Uganda and other Prospective Africa oil producers should reconsider capital inputs undertaken at the upstream stage of the oil and gas industry, to insulate society from the economic mayhem this can create.
The call was made at a stakeholders meeting organised by The Leo Africa Forum, an organization created to provide a platform for quality dialogues on development issues among emerging thought leaders in Africa and the world.
This year’s discussions were held under the theme; Assessing the Extractive Industry’s Contribution to Inclusive Economic growth
Participants observed that the new oil producers are pumping huge capital into the sector at the cost of other key economic drivers.
The experts questioned the opportunity outlook of the oil and gas industry especially for the East African region. They further urged East African policy makers to weigh all economic priorities needed to build a strong value chain that can help build the regional human resource before enormous investments in oil and gas are made.
In a highly provocative presentation, the Executive Director of Tanzania based Civil society organisation Twaweza, Aidan Eyakuze, told participants that huge capital investments in the regional oil sector is built on the “wrong assumptions” about the sector.
He said nations after the discovery of oil believe that extractives are the “magic bullet” for the regional economic woes.
The assumptions according to Eyakuze are; that Oil and gas is a scarce commodity with a higher price, that the demand for fuel is high, among others.
“Those assumptions are wrong…There is plenty of oil and gas around the world. In 2013, Global supply of gas exceeded the global demand. Export capacity was 296 Million Metric tonnes whereas demand was 237 Million Metric tonnes,” he observed.
Eyakuze also stretched the debate on global oil prices which he said are not expected to rise soon due to over supply by major producers who have a more competitive advantage a on the global market and the recent discoveries in Egypt, Qatar, Australia, Nigeria among others.
“Will it be a secure market for our oil and gas”,? he questions. “We are going to compete with other countries where there is plenty of oil and gas where it is even closer to the market,” he asserts.
The Extractive governance expert ridiculed the regional leadership for what he called ‘Non- Contractual debts’. He said the borrowing is not a thoroughly thought out idea, born from wrong ‘political expectations’ about the oil industry.
“Leadership also has expectations. And we make mistakes to think that their expectations are ours as well” he said.
Eyakuze said it is important to lower the expectations of the leadership and society collectively in order to set priorities right and identify our economic competitive advantage.
However, senior Commercial adviser Tullow Oil Uganda, Gilbert Kamutu differed with Eyakuze’s assertions. Kamuntu told participants that the Oil (extractive) sector if well regulated is what Developing countries need to resurrect from recession and trigger sustainable economic growth.
“This is where our challenge lies. If we decide to leave the oil and gas to the ground, how then are we going to Fund the economic growth we so desperately need?” he provoked.
Tourism expert and Managing Director of Great Lakes Safaris Amos Wekesa gave passionate insights on the potential of the tourism sector to Uganda’s economic transformation. He emphasized the need to revise national investment priorities.
Former Uganda Minister of finance and Senior Presidential advisory on the economy Ezra Suruma who gave closing remarks at the conference said Uganda is likely to face a huge economic crisis arousing from miscalculations in financing the oil industry at the cost of other secotors.
Suruma was optimistic however that the delay in oil production and the price insecurity at the global market are good early warning mechanisms from which the nation can read to avoid the mistakes that come with hasty investments.
“The delay in bringing oil to the market and fall in prices should help us to recognise the importance of continuing to rely on other sources of foreign exchange such as coffee and go on to make more and more investments in Agriculture”
Suruma said the risk is real and urged policy makers to struggle and device strategies to ensure that investments in oil do not usurp the growth of other sustainable sectors.
“In my view, oil solves one critical problem; shortage of capital. This has been our problem from the beginning. Capital is a resource we have been drastically short of” he added.