Uganda has joined the Extractive Industries Transparency Initiative in order to subject its oil industry to scrutiny and promote accountable management of revenues.
After years of prodding by legislators, civil society groups, international and donor agencies, Uganda has signed up to EITI to dispel concerns of secrecy in the management of anticipated petrodollars.
Secrecy about contracts in the extractives sector has been found to fuel public suspicion and promote corruption and have denied countries the benefits of fair deals as well as attracting high-quality investments.
Uganda’s decision is expected to enhance confidence in the country’s oil industry, something that is critical in attracting financing for upstream facilities like the pipeline and refinery.
Uganda’s Minister for Finance Matia Kasaija said joining EITI will strengthen the government’s efforts of ensuring overall transparency in the sector, strengthen tax collection, improve the investment climate, build trust and create a lasting value of petroleum resources.
“The decision to join EITI was informed by the appreciation of the values that EITI promotes with regard to disclosure of information about the whole extractive governance chain,” he said.
In effect, Uganda will be required to make public all contracts regarding its oil sector development ranging from allocation and ownership of licences, contractual, legal and fiscal terms, production and exports, payments by companies and expenditure of petrodollars.
Uganda joined the initiative after agreeing to adhere to EITI requirements including allowing for multi-stakeholder oversight, disclosure of information about legal and institutional framework, disclosure of information in exploration and production, transparency on revenue collection and accountability on revenue allocation, including social and economic spending.
In East Africa, Tanzania is the only country that is a signatory to EITI, a global advocacy group that sets and promotes standard of open and accountable management of mineral resources. A total of 51 countries are members of the initiative that was established in 2003.
Uganda’s decision to join EITI now shifts the focus to Kenya, which has refused to join the initiative despite promises dating back to 2012.
President Uhuru Kenyatta has even promised to make public agreements and contracts signed between the government and oil companies like Tullow Oil but this has never materialised.
Ironically, although Tullow, which also discovered crude oil in Uganda is not obligated to make public its operations in Kenya, the British firm has been disclosing contracts in other countries like Ghana which has emerged among African countries committed to transparency and accountability is managing its resource wealth.
Kenya has even undertaken a comprehensive donor-funded petroleum sector technical assistance project whose objective is to strengthen the capacity of the government to manage the petroleum sector and wealth for sustainable development based on joining EITI.
“Kenya has been joining EITI since 2012 and the lack of movement on this front is largely down to some public officials’ unwillingness to undergo scrutiny,” said Charles Wanguhu, platform coordinator, Kenya Civil Society Platform on Oil and Gas.
He added that EITI offers an opportunity for increased transparency in the oil and gas sector that is currently lacking.
In Uganda, the government has awarded nine production licences to three international companies —Total, Tullow and China’s CNOOC — which are developing the country’s upstream infrastructures valued at $10 million ahead of commercial production expected in 2020.
These include a joint project with Tanzania to develop a pipeline that will facilitate oil exports through the port of Tanga.
The country has proven crude oil reserves of 6.5 billion barrels, about 1.4 billion of which is recoverable.
“The existence of large quantities of extractive resources can translate into prosperity and economic development if the revenue is managed well,” said Mr Kasaija.
Uganda is already receiving praise for the decision to join EITI, with the head of European Union Mission in Uganda Attilio Pacifici terming it a positive step towards improved public financial management and accountability of natural resources as the country prepares for oil production.
Uganda joins a total of 25 African countries which are a signatory to the EITI.