Oil in Uganda: A Resource Curse?

Author: Ika Lino

Originally Published at Peace and Conflict Monitor on: 10/03/2011

 

Introduction

In the early 1950s, some development economists, especially
those associated with the Staple theory of growth, suggested that natural
resource-abundance would help the backward States to overcome their capital
shortfalls and provide revenues for their governments to provide public goods
and lift citizens out of the doldrums of poverty. However, since the 1990s, a growing
number of researches have established a link between resource-abundance and a
number of socio-economic problems (Oyefusi, A., 2007).

Natural resource-abundance has been associated with slow
growth (Sachs and Warner, 1995), greater inequality and poverty for a larger
majority of a country’s population (Gravin and Hausmann, 1988; Ross 2004),
corruption of political institutions (Lane and Tornell, 1999; Ross, 1999,
2001), and more fundamentally, an increased risk of civil conflict (Collier and
Hoeffler, 2001). At the same time, there is an established link between
resource motivated conflict and economic collapse (Collier and others, 2003;
Skaperdas 1992; Deininger, 2003).

Of all natural resources, oil has been found to have the
highest risk of civil conflict because of the large rents it offers and the
shocks to which the government and the national economy are exposed (Collier
and Hoeffler, 2005; Fearon and Laiton 2005). According to Collier and Hoeffler
(2002), 23 percent of states dependent on oil exports have experienced civil
war in any 5-year period, a figure that dwarfs the 0.55 for countries without
natural resources. However, while the experiences of oil exporters across the
globe shows that oil dependence is most often a perilous development path, it
is also evident that the negative outcomes of oil (and other resource) booms
can be avoided. Norway, for example, has used the benefits from North Sea oil
to earn the highest place on the UN human development rankings (Gary and Karl,
2003).

Recently oil has been discovered in Uganda and an estimated two
billion to six billion barrels of recoverable oil in the Albertine graben. This
has generated anxiety and expectations which are already a threat to peace in
the country, not only to humankind but to environment, economy and ecology as
well. This paper provides the analysis of oil discovery in relation to the
peace of the country and questions the basic assumption of whether natural
resources are a curse or blessing.

This paper further seeks to answer some fundamental
questions: Will the discovery of oil and expected wealth translate into rapid
economic growth and increased standard of living for majority of Ugandans
amidst the intense anxiety and expectation? Why is oil discovery already
creating conflicts in the country? And how may Uganda escape from the oil
curse?

The methodology used in this paper encompasses the personal
experience and observation in the Civil Society in Uganda, more so as part of
the Civil Society coalition on oil in Uganda, and review of related literature
mostly secondary data.

This paper is composed of three basic sections. Section one
looks the introduction and background to oil in Uganda, section two provides an
analysis of current trends unfolding the oil discovery and provides insight to
some important steps to consider in relation to theoretical and empirical
literature and section three provides recommendations and concludes.

Background

Uganda is located in the sub Saharan Africa, with a
population of 32.7% (Uganda Bureau of Statistics, 2009). Uganda’s population is
predominately rural, and its population density is highest in the southern
regions. The service sector was the largest contributor to GDP in 2009 (at
48%). Manufacturing and agriculture each contributed 23%. Despite their
dwindling shares of Uganda’s GDP, the agriculture and fishing sectors provide
approximately 80% of employment in Uganda. Uganda is Africa’s second-leading
producer of coffee, which accounted for about 23% of the country’s exports in
2007-2008 and 17.9% in 2009. Exports of nontraditional products, including
apparel, hides, skins, vanilla, vegetables, fruits, cut flowers, and fish, are
growing, while traditional exports such as cotton, tea, and tobacco continue to
be mainstays. Most industry is related to agriculture.

The industrial sector has been rehabilitated and resumed
production of building and construction materials, such as cement, reinforcing
rods, corrugated roofing sheets, and paint. Domestically-produced consumer
goods include plastics, soap, cork, beer, and soft drinks.

Oil experts estimate Uganda’s Albertine Basin  has at least
two billion and as many as six billion barrels of recoverable oil, positioning
Uganda to become one of sub-Saharan Africa’s top oil producers and potentially
doubling current government revenues within 10 years. Most of Uganda’s known
oil reserves are located along Lake Albert and the D.R.C. border, in one of
Africa’s most ecologically sensitive areas. Uganda and several private oil
companies hope to begin small-scale production as early as 2012. Potential
construction of a domestic oil refinery and export pipeline are contingent upon
ongoing feasibility studies and negotiations between oil companies and the
government.

The situation analysis in Uganda

Managing expectations, anxiety and governance of oil
revenue

The discovery of Oil in the Albertine Graben has come with
great challenges. First this region covers most of the national parks , game
reserves  and forest reserves  and thus the environment and ecology is under
threat, as well as the tourism sector. In sight of the protracted conflicts in
the oil producing countries in Africa, Nigeria (Oyefusi, A., 2009) in
particular, and inadequate information on benefit sharing from the Uganda
government, tensions enshrine the discovery of the Oil with view of similar
conflicts in anticipated.

According to my experience and observation, Uganda’s
discovery of oil resources has also raised hopes and expectations among the
citizens that, with the substantial revenues likely to be generated from the
oil boom, the country will be able to escape from the biting poverty. Northern
Uganda fresh from the LRA  war (Transition from conflict to post conflict
situation) is where the largest oil well is found and people are expecting
employment, and incidents of land grabbing and migration towards oil sites are
already taking place under the pretext of opportunistic gains. This is based on
the desire to meet the basic needs after long period of war, similarly Jeong,
(2000, p.70) acknowledged basic need satisfaction coherently to human
development.

Such high expectations if not well managed has greater
implications. Especially urbanization with its associated problems, rebellion,
land conflict which are already evident among others. Proper Management not
only at local level but also at national level as seen in the border conflict
as a result of oil discovery between Democratic Republic of Congo and Uganda in
the west (Lake Albert). Similarly Bainomugisha, A. et el, (2006) also noted
that, the discovery of oil has also caused anxiety about how the citizens are
going to share the benefits of the oil boom and the fear that, if not well
governed through an accountable, transparent and people-centered system that
ensures equity in revenue sharing, the resource could become Uganda’s curse rather
than a blessing.

Evidently, Nigeria the largest oil-producer in Sub-Saharan
Africa, with about 32 percent and 34.2 percent of Africa’s oil and gas reserves
respectively, like many oil-producing countries, the nation has not been spared
the agony of recurring violent conflicts associated with the management of her
oil resource. In early 1967, oil-related disputes motivated an insurrection by
a major ethnic group in the Niger Delta.  Less than a year after, the nation
experienced a civil war (the Biafran war of 1967-70), which was not unconnected
with disagreements over the sharing of oil revenues (Oyefusi, A, 2007).

Information gap / propaganda

“For satisfying underlying interests, each side has to
acknowledge the other side’s legitimate concerns. Mutual interests cannot be
satisfied by pursuing unilateral gains. More information helps understand the
true interests of the other side…”, if each side knows the other side’s bottom
line (reservation value), negotiations can be conducted more effectively.
“Accommodation is made possible by satisfying the bottom line of both sides”
(Lebow, 1996, p. 56) and this can only be achieved through proper
communications from parties involved.

Here is an interesting shift in this scenario, the Ugandan
constitution (1995), article 14, stipulates the public access to information,
but its application is invisible. Similarly on the other hand democracy gives
chance for people to elect their representatives who shall be accountable to
them, where is the accountability when those entrusted (once in power) conceal
information for public consumption? This explains my observation about
communication between government and citizens on oil revenue sharing that is
creating unrest. An important trend to remember is when people elect they have
relative deprivation (Jeong, 2000, p. 69) and value expectations after
elections. They often believe that they are rightfully entitled to certain
goods and services such as accountability and other services, after elections.
Jeong, (2000) further noted that:

An individual or collective sense
of entitlement tent to rise faster than can be fulfilled. In general, the
expectation the expected ability to satisfy basic material and social needs rises
disproportionately to what society is able to and does deliver,
disproportionate allocation of benefits combined with poor economic performance
generates further anger and emotional frustration. …discrepancy in anticipated
and need satisfaction increases during a short period of sharp reversal
following economic and social development.

The constitution provides government being responsible to
its citizens and provides for public awareness (article 4) but interestingly
the constitution is surpassed by individual thoughts and interest and when
information flow is distorted, escalation propaganda is eminent for instance my
experience reveal opposition and anti government movement being in forefront of
propaganda to contrive their interests and this creates discrepancy between
government and opposition interests. One looks the other as a threat.
According to enquiry by Jeong (2000, p. 172), points out tension arising as a
result of lack of information, miss information…, the implications of this, in
the discovery has also created tension among citizens, thus predicting violent
conflict in the new future are reputed if such communication flow are not
improved.

One can notice how important information is in exacerbating
and creating conflict when not well managed. Consequently mechanisms that
facilitate effective communication could facilitate the reduction of escalation
propaganda incidences in Uganda’s oil sector.  Looking at the C.R. SIPABIO
(Abdalla, et al, 2002) conflict analysis model, issues of revenue sharing,
feeling of getting employment, behavior of land grabbing, influence of media,
environmental factors play crucial role in the latent oil conflicts taking root
in Uganda.

Scramble for Oil by Multinationals

Many multinational companies backed by their foreign
“interest”, are already scrambling for oil exploration in Uganda. How valid is
their interest in terms of delivering to local community, and protection of the
environment and nature? Lukoil, for example is Russia’s largest oil company,
and the second largest private oil company worldwide by proven hydrocarbon
reserves, with about 1.1 per cent global oil reserves, and 2.3 per cent of
global oil production. Interesting question to ask; what are the implication of
this to “little” Uganda? The same oil will be sold back to Uganda at a higher
cost and additionally employment opportunity will be limited since most of its
exploration and production activity is located in Russia. The higher costs of
fuel are then reflected in the hiking costs in transport sector which in turn
is shifted to the public in terms of high commodity prices, and the costs of
environmental management (Pollution) should be noted.

Indeed, the first oil-driven ‘Scramble’ was arguably of much
greater significance than the current one. It led to major political, economic,
and social transformations in some of the key oil-producing states in Africa,
including Libya, Algeria, and — above all — Africa’s most populous country of
Nigeria. From a level of 20,000 barrels per day in 1960, Nigeria’s daily oil
production rose to over 2 million barrels in 1973; Nigeria’s oil production
today is only slightly higher than that achieved in the 1970s. (Frynas J. G.
& Paulo, M., 2007) However compared with the deep transformations that took
place in the 1960s and 1970s, the impact of today’s ‘Scramble’ in countries
such as Nigeria and Angola will be relatively insignificant.

We have seen multi nationals providing alternative solutions
to provide environmental friendly facilities and social cooperate
responsibility as evidenced in Uganda in the sectors of education where
classrooms have been constructed, infrastructure has been developed, etc. A
question arises:  Is the social cooperate responsibility provided by the multi
nationals worth the cost in the long run? Who can make such a decision? Such
questions can justify proper interventions.

Environment and tourism

Wildlife based tourism and scenery  dominates Uganda’s
hospitality industry with more than 70% of the visitors coming to the Albertine
rift . Important to note is the fact that Albertine is the bedrock of tourism
and conservation. (The state of environment report, Uganda, 2004/5). The
location of 10 out of the 22 national parks and wildlife reserves in Uganda
within the oil rich Albertine Graben presents a land use challenge state of
environment report, Uganda, 2004/5:

Oil development could disrupt
conservation if not well planned. Yet these national parks and forest reserves,
along with other protected areas inside and outside the Albertine graben form a
continuous protected area system and they are generally linked by wildlife
corridors, these corridors facilitate the movement of wildlife between habitats
that are increasingly being fragmented by farmland and urban centers. Not only
do corridors link protected areas within Uganda, they also connect the protected
areas of DR Congo to those of Uganda.

Already tension enshrines the people because vibrations
during seismic surveys have triggered off migrations of large mammals.
Incidences of elephants with other animals destroying crops were encountered during
my field experience.

Similarly, in reference to the expected increase in environmental
pollution, this does not affect environment alone but also human activity. The
rapid development of urban centers are likely to boost and yet the current urban
centers pose vast environmental challenges to the government in terms of
garbage and waste management, and of course agriculture, the backbone to the
economy, will also be affected. According to Parker, (2009), it is therefore
important to consider various strategies before oil exploration begins, as
evidenced in the case of Niger Delta:

While the world worries about the
oil supply, Niger Delta residents fight for access to safe drinking water and
sanitation. Oil spills were frequent before the clash. Pollution has been
endemic. According to the United Nations more than 6,800 spills were recorded
between 1976 and 2001. A Nigerian government study identified 2,000
contaminated sites in the region. Amnesty International reported that residents
of the Niger Delta bathe in and drink oil-contaminated water. Additionally, a
half-century of petroleum pollution decimated fish populations that were the
primary source of protein for these communities for generations.

How prepared is Uganda in terms of these great challenges to
avoid the Oil curse? What lessons can we take from the conflict already triggered
by the movement of animals caused by vibration, and what can we draw from the
experience of other countries?

Recommendations and Conclusions

The discovery of Uganda’s should be well thought-out at this
early stage. The already existing conflicts are very good and give insight to
what should be done to regulate future conflicts. Following violent incidences
in other oil producing countries, Uganda should be in position to put
strategies to counteract such expected conflicts. However it may not be a valid
solution given the nature of people, culture, religion, and identity in Uganda
may not be the same as those in the conflicting countries.

The study recommends a continuous conflict sensitive system
that covers the elements of peacekeeping, peacemaking and peace building that
acknowledges and integrates the role of citizens, institutions, government and
civil society organizations in realism, receptive to reflecting back, should be
set in place in order to manage, resolve and transform the existing, expected
and exacerbated conflict with early warning systems in place. Commitment of the
mentioned actors in regards to time, participation, and resources is
significant.

Conclusively, it’s important to acknowledge that the existing
conflicts are real and that small conflicts may escalate if not well managed.
This is true with the current conflicts in Uganda; the acknowledgement of these
conflicts may yield the provision of amicable interventions. The conflicts
include: scrambling over land, multinational companies scrambling over oil
exploration licenses, and associated consequences like corruption, contracting
a monopoly or medium firm which may use sub-standard materials, political
tensions which may explode into violence and creating ethnic and cultural
differences, propaganda, migration of wildlife, and environmental threats such
as clearing forests, digging of trench during survey.

The study suggests the above recommendation for improved
conflict sensitive intervention in the oil sector in Uganda. However this study
does not explicitly predict or prove an idyllic intervention to resolve the
ongoing and future conflict in the oil industry. The discussion and finding
were based on personal experience from a civil society perspective in respect
to document review of secondary data. It’s recommended that more research be
done to transcend the findings from this study otherwise the same question will
remain: is Uganda going to escape the resource curse?

 

Bio: Ika Lino is an MA candidate in the Sustainable Urban Governance and Peace Programme at the University for Peace.