Handshake Scandal: Can Uganda Swim Against The Tide of The Oil Curse 2

Uganda is sitting on a prospective goldmine. As outlined in the previous article, the country has joined the ranks of other African nations with sizable proven oil reserves – a potential panacea for its economic woes.

Frist and foremost, the resource can help fulfill energy requirements domestically. According to a presentation made by Mahathi Infra Uganda Limited at the Joint Oil and Gas Convention and Regional Logistics Expo organized in late April, the demand for petroleum products in Uganda stands at 1.6 million metric tons.

Combined with 600,000 metric tons of products being transported to South Sudan and the Democratic Republic of Congo via the country, the total requirement is 2.2 million metric tons. This is expected to rise to 3 million metric tons by 2020. The graph below has been taken from the presentation made by Mahathi.

However, effective execution of crude oil production and efficient use of revenues from the industry, once it becomes operational, remain substantial challenges for the country.

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The ‘curse of Africa’

Despite abundant natural resources, especially oil, many African nations have struggled to harness their full potential. That is due in part to various degrees of corruption and lack of efficient use of resources once they go into production.

For instance, Equatorial Guinea produces over 300,000 barrels of oil per day, about 90% of which is exported. But even then, this nation of less than one million residents remains with over three-fourths living below the poverty line.

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At the 7th Annual High-Level Policy Dialogue on the Budget in May, Danish ambassador to Uganda, Mogens Pedersen, was quoted as saying, “Please, tell me one African country, where oil has been a blessing. It is always a curse for inclusive development, mainly because of corruption.”

Uganda is currently studying what has come to be known as the handshake scandal. It is alleged that under the “Presidential Handshake” scheme, 42 government officials who handled the tax disputes with Heritage Oil and Tullow Oil were awarded 6 billion Ugandan shillings ($1.7 million). The fact that they were given additional money for doing what was supposed to be their job has raised eyebrows.

Can Uganda swim against the tide?

In response to corruption concerns, David Bahati, the Minister of State for Planning, said “You are going to see Uganda; our oil will not be a curse. All the systems have been put in place to ensure oil is a blessing for Uganda. That is why we have been cautiously slow.”

Further, once oil revenue starts coming in, the country plans to place it in a petroleum fund, which has been structured with the help of Norway. Uganda intends to use the money for developing infrastructure.

 

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