Following the oil money: How much has it done?
Posted Tuesday, December 3 2013 at 02:00
At any Oil and Gas revenue workshop, economic experts will always weigh in on how Uganda should better utilise its oil revenues. So far, the argument has been that Uganda invests the money in infrastructure and social services like education, health and to focus on improving the traditional sources of income like agriculture to avoid the infamous Dutch disease and rent seeking. However, as we plan how to use the money, how much oil money has entered Uganda’s economy since the discovery of the resources? The Daily Monitor oil reporters,Isaac ImakaandFrederic Musisi, look at how much money has so far come in, and what it has done.
Oil producing countries mainly get oil money in form of signature bonus, training fees, annual surface rentals, data purchase, permit fees, withholding taxes, capital gains tax, value added taxes and royalties.
Most of the money is paid directly to governments in form of taxes but oil money also comes into the economy through payments to local labour, through corporate social responsibility (CSR) expenditures, and through payments to the local service providers.
This story will ignore the $1.5 billion (Shs3.9 trillion) paid by Total and Cnooc respectively to Tullow on the farm down– that money did not enter the economy, because it was Tullow’s.
At the onset, it is important to note that apart from CSR expenses, most of the money spent by the oil companies in their quest for oil will be paid back as recoverable cost.
The Auditor General will audit the total recoverable cost and the oil companies will recoup their expenses through a percentage of the oil produced called cost oil.
In its submission dated November 9, 2011 to the parliamentary committee investigating the oil sector, Uganda Revenue Authority gave the total amount of revenue collected so far from all the oil companies as $449 million (Shs1.6 trillion). The money was got as capital gains tax and stamp duty when Heritage sold its interests to Tullow oil plc.
URA also reported that it received tax payments from subcontractors exclusive to the petroleum sector amounted to Shs149b.
The subcontractors include those with offices in Uganda and offering services exclusively to the petroleum sector.
The Energy ministry also reported a $4 million (Shs11.6 billion) non-tax revenue collection from signature bonuses, permit fees, data purchase from over four years over ten year period.
According to the oil ad hoc committee’s report, the government revenue collection from oil totals to Shs1.8 trillion– mainly from non-tax revenues, stamp duty, and capital gains tax.
Oil companies on the other hand say they have injected an extra Shs10 trillion in the economy bringing the total figure to Shs11.8 trillion.
UK’ Tullow Oil PLC (Uganda) takes the biggest chunk of the Shs10 trillion with a Shs7.3 trillion investment since 2004. The company, however, spent $1.45 billion (Shs3.8 trillion) of its current investment on the acquisition of Heritage oil’s Ugandan interest. This means it has so far directly injected $1.35 billion (Shs4 trillion) in Uganda.
Of the Shs10 trillion, Total and Cnooc say they have injected $600 million (Shs1.5 trillion) and $500 million (Shs1.3 trillion) respectively in the economy.
The money and the lack of transparency in government
The last time anything was communicated about the whereabouts of the oil money collected by government was when Bank of Uganda Governor Emmanuel Tumusiime Mutebile told Parliament that the President had used the money to buy fighter jets. Since then, secrecy and confidentiality has mired the sector as regards revenue collections.