumed it just like that. Even the disputed $404m we received from Heritage Oil recently has also been exchanged into Shillings and committed to Karuma Hydro Power project. But this is not how we must proceed; there should be credible fiscal institutions to manage these resources.

Vast deposits
The discovery of vast oil deposits estimated at six billion barrels even though others put the figure at only 2.5 billion barrels, caused excitement across the country. Because of this excitement, we have failed to confirm the exact oil we have, we have made mistakes along the way and in the end we stand to lose billions of Shillings in the process. We have forgotten that we don’t have oil experts in the country to help us draft laws to guide the sector yet we can hire experts from other oil producing countries.

While the fear is that if we don’t get serious before production starts, our oil could easily plunge into a curse, there is no such African oil curse, maintains global oil and gas expert Dr Duncan Clarke, only an inherited and continuing curse of politics. In his book, Africa, Crude Continent: The Struggle for Africa’s Oil Prize, Dr Clarke argues that, the oil sector’s history teaches many lessons, the failure of forecasting being one of them. It also instructs us about human ingenuity and adaptability. Like the weather, the oil industry could take many unexpected turns in future. This is why we need to trade carefully.

With exception of plausible oil producing countries like Norway, whose people have benefited from an oil windfall because of the prudent management of oil dollars, in most countries, increased revenues have not helped developing countries to reduce poverty; indeed, as Ghazvinian, in Untapped: The Scramble for Africa’s Oil, put it that the presence of oil has instead exacerbated poverty in some countries. In Nigeria, for example, which has received over $300b in oil revenues over last 25 years, per capita income is less than $1 a day.

Enhanced oil transparency leads to stronger accountability and in turn can contribute to improved governance and strengthened business confidence.

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