What you need to know:
“Oil discovery alone may not transform a country. Saudi Arabia, for example, is not as advanced as Japan.”
The Secretary to the Treasury, Mr Ramathan Ggoobi, argued in these pages that agriculture alone cannot transform a country. Indeed, I agree. Agriculture alone cannot transform Uganda. Mr Ggoobi also posed an interesting question, “How did the Americans, the Canadians, the Europeans and more recently the East Asians achieve the high physical quality of life they enjoy today?”
Before we answer that, let’s take stock of our own reality. While we have recently discovered oil, agriculture is currently the heart and soul of our economy. At least 72 percent of Ugandans are employed in agriculture. Transforming agriculture will certainly benefit most Ugandans. Elsewhere, the Netherlands earns more than $100b from agricultural exports. It is the second largest agricultural exporter in the world. The Netherlands is about six times smaller than Uganda.
So, why does the Netherlands earn almost 14 times our Budget from its agriculture alone? What kind of farming are they doing that produces such astronomical wealth? Of course, the Dutch have found incredible eco-friendly ways to be the food basket of the world. However, agriculture has been transformed by more than new farming methods. In reality, global agriculture has been transformed, to a great degree, by oil.
One study states that “in 1900, American farmers needed an average of about three minutes labour to produce 1kg of wheat, but by 2000, the time was down to just two seconds and the best producers now do it in one second”. As efficiency increased, Americans employed in agriculture reduced from about 40 percent of the population in 1900 to 1.4 percent of the population today. This is as a result of the massive mechanisation of agricultural activities which was made possible by fuel-powered engines in tractors.
We have also seen better yields as a result of the use of inorganic fertilisers. Natural gas is used to produce inorganic fertilisers. Oil and gas are also used in the manufacture of pesticides. Oil is needed at all stages of food production: from planting, irrigation, feeding and harvesting, through to processing, distribution and packaging. Previously, agriculture was powered by the sun and organic fertilisers, now we need oil and gas.
Ecologist Howard Odum wrote, “The great conceit of industrial man imagined that his progress in agricultural yields was due to new know-how. This is a sad hoax, for industrial man no longer eats potatoes made from solar energy; now he eats potatoes partly made of oil.”
The logistics required to make sure that flowers sold in Amsterdam reach New York on the same day are logistics entirely dependent on oil. Another by-product of oil is asphalt. Asphalt is mainly used for paving roads. American refineries produce 30 million tonnes of asphalt per year.
It is safe to say, oil spurs and fuels industrialisation. In 1970, China consumed 540,000 barrels of oil per day. Today, China consumes 14.23 million barrels of oil per day. In that same period, China has lifted about 700 million people out of poverty. It has also become the world’s factory. China’s industrial revolution has certainly been driven by increased use of oil. America consumes 19.78 million barrels of oil per day. It is the biggest consumer in the world and the most advanced country in the world. In Uganda, we consume approximately 37,000 barrels of oil per day. In other words, we consume 0.0004 percent of global oil.
So, how did the advanced countries achieve an improved quality of life? By using oil. Oil discovery - alone - may not actually transform a country. Saudi Arabia, for example, is not as advanced as Japan and for many in Africa, oil discovery has left them worse than it found them. However, I am yet to learn of a country that has been transformed by relying on wind energy.
In light of this, we need to add value to what we produce, including adding value to our oil. It means building the refinery and establishing a petrochemical industry. Policymakers across government must prioritise this. Any discussion about transformation to achieve the high quality of life that is enjoyed by the Americans, the Canadians, the Europeans and the East Asians must include plans to establish the refinery and to support efforts towards agriculture industrialisation. No commodity is an island.
The writer is an advocate and partner at Kampala Associated Advocates