Can your business win oil contracts?

Georgina Kirabo.  Photo / Courtesy

What you need to know:

  • Do not wait for tenders and bids to be advertised but have this ready for submission whenever it is required. The national content plan should address aspects such as the number of Ugandans you employ, the number of Ugandans in the management team, training opportunities and internships for fresh graduates, research initiatives to transfer knowledge and technology to Ugandan companies.

The Government has developed policies that the licensed oil companies and their service providers must meet to ensure Ugandan citizens and businesses benefit from the oil and gas sector. This is what has come to be known as national content. Our national content is mainly concerned with three things: employment of Ugandans, building capacity of Ugandan citizens and businesses, and skills and technology transfer.

Why is national content a big deal?

The biggest sustainable benefit that a country can get from developing the oil resource is through the impact and value addition that it brings to its people. For example, it is anticipated that with an expected investment of more than $15 billion during the development and construction phase, the EACOP project alone will employ more than 150,000 Ugandans.

Therefore, oil companies are required to demonstrate how national content is being incorporated and implemented within their petroleum activities in Uganda. This requirement is tied to the licence and subsequent renewals and is closely monitored by the Petroleum Authority of Uganda (PAU). As such, every company that is looking to win a tender or retain a contract in the oil and gas industry must incorporate national content within its business. National content also contributes a significant score when evaluating bids in the industry.

How can a business enhance its national content?

National content is measured by the level of use of Ugandan local expertise, citizens, registered entities, businesses and the utilisation of Ugandan human and material resources for the provision of goods and services to the petroleum industry in Uganda. Below are some of the strategies that your business can undertake to enhance the national content.

Register in Uganda

Businesses that register in Uganda are considered to be Ugandan companies and therefore qualify to bid for the contracts in the industry provided they meet the necessary bid requirements. In addition to registering the entity, the business must demonstrate value addition by using Ugandan local raw materials, employ at least 70 percent of Ugandans and be registered on the national Supplier Database as a provider in the oil and gas industry.

Prepare a national content plan. Do not wait for tenders and bids to be advertised but have this ready for submission whenever it is required. The national content plan should address aspects such as the number of Ugandans you employ, the number of Ugandans in the management team, training opportunities and internships for fresh graduates, research initiatives to transfer knowledge and technology to Ugandan companies.

Identify potential joint venture partners or subcontractors. Foreign firms that have won large contracts are required to work with local Ugandan companies by sub-contracting a portion of their work to Ugandan companies that have the required experience and expertise. Working with Ugandan businesses across the value chain contributes to national content.

Employment of Ugandans at management and technical levels to meet the required thresholds. For example, no more than 30 percent of management level positions should be held by non-Ugandans for businesses providing goods, services and works in the upstream while for the midstream, at least 20 percent of the management staff should be Ugandan citizens. The laws also provide that this should be increased to 70 percent and 60 percent within five years, for the upstream and midstream respectively.

This has good intentions in emphasising national content for the benefit of its citizens. National content will continue to be of key national importance in developing the oil resource.  Businesses should, therefore, incorporate national content within their operations and position themselves competitively in the market.

EMPLOYMENT TERMS

The law

 No more than 30 percent of management level positions should be held by non-Ugandans for businesses providing goods, services and works in the upstream while for the midstream, at least 20 percent of the management staff should be Ugandan citizens. The laws also provide that this should be increased to 70 percent and 60 percent within five years.

Currency market

 Stephen Kaboyo

The Uganda Shilling surrendered some ground, undercut by a surge in dollar demand from offshore buyers, oil and merchandise importers. The unit traded just above the 3600 key level for most of the trading sessions.

Currency markets In general have not escaped the steep losses and wild swings seen across other asset classes with many facing massive downward pressure.

In particular, the Kenya shilling weakened to a new record low due to rising global energy prices triggered by the Ukraine war, touching levels of 114.05/25.

In the global markets, the current geopolitical shock is serving as a catalyst to trigger mean reversion where the US dollar will continue to outperform all the major currencies. The greenback hit a new five-year high riding on safe haven sentiment while liquidity in other currencies remained extremely poor leaving room for volatility.

On the economic front, Uganda faces upside risks of food and headline inflation amid rising oil prices and supply chain constraints that will likely impede economic recovery going forward. At the same time, this backdrop points to a period of less inward investments due to rising global inflation and energy prices that will result in further deterioration in the trade balance.

By Georgina Kirabo. The author is the senior associate, Tax, PwC.

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