It is about 36 years since the mining of copper at Kilembe Mines in Kasese district ended. But up to now residents still suffer the consequences of pollution.
A recently released research shows that high levels of metal concentrates including copper, cobalt, nickel, zinc and arsenic remain present in agricultural soils and public water sources.
Researchers from Makerere University believe that the minerals are causing danger not only to the community but livestock and environment. Diseases like cancer and ulcers in the area are attributed to the pollution that was caused by the mining.
Dr Abraham Mwesigye, an environmental toxicologist at the College of Agriculture and Environmental Sciences, Makerere University, found that the mining in western Uganda from 1956 to 1982 left over 15 mountains of waste containing cupriferous and cobaltiferous pyrite dumped within a mountain river valley.
According to the researcher, the waste water was not treated to remove heavy metal, thus exposing the environment to contamination.
Untreated water has found itself into water bodies like Lake George and River Nyamwamba, the main water sources in Kasese and areas around Mpondwe.
Mwesigye released his damning report on June 7 and explained that samples collected from soil, water, foods, forage, sediments and toe nails from local volunteers were analysed at the school of biosciences, Nottingham University, UK.
They found high levels of copper, cobalt, nickel, zinc, arsenic and lead in the soils, water sources, house dust and river sediments.
Beans, yams, cassava, sweet potatoes, maize, ground nuts, bananas and amaranthus vegetables appeared to be accumulating the metals beyond acceptable thresholds for human consumption.
The report further indicates the source of contamination as mine tailings and underground mine water. Aluminum, copper and iron were more abundant in public water sources, he said.
“The food crops and forage grown in these areas contains significantly higher concentrations of copper, cobalt, zinc, possibly taken up during growth and accumulated in the foods, which could lead to consumption of the same elements by local people,” he said.
“We [carried out] tests on human nails from Kilembe area and it confirmed that children ignorantly play in dangerous areas that expose them more than adults to the mine metals, especially copper, cobalt and nickel.”
Effects on man
The consumption of food contaminated with metals can cause cancer, gastro-intestinal complications, a decrease of immunological defenses, physical and mental disabilities and retardation.
The large amounts of soil metals could affect soil productivity. Drinking water is contaminated mainly with cobalt, iron, aluminum and manganese, which exposes the people to heavy metal poisoning.
The dust in peoples’ homes and public buildings especially along the River Nyamwamba valley and downhill of tailing sites could be inhaled or accidentally ingested.
With forage containing large amounts of copper and zinc, these elements could affect animal health and the quality of milk and beef produced in the Kilembe area.
What to do
Mwesigye suggested that there should be enforcement of proper waste storage and disposal protocols, and the local people living in contaminated environments should be sensitised about the dangers, so that they make informed decisions.
Also, there is need for construction of containment all around Kilembe tailing sites and land filling to safeguard the soil.
There is urgent need to treat Kilembe mine underground water before it is discharged into River Nyamwamba; need for remediation activities for soils along River Nyamwamba, he added.
In October 22, 2008, The Observer carried a story about Lake George’s strange greenish-blue fish. Fishermen at one of the landing sites discovered a strange blue fish, which was suspected to have absorbed excess copper.
However, the local authority then responded that there was no research done to prove this claim, noting that the abnormality may have another cause, such as disease.
The then General Manager of Kilembe Mines, Fred Kyakonye Weraga, said that the coloured water discharged from the mines into the lake is green algae, which results from excess mineral nutrients in the water, a phenomenon known as eutrophication.
This phenomenon is also known to be damaging to the sustainability of the fisheries sector. Weraga claimed that copper, being a sulfide does not dissolve in water. He admitted that Kilembe Mines has not done anything to stop solid waste which was extracted from the copper tunnels, being dumped along the nearby valley.
With many homes having been built using sand from the contaminated River Nyamwambaa, there is urgent need for the environment stakeholders to plan and implement mitigation programmes. The option of resettling people living in contaminated areas could also be explored.
source: The observer
People have made various suggestions on how Uganda’s oil revenues ,including the Petroleum fund ,should be used. Currently, all oil related revenues are placed in the Petroleum Fund that was established by the Public Finance Management Act, 2015.
According to the Act, all petroleum revenues, which accrue to government, shall be paid into the Petroleum Fund. And management of this fund is placed under the Minister of finance. “The Minister shall be responsible for the overall management of the Petroleum Fund and shall oversee the transfer into and the disbursements from the Petroleum Fund,” reads section 55 (3) of the PFMA.
Uganda is moving closer to the dream of commercializing its huge oil and gas reserves currently at 6.5 billion barrels after years of back and forth delays. The dream is closer to reality after signing a $3 billion deal with a consortium of companies, known as Albertine Graben Refinery to build and operate a 60,000 barrels-a-day refinery.
Uganda also recently hit yet another landmark after agreeing to sign an intergovernmental accord with Tanzania by end of June to speed up construction of the $3.5 billion crude oil export pipeline. With deals for the refinery and pipeline now fully entrenched, oil development is poised for the next big stage that should see Uganda join the league of oil producers.
But amid the pomp and great expectations, Ugandans must prepare for the proper utilisation of oil revenues if we are to cement our place up the developmental ladder and deliver to the common man and woman the transformation that the oil resource promises. One investment that is vital to our economy and to securing our future would be in renewable sources of energy.
Investing in renewable energy to power our country could see us tackle climate change which is a reality today and a major threat to sustainable progress in the country. It will provide cleaner and environmentally friendly energy for industrial purposes, cooking, transport and power generation.
Although government has tried to develop Uganda’s renewable energy sector with projects such as Karuma and Isimba dam expected to come on line this year,a lot of the country’s renewable energy potential remains largely untapped. Uganda is richly endowed with renewable energy resources for clean energy production and the provision of energy services. According to the renewable energy policy, the country has a solar electricity potential of about 200MW, 1650MW from biomass, 800MW from peat, 2200MW from hydropower stations and 400MW from geothermal energy.
The total estimated potential is about 5,300 MW. Hydro and biomass are considered to have the largest potential for electricity generation. Kabaale, Hoima and Kasese districts in western Uganda, where the great rift valley and escarpment are located, have the greatest potential for generating geothermal energy. Overall, if we are to invest in renewable sources of energy we are blessed with a bounty to choose from .
According to statistics from the ministry of energy only 10% of Uganda’s population has access to clean energy and even less than 5% in rural areas .The majority of the population relies on wood fuels inform of wood and charcoal as a main source of energy for cooking which has led to massive environmental degradation and health hazards among households.
Renewable energy is at the forefront of low-carbon options as its green energy with no adverse effects on the environment unlike oil which is a fossil fuel that contributes to global warming.
Investing in these renewable energy sources can monumentally benefit Uganda economically. It could see government tackle problems of electricity reliability while decreasing the price of electricity, the cost of doing business in the country and help us realize our industrial potential. We will also have the capacity to indirectly solve problems of youth unemployment and poverty.
Finally, Uganda is signatory to the Paris climate accord and investment in renewables will contribute towards realisation of its commitments. According Uganda’s Intended Nationally Determined Contributions INDCs, the country has committed to a 22 per cent emission cut on a business as usual basis by 2030 in a bid to mitigate and adapt to climate change and transit to a low-carbon climate-resilient economy. Government hopes to do this by increasing renewable energy deployment and achieve a total of at least 3,200 Mega Watts renewable electricity generation capacity by 2030.
The world around Uganda is evolving in such a way that oil has no future in it. Uganda should be planning towards green energy transition.
By Diana Taremwa
Water Governance Institute
- Output to begin three years after investment decision is made
- Oil deposit in Albertine Graben to pump 40,000 barrels a day
Cnooc is likely to bring Kingfisher on stream three years after making a final investment decision, expected later in 2018, according to Likun Kuang, finance manager at Cnooc Uganda Ltd. The field is one of several in the Albertine Graben, an area estimated to hold 6.5 billion barrels of oil, where the government is targeting first production in 2020.
Three years is a “reasonable” period to get the Kingfisher development ready, Kuang said in an interview late Wednesday in the western town of Hoima. Cnooc plans to pump 40,000 barrels of crude a day from the field, feeding a planned 60,000-barrel-a-day refinery as well as an export pipeline to the Tanzanian port of Tanga.
Cnooc is developing Kingfisher on behalf of its partners, France’s Total and London-based Tullow. Total is taking the lead at Tilenga, which will have a capacity of 190,000 barrels a day.
Women look for gold in a rock at Acerere Gold Mining Site in Nakapiripirit District last year. PHOTO BY STEVEN ARIONG
Uganda’s natural resource base is one of the richest and among the most diverse in Africa. From fertile soils and good climate, the emerald hills and wild life, misty forests, fresh water bodies and snow-capped mountains, to the commercially viable oil reserves currently estimated at 6.5 billion barrels. For a very long time, before the discovery of oil, the country basked in adulation of its vast mineral deposits.
Across the world, there are a number of countries whose fortunes have been turned around by natural resources—mostly minerals—but in Africa generally, this has not been the case and there is little indication that this is about to change.
Neighbouring DR Congo is, for instance, considered to be one of the wealthiest countries in the world in terms of natural resources with huge deposits of diamonds, gold, coltan, uranium, tin, copper, cobalt, oil, tungsten, and many others but citizens of the war-ravaged country remain some of the poorest in the world. Economists and political scientists are constantly debating this contradiction. Yet 50 years ago, the mining industry was at the heart of many African economies—before and shortly after independence of many countries.
How and why everything fell apart is a combination of many factors ranging from political chaos resulting from civil wars, sporadic military coups, fall in prices of some commodities (including minerals), but mostly confusion and lack of prioritisation by successive governments.
In Uganda, towns such as Kasese in the southwest enjoyed the benefits of copper/cobalt and limestone mining; Tororo in the east bustled with activity of limestone and phosphate mining; Kabale and Kisoro with wolfram, tungsten, tin and beryllium, and Buhweju was a hub for gold mining. In fact, each region was famed for at least one or two minerals.
Things have changed
Today, gold mining in Buhweju and other new locations such as Mubende is a preserve of artisanals, including speculators, foreigners and big shots in government operating in shadows while in Kabale and Kisoro, it is the same script of illegal miners/smugglers and speculators running most of the show.
This state of affairs partly explains why the mining sector is in limbo and despite government’s various interventions over the last 30 years, including streamlining the regulatory environment through adoption of the mining policy in 2001 (currently under revision), the sector that once accounted for nearly 30 per cent of Uganda’s exports and 7 per cent of GDP has continued to perform way below average.
McKinsey, a New York-based consultancy in a report published in 2010, noted that Africa’s mining sector presents a paradox. That although the continent is strongly endowed with mineral resources, mining has not been the consistent engine of economic development that people in many countries have hoped for.
Uganda’s mining story dates back to pre-colonial times, but gained momentum during the British colonial administration between 1902 and 1939. This was when the first prospecting concessions were issued to individuals and companies – the East Africa Syndicate– in 1902 to prospect 100 square miles in Butiaba in Bunyoro for gold. By the end of 1908, 22 prospecting licences had been issued to cover the entire crown land in the protectorate.
In 1913, a British prospector, W. Brittlebank, got the first oil prospecting licence covering 898 square miles centering on Kibiro near Lake Albert where he had located oil seeps. However, the outbreak of World War 1 halted his activities up to the time when his licence expired in 1922.
In 1920, Capt A. W. Hills and Sir Phillip Lee Brocklehurst bought exclusive oil rights over a large area of West Nile at £50 (just Shs200,000 at the current exchange rate).
According to the Uganda Journal of 1967, mineral prospector J. G. Currie discovered gold in West Nile as early as 1915, though mining in the area did not pick up until 1920 when the Kilo Moto gold mines opened in Congo.
The opening of the Kilo Moto mines led to a rush by other prospecting companies such as Nile Congo Divide Syndicate from Congo to the West Nile sub-region. Though it did not find gold of economic value, the company discovered low grade copper in Manya area in West Madi.
More commercial deposits of minerals were found: Tin was discovered in 1925; gold in 1915 but its commercial mining started in 1933; wolfram in 1933; alluvial diamond in 1933; beryllium in 1922 and by 1959, Uganda had exported 1,063 tonnes of it, representing 11 per cent of the total world production. Others were limestone, copper, phosphate, cobalt, steel, etc.
The mining industry boomed during the British colonial administration, who, in fact, were pilfering most of the proceeds back home until their departure in 1962.
In the mid-1960s, President Milton Obote sent shockwaves in the economy with his Leftist tendencies—through the Common Man’s Charter—which catapulted him out of power a few years later. The period from 1971 up to around 1990 was marred by not just political but economic instability too.
From boom to burst
At the time of independence, the copper/cobalt from Kilembe in Kasese accounted for 5 per cent of the value of Uganda’s exports and the mining sector generally performed modestly. These fortunes gradually dropped over the years to its current contribution of less than 1 per cent to GDP.
“Besides economic turmoil, which set back most of our industry, over the years the global market experienced a big shift in commodities and their prices,” the Commissioner for Mines in the Ministry of Energy, Ms Agnes Alaba, says.
“This meant that investment in certain minerals was no longer lucrative,” Ms Alaba says, adding: “But it was and is still a matter of refocusing our attention; there is still huge potential in the sector.”
In fact, McKinsey in its research indicated that the period after the 2007/2008 global economic crisis was marked by “less appetite for the relatively high risk that usually comes with mining in many African countries.”
“Despitethe recent market turbulence, most observers expect demand for major mined commodities to grow strongly in the next 10 to 20 years, to support increased urbanization and infrastructure build-out in China and the emergence of India’s middle class. Africa, given its share of global resources, will surely play a significant part in meeting that demand,” McKinsey brief reads in part.
According to Ministry of Energy statistics, foreign direct investment in the sector rose from Shs18b in 2003 to Shs3 trillion in the financial year 2015/2016, particularly in gold, tin, phosphates, copper mining and processing projects. This excludes new minerals exploration projects.
The much anticipated investment of $620 million (Shs2.2 trillion) in the Sukulu phosphate complex in Tororo is the main driver of the current estimates.
Other major players include Hima Cement and Tororo Cement, the largest players in limestone mining for cement production. Last year, a Chinese company, Dao Marble, started mining and production of marble products from Karamoja. In 2013, the government attempted to resuscitate the Kilembe copper mines by leasing it to a Chinese company – Tibet-Hima – but the deal encountered some headwinds.
Similarly, revenues from licence fees and royalties increased from Shs1.8b in 2003 to Shs52b in 2011 but “between 2011 and 2014 there was a continuous decline in mineral revenues plunging back to Shs7.2b by end of Financial Year 2014/15,” according to the ministry estimates.
And given the extent of artisanal and illegal mining in the country, Ms Alaba said “a lot of the statistics are not captured.”
According to the Energy ministry’s Directorate of Geology, Survey and Mines (DGSM) which oversees the sector, as at the end of 2015, there were 818 mineral licences issued around the country, up from 100 in 2003.
However, several companies do not submit returns on the exploration work they have carried out.
Additionally, areas that are licensed for exploration work to determine the mineral deposits are actually parceled out actual mining activity. As a result, the Auditor General – in various reports says (and DGSM also admits) – that the country lost a lot revenues. For example, the Auditor General John Muwanga in last year’s audit submitted to Parliament in January indicated that Shs2.7b was outstanding in “annual mineral rent fees” by DGSM.
The audit also shows that royalties amounting to Shs354m was uncollected as at June 2017, a practice which “denies landowners the revenues arising from use of their land, which potentially can affect the relationship between mineral right holders and landowners,” the report notes.
Separately, one private mining company had not paid royalties amounting to Shs679 million caused by failure by DGSM to enforce payment.
Grind to halt?
According to Ms Alaba, progress is being made: “[Previously], we did not know much about the proven reserves for the minerals and it was hard to convince anyone to come and invest in what we are not sure of but we are making good progress on surveys.
“In 2012, we undertook some airborne geological surveys that gave us preliminary estimates and we are working with data to attract more investments,” she says.
The World Bank, African Development Bank, and Nordic Development Fund funded the survey. At the several mining conferences convened by the Uganda Chamber of Mines and Petroleum (UCMP), an association of formal mining players, experts have repeatedly pointed out lack of adequate geological data for mineral exploration as a setback to the growth of the sector.
This is worsened by other challenges such as land acquisition and the poor infrastructure in the countryside, where most deposits are located. The government is currently in the process of revising the mining policy, which Ms Alaba said will “usher in a new regime” in the sector with the objective of increasing the economic contribution of mining to the economy through more private investment.
Additionally, there will be provisions that would finally define artisanal mining in Uganda and this allows a process on how it can be legalised. The policy also attempts to have a mix of competitive bidding and first come first serve basis in applications for an exploration licence.
Among the ongoing interventions to revive mining also includes surveying of the Karamoja sub-region to get enough geological data about mineral deposits in the area. UCMP’s board chairperson Elly Karuhanga says this was flagged a priority during the Presidential Investors Round Table (PIRT) meeting at State House in Entebbe early this year.
PIRT), conceived in 2004, is a high level forum chaired by the President and coordinated by the Prime Minister. It brings together select foreign and local investors to advise government on, among other things, how to improve the investment climate. President Museveni has on various occasions outlined plans to revive mining, including twice decreeing against exportation of minerals—Tungsten, iron, gold, cobalt, phosphate, Granite, salt, and copper—in raw form.
He argued that the country was losing a lot of money in wasted value addition but later made a U-turn following intensive lobbying and complaints by investors.
In part two tomorrow, we look at prospects of Tororo’s phosphate.
Challenges and opportunities
The United Nations Development Programme (UNDP) and European Union recently released a report titled: ‘Baseline Assessment and Value Chain Analysis of Development Minerals in Uganda’ detailing challenges and opportunities of Development Minerals (minerals and materials that are mined, processed, manufactured and used domestically in industries such as construction, manufacturing, infrastructure and agriculture).
“Despite multiple potential downstream applications, most Development Minerals are transformed into a limited number of products and/or produced in insufficient quantities, with implications for the trade deficit. Reliance on imports of many Development Minerals and their products constituted 3.2 percent of Uganda’s trade deficit of $2.56b in 2016,” the report reads in part.
The other challenge, as Uganda Chamber of Mines and Petroleum’s board chairperson Elly Karuhanga explains, is lately a lot of attention has been focused on the oil discoveries which are expected to earn the country between $1.5b and $2b in revenues once commercial production starts.
“But mining would make a much bigger contribution than oil and gas, for we are endowed with different types of minerals. No economy can develop without steel or cement and we have enough steel reserves to last Uganda more than 100 years; oil cannot last 100 years. We have phosphate and in fact world class reserves than can make this country rich,” Mr Karuhanga says.
From the private sector vantage point, Mr Karuhaga says Uganda has potential to revive its mining glory only if the government starts addressing the bottlenecks such as bureaucracy that every investor keeps raising.
“Implementation is the problem, not just in Uganda but the whole of Africa… But if the President can ensure that we have Hakuna Mchezo in the mining sector, I think we are about see a revival of mining,” he says, adding: “Nobody was going to invest in Uganda with all these bottlenecks.”
Research. The Global Witness report published in June last year titled: ‘Undermined: How Corruption, Mismanagement and political influence is undermining Investment in Uganda’s mining sector and threatening people and environment’, put prominent names in the government at the centre of the mess in Uganda’s mining sector.
The UK based anti-corruption group in the report accused President Museveni of influencing the awarding of deals to investors in the extractive sector. These investors, the report noted, sometimes turn out to be fake, evade taxes, and abuse human rights and the environment concerns.
Total investments in the mining industry: Shs3 trillion
Number of mineral licences issued as of 2017: 818
Mining sector contribution to the economy: one per cent from 30 per cent in the 1950s/1960s.
Source: Uganda's Daily monitor
New research from the the Food and Agriculture Organization (FAO) of the United Nations has shown the significant potential for solar powered irrigation systems to increase sustainable water use.
The report highlights that solar powered irrigation systems are an affordable technology for small and large scale farmers in developing countries.
Solar irrigation also has the benefit of being climate-friendly and can help farmers adapt their agricultural practices to prepare for changing weather patterns.
However, the FAO warns that unless managed and regulated appropriately water use could be unsustainable. Helena Semedo, FAO Deputy Director-General commented: "The rapid expansion of more affordable solar-powered irrigation offers viable solutions that span the water-energy-food nexus, providing a great opportunity for small-holders to improve their livelihoods, economic prosperity and food security”
Photovoltaic panels have been experiencing sharp and consistent price drops, further reductions could result in a power revolution.
Eduardo Mansur, Director of FAO's Land and Water Division, added: "The opportunity cheaper solar energy offers also increases the urgency of making sure appropriate water management and governance systems are in place.”
"We need to think strategically about how this technology can be used to encourage more sustainable use of groundwater resources to avoid risks such as wasteful water-use and over-abstraction of groundwater."
Approximately 20% of cultivated land is irrigated around the world and this contributes to roughly 40% of total food output; however, this figure is just 3% in Sub-Saharan Africa.
Irrigation can boost the productivity of agriculture in numerous ways, such as allowing the growth of more and varied crops each year.
Both Sub-Saharan Africa and South America could benefit significantly from solar powered irrigation systems.
The FAO reports that solar powered irrigation systems could reduce greenhouse gas emissions for water pumping by 95% compared to alternatives fuelled by fossil fuels.
However, the FAO stressed the importance of managing and regulating solar powered irrigation systems as pumps could result in the unsustainable extraction of ground water as farmers may seek to expand their farming areas or switch to water intensive crops.
The report recommends that irrigation policies should be informed by water accounting for large areas and the different elements of the hydrological cycle.
Solar powered irrigation systems do offer tools to improve water governance with devices that provide real time updates on storage tank levels, pump speed and borehole water levels. The FAO urges that no water should be withdrawn without an appropriate water management plan.
Source: Climate action programe
Oil production is expected to double Uganda’s economic growth from the current 4 per cent to 10 per cent.
After the initial exploration of oil and gas in 2014, Uganda confirmed commercial oil finds of 6.5 billion barrels, of which 1.4 billion are recoverable.
Thus the government has now embarked on the development phase and has plans to invest $800m (Shs2.9 trillion) in the 1,445 kilometres long East African Crude Oil Pipeline (EACOP) and refinery which will guarantee realisation of first oil in 2020 at the earliest, have been finalized.
According to a new report, government plans to invest $500m into the refinery project (40 per cent share) and $300m in the EACOP (15 per cent share).
The main funders of the projects will be the international oil companies including Total and CNOOC as well the government of Tanzania.
All these activities are a pre-cursor to oil production likely to start in 2020 or 2021, according to government.
Significant amounts of revenues and taxes are generated at all stages of the petroleum value-chain and these include signature bonuses, royalties, exploration fees, development fees, rents, fees on permits and capital gains tax on transfer of interests and assets, among others.
Beyond the above revenues are also generated from government’s profit share on production, taxes at the refining, gas processing and conversion, transportation and storage of petroleum and its associated products, bi-products and wastes.
Additional revenue streams include income tax, withholding tax, Pay as You Earn, Value Added Tax, Import Duty, Stamp Duty and Service Tax, among others.
Thus, it is anticipated that Uganda will generate between $3b and $3.5b annually at peak production (2029-2045) and research has indicated that it will drive Uganda’s gross domestic product to double digit growth 2025.
Indeed, the World Bank estimates that oil production could increase total government revenue from the current 13 per cent of GDP to about 18 per cent on average for more than 20 years.
However, with doubling of the size of the economy (GDP growth rate average of 10 per cent from the current 4 per cent) which may not be backed by equally competent citizenry to support the economy through proportionate innovation and invention, engagement in reasonable productive activities, Uganda may miss out on opportunities in the sector.
According to experts, the failure to match production with the size of GDP may cause distortionary effects on the economy, which might cause hyperinflation thus hindering investments.
In addition, such a situation is indeed ripe to cause a boom-bust economy as it occurred to Nauru Islands which had a per capita income of $40,000 (Shs142m) in 1980 at the start of mineral production and reduced significantly to $2,000 (Shs7m) in 2000 after depletion of the resource.
According to the Oil and Gas policy of 2008, oil revenue will be used for infrastructure development and not recurrent expenditure.
Whereas this is a good move, there is need to consider the fact that Ugandans are equally an important resource who must have the capacity to put to use the infrastructure put up by the government using proceeds from oil.
For instance, it does not make better sense for so many roads connecting different villages to be tarmacked if residents have nothing to transport or cannot afford cars to drive on such roads.
Relatedly, extending electricity to all villages is a wise move; however, connecting such power in grass houses is not only risky but defeats the analogy of modernization, a key development agenda.
It is therefore important to put human resource development at the forefront such that citizens are positioned to fit in the oil economy boom when production commences.
This will help the country avoid the ‘resource curse’ analogy that has dogged many African countries such as DR Congo, Equatorial Guinea and Angola among others.
Oil and gas being non-renewable and finite resources, Uganda needs to ensure that the resource is managed efficiently and managing them in a manner that will create lasting benefits to society.
Thus there is need for a deliberate plan for the emergency of new industries, such as chemicals, fertilizers and cement, among others.
Such industries are new to Ugandans therefore government needs to render a hand in building capacity of local investors to take up such subsidiary industries which will support the economy.
According to Siragi Luyima, an economist and a lecture at Islamic University in Uganda, there is also need to address key bottlenecks to growth in agriculture, manufacturing, mining and tourism through investing oil proceeds in infrastructure, better healthcare and quality education to develop the human capital with adequate and employable skills suitable for the oil economy.
This, he says, there is need to build strong and transparent accountability systems as well as a conducive environment for private sector development so that natural resource rents are invested to create other forms of capital.
“Failure to address the human resource challenges,” he says “it will be impossible for Uganda to eliminate the ‘resource curse’ and there will be a high likelihood that oil revenues will not be used properly and will not impact positively on the lives of Ugandans.”
Government, he says, needs to transparently manage oil revenues and must account whenever there are gaps.
Preparing for production
Uganda’s long walk to oil production continues. In June 2016, during the Budget speech for 2016/17, President Museveni set a target for oil production to 2020. It had also been a constant phrase from Ms Irene Muloni, the Energy minister who, on several occasions, had said the oil production target is 2020.
However, oil companies have remained non-committal on the year oil will start to flow.
But what is clear is that the level of infrastructure in the country doesn’t match the needs for the oil sector.
For instance there is need for roads, an export pipeline, refined products pipeline and an oil refinery. The timeline for project completion being between three and five years, Uganda still has a long way to complete projects meant to deliver oil by 2020.
Although some industry players think 2020 is unrealistic, President Museveni maintains that uganda will surely be producing oil by 2020.
SOURCE: Daily monitor
The Water and Environment Sector of Uganda has recently developed a Strategic Sector Investment Plan (SSIP) to guide annual investments in the sector up to year 2030. In order to meet the sector's targets across 24 indicators measuring the key activities of the sector, including U.N. Sustainable Development Goal (SDG) commitments, the sector will need a large increase in funding—over nine times current levels. In the absence of this funding increase, the sector will have to make strategic tradeoffs between investments to best use the limited funds available. This handout presents the results of the SSIP study, including investment requirements to meet targets and strategic investment planning under limited funding scenarios.
"Uganda’s Water and Environment Sector Requires a Nine-fold Increase in Annual Funding to Reach 2030 Targets"(According to the Plan).
Access the detailed plan from the links bellow
Download the Final Water and Environment sector Investment Plan
In the past, I have written in the media highlighting the avenues in which oil and its associated revenues could be stolen resulting in Uganda getting peanuts in return.
Some of the few avenues I cited included wrongful recording (metering) of oil production; inaccurate declaration of petroleum in stock and that which is sold (lifted); differences between the oil reserve price and the actual market price (windfall), government investments backed by oil revenues; oil supplies to government in cases of war, threat of war or other crises; and inflation of production costs by oil companies.
When I wrote about these issues at the time, I chose to be silent on the other avenues of theft related to tax and profit revenues to avoid overloading the readers.
However, this week I read with great interest online that the “Albertine Graben Refinery Consortium (AGRC) signs oil refinery pact with Uganda”.
I noticed some interesting facts, some members of the consortium are registered in Mauritius – a tax haven country that has a Double Taxation Agreement (DTA) with government of Uganda and one in which International Companies form a complex web of subsidiaries (shell companies) to siphon profits out of the host (resident) countries (in this case Uganda) that have DTAs in the guise of professional fees, management fees, dividend transfers, interest payments on loans/ credits internally obtained, profit shifting, transfer pricing, tax planning, tax avoidance and tax evasion schemes.
The space here is not enough for me to fully explain how each of these schemes are utilized to reduce the amount of tax and profits that finally accrue to government of Uganda.
But suffice to say that they are schemes that make false claims that appear genuine to a person that does not understand them.
Double Taxation Agreements (DTAs) are signed between two states to remove the problem of an individual paying tax on the same income twice.
In the absence of a DTA, an international person, say from the UK working in Uganda, would have to pay the full income tax (30%) in Uganda (if he/she spent 183 days in Uganda) and also pay the same income tax when the money is sent to his/her UK account.
DTAs are intended to allow the country from where the income was made (i.e. source country) to take a small proportion of the taxable income and leave the balance to be taken by the country where the person normally lives (i.e. domicile country).
While this seems to be a very good arrangement, which it is, it is often abused resulting in a person paying lesser tax on both sides or not paying tax in either country which is referred to as Double None Taxation.
For example, some of the International Oil Companies (IOCs) are shareholders of the Uganda Refinery Holding Company (URHC) whose interests will be managed by a special purpose Company called the Refinery Company (RC). Please note that the URHC is a subsidiary of Uganda National Oil Company (NOC).
In addition to this not so complex web of companies, there are multiple relationships between the IOCs, their subsidiaries abroad and their parent companies in the domicile countries.
The IOC subsidiaries are usually domiciled in countries that have zero or very small taxes (i.e. tax havens) compared with other countries or countries where the host country has DTAs.
IOCs will then use their subsidiaries to claim falsified costs or route their dividends and profits to minimize or avoid or evade taxes in the host (source) and home (domicile) countries.
The effect of this is that government of Uganda would receive reduced taxes and profits on the petroleum products.
It is such schemes that are responsible for the Capital Flight (illicit financial flows) report on the African continent.
Uganda needs to understand the relationships between the Albertine Graben Refinery Consortium (AGRC) members with their subsidiaries and parent companies abroad and how they are engaging each other to execute businesses in Uganda, so as to seal the loopholes. Uganda Revenue Authority (URA) needs to up its game in monitoring and tracking contracts, sales and revenues in the petroleum and mining sector.
Government also needs to address the problem of tax loss related to an individual not being classified as being resident in Uganda (i.e. staying less than the stipulated 183 days in Uganda).
Mr. Henry Mugisha Bazira is the Executive Director, Water Governance Institute (WGI) and founding Chairperson of the Civil Society Coalition on Oil and Gas (CSCO) in Uganda; Member of the Energy and Extractives Working Group (ESWG) of the Uganda Contracts Monitoring Coalition (UCMC) and Tax Justice Alliance Uganda (TJAU).
PRESIDENT YOWERI MUSEVENI AT THE SIGNING OF THE PROJECT PERFORMANCE AGREEMENT BETWEEN OUR GOVERNMENT AND THE ALBERTINE GRABEN REFINERY CONSORTIUM (AGRC) AT STATE HOUSE ENTEBBE.
Government through the Energy Ministry on Tuesday marked yet another milestone in the country’s oil and gas sector, by signing the Project Framework Agreement (PFA) for construction of the Oil Refinery in Hoima District.
The PFA was signed by the Energy Ministry and the Albertine Graben Refinery Consortium (AGRC) which was selected in June last year to negotiate the agreement.
Uganda entered the agreement with AGRC to develop, design, finance, construct, operate and maintain of the oil refinery in Hoima district.
The signing of the PFA will lead to the commencement of pre-Final Investment Decision (FID) activities such as Front-End Engineering and Design (FEED), Project Capital and Investment Costs Estimations (PCE), Environmental and Social Impact Assessments (ESIA), among others.
President Yoweri Museveni who witnessed the signing at State House Entebbe, expressed commitment to continue a sustainable and desirable development of an oil and gas industry in the country in partnership with diverse group of private sector partners for the benefit of Uganda and the region.
The Parties to the Agreement are: – (i) Government of the Republic of Uganda (Acting through the Ministry of Energy and Mineral Development), The Uganda National Oil Company Limited, YAATRA Africa (Mauritius), Lionworks Group Limited (Mauritius), Nuovo Pignone International SRL – A General Electric Company (Italy) and SAIPEM SPA (Italy).
Under the PFA, AGRC will be responsible for funding the pre-FID activities listed above and will proceed thereafter to construct and operate the refinery.
The refinery will be developed as a commercially viable venture with a regional market focus.
It will supply its products that will include kerosene, petrol, diesel, heavy fuel oils, among others to the Ugandan and regional markets.
It is believed that this will not only improve access to these products but also create employment as well contribute to national development.
The refinery is planned to have a 60,000 Barrels per Day refining capacity and will rely on crude oil from Uganda’s oil fields under development.
During the term of the Agreement, the Albertine Graben Refinery Consortium (AGRC) shall establish a profitable and commercially viable refinery that delivers refined products to the market.
The consortium will be required to raise the required finances for the Project and deliver a cost effective, technologically sound and environmentally compliant refinery design that creates jobs and skills development for Ugandans.
The Project will be implemented by a Special Purpose Company, the Refinery Company, to be incorporated by the Private investors and the Uganda Refinery Holding Company, a subsidiary of the Uganda National Oil Company.
SOURCE: chimp reports