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Development is accelerated when a country is able to use its own resources effectively and efficiently. When foreign companies and governments conspire to prevent this happening, justice is not being served.
That is why the decision by the UK government, with France and Germany, to support reform of obscure European Union rules on financial reporting for oil, gas and mineral companies will have such far-reaching consequences. In Uganda, campaigners for greater transparency and accountability in the oil industry are already preparing for the day when they will have access to all legal payments made by oil companies to their government. In a letter sent on Thursday to David Cameron, over 200 of these activists make clear why this is so important, saying, “the only losers would be those who plan to steal the revenue”.
Last year civil society in many resource-rich developing countries celebrated as the US passed the Dodd-Frank Act, which contained the first ever “publish what you pay” law. This means that from April all companies listed on the New York stock exchange will have to report their payments to the governments of the countries where they operate, and even break down the payments to the level of individual projects. This will empower millions of people by giving them access to the information they need to hold their leaders accountable, demanding greater social and economic results, and reducing levels of corruption.
However, Uganda – which has large untapped oil reserves – will not see the benefits of the US law since the companies operating here are all listed on European stock exchanges. Tullow Oil, for example, is registered in the UK. Uganda is the perfect example of why European leaders need to swiftly implement these reforms. In his 10 minute-rule bill last week Anas Sarwar MP highlighted this by referring to the Ugandan shadow finance minister’s recent video message calling for UK leadership.
It is estimated that at peak production the oil reserves in Uganda will generate $2bn a year in revenue. To put this in context, the last national budget is $3bn billion, and $1.7bn has been coming from foreign aid. Clearly this oil money has the potential to drive economic development in Uganda, yet the early signs are not promising.
The production sharing agreements between Kampala and the oil companies have been kept secret by the Ugandan government despite repeated attempts by MPs, journalists and activists to access the contracts. A section of one of the agreements, which was leaked by a whistleblower, showed that the terms were not consistent with international norms as the government claims.
Currently, there is no provision in place for publishing the payments received once production begins. Ugandans are nervously looking across to neighbours in the Democratic Republic of Congo and wondering if they are heading down the same road, where natural resources have been a curse rather than a blessing.
Of course, transparency itself cannot deliver perfect oil governance – it is a means to an end. It is vital that once published, the information is used in the right way. Those working to improve aid transparency have voiced some concern that people in developing countries do not feel sufficient ownership over aid to hold donors and governments to account, even with greater transparency.
Natural resources do not suffer that problem. Citizens are demanding their fair share of what they know to be theirs. Civil society, supported by the Extractive Industries Transparency Initiative, is tooling up to provide the checks and balances on government. The Ugandan activists are clear: “We stand ready to hold our leaders accountable, but we require your support to do so even more.”
The importance of extractive industries to African development cannot be understated. In 2008, exports of oil, gas and minerals from Africa were worth about nine times the value of international aid to the continent ($393bn v $44bn), and over 10 times the value of exports of agricultural produce ($37.9bn). Yet most of Africa’s natural resources remain in the ground. The economist Paul Collier estimates that only a fifth of sub-soil assets have been discovered in sub-Saharan Africa.
In Uganda, where over 7 million people still live in extreme poverty, harnessing the newfound oil wealth is a one-off opportunity to accelerate social and economic development at a previously unthinkable rate. With transparency and accountability acting as a vaccine against corruption and poor leadership, the new revenue has the potential to lift the country to middle-income status. Europe must do all it can to empower the people of Uganda to make sure this happens.
This blog was co-written by Winnie Ngabiiwe – chairwoman of Publish What You Pay – Uganda,
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