Musaazi Namiti
The headlines last week were about the 60,000-barrel-per-day refinery that the Dubai-based Alpha MBM Investments is set to construct in the Albertine region after signing an agreement with the Ugandan government. It is not hard to see why a country with deep pockets is financing the project.
The refinery will cost a whopping Shs7.7 trillion. While Uganda has joined the club of oil-producing countries, it is far from being an oil-rich country. And that shows why its oil cannot be the magic wand people expect the government to wave and break the poverty grip.
We cannot, it seems to me, oil our way out of poverty with just 60,000 barrels of crude oil per day. Here is why. The current price of brent crude oil is $64. If we were to divide the total annual oil revenue of $1.4 billion by Uganda’s population of 45 million people, it would come out to around $31 (Sh115,200) per person.
But this is a hypothetical breakdown and does not reflect how oil revenue will be allocated. Refineries make money not just by selling crude oil, but by turning it into high-value products such as bitumen (asphalt), jet fuel, liquefied petroleum gas (LPG), lubricants, etc.
Yet the fact remains that countries that have oiled their way out of poverty typically produce several million barrels per day, and nearly all of them have lower populations than Uganda’s. For example, Saudi Arabia, with a population of 38 million, produces 9–11 million barrels per day. (With 60,000 barrels per day, Uganda produces 0.6 percent of Saudi Arabia’s output.)
Other major oil producers, such as the United Arab Emirates (2.9 million barrels), Norway (1.9 million barrels) and Kuwait (2.4 million barrels), have even smaller populations. Kuwait has 4.4 million, Norway has 5.4 million and the UAE has 9.2 million.
Scale matters. Many expatriates working in the Gulf Cooperation Council member states (all oil producers) — Bahrain, Kuwait, Oman, Qatar, UAE, Saudi Arabia — do not even pay taxes because the governments get enough revenue from their oil. The people of these countries barely pay taxes, unlike poverty-stricken Ugandans who are forced to do so.
If Uganda had fiscal discipline and transparent governance, it would probably do fine with the 60,000 barrels. But from the look of things, it is going to grapple with two main problems. The first is runaway corruption and the second is the oil illusion.
The current government cannot fight corruption. There are more corruption cases than inmates in prisons convicted of corruption. A bigger problem is that the governing party still wants to be in power and probably “taste” a bit of oil revenue. It is famous for using underhand methods to win elections.
That means fighting corruption under a new administration remains a dream. Then there is the oil illusion. The government has borrowed heavily, and technocrats thought that oil revenue would be used to repay the loans. But when you factor in corruption, the huge sums spent on salaries of more than 500 MPs the country does not even need, State House’s profligate lifestyle, etc, you have to conclude oil revenue will struggle to service our debt.
Uganda could go the way of other oil producers in Africa. They have produced oil for decades but remain trapped in poverty. Nigeria, Africa’s leading oil producer, even imports oil because some of its oil refineries do not work.
And neighbouring South Sudan has little to show for its oil; sometimes it even fails to pay civil servants in time. As things stand, Dubai and China could benefit from our oil more than Ugandans.
Mr Namiti is a journalist and former
Al Jazeera digital editor in charge of the Africa desk
