April 7, 2003
The announcement last week of the preliminary results from trial drilling in western Uganda that point to billions of barrels' worth of oil deposits along the western arm of the East African Rift Valley in the Semliki area is good news for Uganda and the region.
The exploration for oil has been going on for some time now and last week's announcement by a joint venture of Energy Africa of South Africa and Heritage Oil Corporation, a Canadian company, was a great relief to both the government and the people, who had started wondering whether there were oil deposits in the country after all.
Uganda spends over $140 million on oil imports per year, and that figure is set to rise as more industries are set up. Economic growth, which used to register an average of 7 per cent, has now slowed to an average of five per cent. According to the IMF and World Bank, growth rates of 5 per cent cannot help Uganda create employment for its nationals or reduce its dependence on donor aid.
The fortunes of coffee, which for decades was the country's major foreign exchange earner, are also dwindling given the low world prices for the crop and the coffee wilt disease that has affected millions of trees. Security concerns, both internal and external, have also affected the country's tourism sector, which in the past earned the country considerable foreign exchange.
Uganda's external debt, which in the 1980s was about $2.5 billion, has grown to $3.6 billion, while unemployment has shot up. The government seems to have no immediate solutions to this problem apart from cynically advising those leaving colleges to join security organisations. Uganda's budget is at present supported by the donor community by up to 52 per cent, a proportion that is unsustainable given growing donor fatigue.
That is why it is good news that Uganda may soon start exporting oil in significant quantities. Optimists predict that all these problems will then vanish and per capita income will shoot up from the current $340. The only concern now is that most countries where oil deposits have been found are embroiled in civil wars. Will Uganda avoid such a fate?
Angola, Sudan and Nigeria come to mind whenever one talks about oil deposits. The Democratic Republic of Congo is in crisis, partly because of its mineral deposits being fought over by foreign interests. And given the historical background of Uganda, the future may not be that rosy, after all. The government should take steps to ensure that all citizens benefit from the oil. It must make public the contractual agreement reached with the company at the forefront of the exploration.
In the recent past, there has been a tendency for only a section of politicians to benefit from such lucrative ventures. A good example is the ongoing privatisation process, in which the Ugandan people have lost out. Until such measures are put in place, local people will continue to consider the existence of minerals in any country a curse.
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