The Oil Curse in Uganda

In 50s, some economists 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 then, a growing number of researches have established a link between resource-abundance and a number of social and economic problems. Natural resource-abundance has been associated with slow growth, greater inequality and poverty for a larger majority of a country’s population, corruption of political institutions, and more fundamentally, an increased risk of civil conflict. At the same time, there is an established link between resource motivated conflict and economic collapse. Of all natural resources, oil has been found to have the highest risk. 23% 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.

Recently oil has been discovered in Uganda. 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. The resource could become Uganda’s curse rather than a blessing. In Uganda the agriculture and fishing sectors provide approximately 80% of employment. 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.

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. Wildlife based tourism and scenery dominates Uganda’s hospitality industry with more than 70% of the visitors coming to the Albertine rift. Incidents of land grabbing and migration towards oil sites are already taking place. Many multinational companies backed by their foreign “interest”, are already scrambling for oil exploration in Uganda. 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.

it’s important to acknowledge that the existing conflicts are real and that small conflicts may escalate. This is true with the current conflicts in Uganda. 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.

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