Oil Discovery in Uganda: Managing Expectations

1. Oil Discovery in Uganda: Managing Expectations By: Lawrence Bategeka; Julius Kiiza; and Sarah Ssewanyana

2. Methodology Critical Review of published literature – government documents and press reports; Primary data collected via interviewing a) Leading politicians; b) Top Government bureaucrats in the Ministry of Energy; c) Top officials of Local Governments in the Hoima, Masindi, Kibaale, and Buliisa districts; d) Oil companies; e) Grass-root communities in the oil area; and f) Officials of Bunyoro Kitara Kingdom.

3. Expectations Management: Setting the Stage Expectation management is one of the inescapable challenges in modern governance – three major expectation management strategies: Laissez-faire - allow the citizens the right to think, say or publish whatever they wish. This strategy most times allows civil society to give inaccurate information to citizens; Uganda seems to have adopted this strategy! Exaggeration - largely by populist politicians to mobilize support; Under-reporting - used in advanced democracies where empty political promises are punishable; This has also been tried in Uganda.

4. Positive and Negative Expectations • Positive Expectation – Hope that oil and the associated windfall revenues will deliver substantial social, economic and infrastructural improvements; attainment of economic sovereignty; liberate Uganda from donor dependence; • Negative Expectation – oil curse or a situation where abundance of oil paradoxically leads to economic stagnation, the death of other exports, and conflicts over the allocation of resources;

5. Expectation Levels National expectations (Positive and negative); Company expectations (positive and negative); Local Government (Positive and negative); Uganda community (Positive and negative); Local community (source of oil); Individual expectations (ordinary citizens, politicians, Government bureaucrats etc)

6. Oil Curse Related Expectations Entrenching a primary commodity economy; Repositioning government as the key driver of growth; Erosion of citizens’ duties and obligations such as payment of tax; The problem of political instability; The problem of “leakage” or corruption; Entrenching authoritarian rule or unaccountable governance; Environmental and health risks; Exaggerated expectations - exerting pressure on Government to spend; fiscal indiscipline to the detriment of sustainable economic growth;

7. Oil Curse Related Expectations - Continued The Economic Views of the Oil Curse: a) Rent seeking or greed based; b) Secessionist wars The Political Views of the Oil curse – the renter state: Reduced incentive of the rulers to levy domestic taxes; Oil states tend to have weak institutions – they have less incentive to create bureaucracies to raise revenue. Oil states tend to be vulnerable to insurgency; Leaders of oil states tend to be less accountable to their citizens. The probability of official corruption, authoritarian rule or dictatorship tends to be high. The real source of the “oil curse” is not the oil; it is economic and political mismanagement; it explains the difference between good and bad performers.

8. Oil and Uganda’s Political Economy – can the oil curse be avoided? The political events from 1986 show that Uganda is a young democracy; The Uganda constitution came into being only in 1995; Several elections (or voting) have been held since 1986: 1989 (national and local government); 1990 (constituency); 1996 (national); 1997 (local government); 2000 (referendum); 2001 (national and local government); 2006 (national); There is political pluralism in place – many political parties but only five with elected MPs; Uganda is a Low Income Country (LIC) with 31% of the population living on less than one dolor a day.

9. Oil and Uganda’s Political Economy – can the oil curse be avoided? • The discovery of oil has raised high hopes for the electorate • However, there is also apprehension • Politicians are likely to make exaggerated promises to the electorate because of oil. • The oil question is likely to have a big bearing on the politics of Bunyoro (the source of oil)

10. Oil and Uganda's Political Economy – Legal Framework for oil development • A National Oil and Gas Policy is in place – the law to give it legal effect not yet in place. • Key beneficiaries mentioned in the Oil and Gas Policy include i) the Central Government; ii) the Oil exploration/extraction companies; iii) Local governments at the source of oil; and iv) land owners • Bunyoro Kingdom is demanding recognition as a beneficiary.

11. Oil and Uganda's Political Economy – Legal Framework for oil development • Uganda and the oil companies have signed Production Sharing Agreements (PSA); • The details of the PSAs are kept away from the public – though initially reported to be very favorable to Uganda, a publication by PLATFORM in September 2009 says the PSAs are “designed for company profit, not Uganda’s development”; • Civil society and Parliament have demanded to access the PSAs; • DRC has expressed concern about Uganda’s oil exploration (advancing fast); that the oil is a shared natural resources – Boarder disputes (ownership of Rwankwanzi Island).

12. Oil and Uganda's Political Economy: Socio-Economic Dynamics in Bunyoro • As oil exploration continues, oil has been discovered in Hoima and Buliisa districts; • Because of oil discovery, the people of Bunyoro (mainly the Banyoro) have high hopes of the following: i) infrastructure (e.g. roads, rail network); ii) schools; iii) a university; iv) improved health services; v) reduced poverty; etc. • Bunyoro’s demands relating to oil discovery arise from a feeling of marginalization in terms of development – that the discovery of oil presents a development opportunity;

13. Oil and Uganda's Political Economy: Socio-Economic Dynamics in Bunyoro • Bunyoro Kitara Kingdom Demands that: • The Central Government should transfer ownership of land where oil has been discovered from UWA to the kingdom; • Oil companies should establish offices in Bunyoro and give higher chances to the people of Bunyoro for technical jobs. • Inclusion of the Bunyoro Kingdom in the National Oil and Gas Policy and recognize it as beneficiary. • Inclusion in decision making processes that will impact on the lives of the people of Bunyoro (Government and/or on the Boards of the oil companies).

14. Oil and Uganda's Political Economy: Socio-Economic Dynamics in Bunyoro • The Local Governments of Bunyoro demand that: • The Oil and Gas Companies should establish liaison offices in the region to coordinate development planning; • The Oil and Gas companies should involve them in the social responsibility undertakings by the oil companies; • Gazetting of the area where oil has been discovered for planned urban development;

15. Oil and Uganda's Political Economy: Socio-Economic Dynamics in Bunyoro • MPs from Bunyoro demand that the central Government should: • Reduce the secrecy surrounding oil exploration and exploitation; • Develop a comprehensive plan to sensitize the people of Bunyoro; the plan should involve the MPs; • Establishment of a regional tier government for the benefit of the entire Bunyoro; • Increase public sector investment in Bunyoro.

16. Oil and Uganda's Political Economy: Socio-Economic Dynamics in Bunyoro - Continued • The Local Communities around the oil wells for now praise the oil companies because of: • Improved accessibility by road; • Maternity built in Kyehorro village; • Some schools have been constructed; • Jobs for unskilled people • However, the same communities demand: • Significant improvement in their welfare • No interruption of their fishing lifestyle

17. Oil and Uganda's Political Economy: Socio-Economic Dynamics in Bunyoro • Other key issues at the source of oil • Land –press reports point to massive land-grabbing; yet no land grabbing was reported on the ground except in Buliisa district where the Baraaro occupied the land for the Bagungu; the Bagungu claim that some big army officers are behind the Baraaro. • Development and/or jobs - The Banyoro in general feel marginalized; some said that they could resist Government exploitation of oil by denying it votes or even militarily.

18. Opportunities and challenges of oil discovery in Uganda • International level opportunities • OPEC country; from LIC to Developing country • Leverage in management of the economy • Uganda’s status in the EAC & Great Lakes region; • International level challenges • Handling implications of the new status • Managing reduced international impact on economic management & the politics of Uganda • Cross border conflicts; shared resources

19. Opportunities and challenges of oil discovery in Uganda • National level opportunities • Human development • Economic development • National level challenges • Abuse of oil wealth; weak institutions • Reversal of the democratization process • Maintaining export diversification • “Public sector driven economy” replacing “private sector driven economy. • Inequitable distribution of oil benefits • Maintaining peace (nationally and in Bunyoro)

20. Opportunities and challenges of oil discovery in Uganda • Bunyoro Kitara Kingdom level opportunities • Human development • Economic development • Bunyoro Kitara Kingdom level challenges • Meeting the expectations of Bunyoro (development & jobs) to avert rebellion. • Land issues – Bunyoro Kitara Kingdom and UWA claim over the same land; and the Baraaro question. • A regional tier Government for Bunyoro

21. Conclusion • Interest of some stakeholders have been taken care of: i.e. i) central government; ii) oil companies; iii) local governments; and iv) land owners; • Interest of communities in Bunyoro and the Bunyoro Kitara Kingdom need to be catered for; • Secrecy is fueling inaccurate reporting and varied expectations – some positive and others negative; • Exaggerated expectations are not managed well; • Exaggerated promises (the good in the PSAs) are increasingly being doubted; • Peoples’ anxieties appear to spring from past record of corruption in public office.

22. Conclusion - Continued • Governance matters – but what form of governance? Is democracy the answer? • Institutions matter (the requisite legal and regulatory frameworks); with regard to oil, these are largely missing; putting institutions in place should precede oil production. • Building a culture of “shared” growth among the country’s citizens; • Dealing with official corruption; • Civil society must play an active role in debates on the all issues relating to development of the country – including oil; • Government should keep its citizens informed about developments in the oil sector.

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