Don’t borrow to invest in oil and gas, SMEs warned
Oil exploration; there is need for Ugandans to develop skills in strategy, planning, and risk management, especially in the oil and gas sector, failure of which many Ugandans will be deployed as casual workers. PHOTO/FILE/NMG
What you need to know:
- The call comes at a time when Uganda is nearing first oil despite delays that have spanned more than 10 years now.
Small and Medium Enterprises (SMEs) must not be tempted to take loans in order to invest in the oil and gas sector, according to Federation of Small and Medium Enterprises.
The call comes at a time when Uganda is nearing first oil despite delays that have spanned more than 10 years now.
Government had projected that Uganda would have first oil in 2016. However, there had been unprecedented delays and deferral of new timelines.
Therefore, Mr John Walugembe, Federation of Small and Medium Enterprises executive director, said businesses should moderate their expectations in the oil and gas sector and restrain themselves from borrowing due to a number of uncertainties.
Mr Walugembe, who was speaking during an engagement with the media, said: “We need to understand that there are changes in the global economy that might affect our ability to benefit from the industry as would have been desired. Some SMEs might want to speculate, take out loans and put themselves in precarious situations, don’t do that.”
Ugandans who invested in the oil and gas sector years back have been counting losses and continue to be uncertain of when production is expected to start.
Mr Ronald Kanyerezi, Bemuga Holdings chief executive officer, admitted that the company over invested in the oil and gas industry, which gravely affected its operations.
“Over investment was a problem. You end up stocking so much assets when the industry goes down, you are stuck with them and heavy bank loans,” he said.
Uganda’s oil and gas resources are estimated at 6 billion barrels with revenue projections of $2b annually.
After years of stalling, the industry has registered increased activity after President Museveni and President John Magufuli of Tanzania signed the $3.5b crude oil pipeline deal.
This has raised anticipation among sector players and has been boosted by international oil players, who recently agreed over the stalled exit of Tullow Oil stake.
Mr Walugembe emphasised that small and enterprises should take well informed decisions before investing in oil and gas while maintaining focus on other sectors of the economy.
