How Shs500b can change extractives 

The new financial year (2023/2024) officially kicked off on Saturday, July 1, amid great expectations of key movers of the economy. They expect the economy to grow faster, and create jobs and related opportunities.

During this period, the economy is expected to grow at 6 percent higher than the 5.5 percent registered in FY2022/2023. Faster growth means more jobs in the economy– which is a necessity for Uganda.  It would also mean increased tax revenue collections which is good news for the government’s service delivery plan. 

The extractive industry – which covers oil and gas and mining – is among the areas that the government is banking on to achieve this growth.  In the budget speech for FY2023/2024, Finance minister Matia Kasaija said foreign direct investment (FDI) in the oil and gas sector played a crucial role in stabilising the exchange rate and the overall positive economic performance in FY2022/2023.

As a result, the government allocated Shs447 billion in the new budget to fast-track the development of petroleum resources this financial year. This money will go towards fast-tracking the construction of the East African Crude Oil Pipeline (EACOP), the National Oil Refinery, and related sector infrastructure as the country hopes to ‘see’ its first oil in 2025.

As Uganda Chamber of Mines and Petroleum (UCMP), we entirely support all efforts towards attracting investments in the extractive sector given its tangible contribution to the economy.
However, we urge the government to ensure enhanced value retention for this money by allocating some of it towards the implementation of the National Content Fund (NCF).

The good thing is that the country’s legal and policy framework is strong enough to support investments and related activities. Local content is already yielding tangible results in the oil and gas sector after the country reached its Final Investment Decision (FID) in February last year.  For instance, official figures from the Petroleum Authority of Uganda indicate that Uganda’s oil and gas sector has employed more than 11,670 people with local citizens taking more than 93 percent of the jobs at the end of May this year.

Oil companies CNOOC and Total Energies directly employed 808, of whom 72 percent were Ugandans while contractors employed 10,955 of which 96 percent were Ugandans mainly from the local communities of the oil-rich Albertine Graben.

In addition, approximately 11,800 Ugandans have been trained and certified in various oil and gas disciplines of welding, health safety and environment, heavy goods vehicles, and scaffolding among others. 
Over the last five years, approximately 90 percent of the procurements have gone to Ugandan companies ($1.2 billion out of $1.3 billion), and 20 percent of this $ 1.2 billion went to Ugandan companies with Ugandan ownership. 

Furthermore, approximately 73 percent of the companies, equivalent to 460 out of 624 involved in supplying the sector have been Ugandan companies. More than $988,650 have been channeled to the community economy in exchange for the provision of goods and services.
We call on the government to engage with private sector players and other actors to come up with a minerals strategy to define a roadmap that would attract investment in value addition in the sector. 

 Geological surveys indicate that Uganda has the potential for commercial exploitation of over 20 categories of minerals. We also urge the government to walk the talk in line with the third National Development Plan’s  priorities such as development of iron ore, gold, copper, phosphates, and development minerals (marble, silica sand, aggregate, and limestone  for  commercial purposes.

Globally, these minerals have become the most sought after mainly for the application in the batteries and turbines necessary for transition from fossil fuels.

The author, Mr Humphrey Asiimwe is the Chief Executive Officer of the Uganda Chamber of Mines and Petroleum (UCMP).