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Governance

  • Parliament calls for stringent fiscal rules on the management of oil revenues

    The move is meant to curtail government’s uncontrolled withdrawals from the Petroleum Fund to finance budget deficits and/or priorities. 

    Members of Parliament on the Natural Resources Committee have called for an amendment of the Public Finance Management Act to introduce a cap on how much oil revenues can be withdrawn from the Petroleum Fund to finance budget priorities.

    The MPs proposal is contained in the report of the Parliamentary Sectoral Committee on Natural Resources on the Ministerial Policy Statements and budget estimates for 2019/2020 dated April 2019.

    The introduction of a cap, MPs argue, will curtail the uncontrolled withdrawals of revenues from the Petroleum Fund to finance budget priorities.  For instance, according to the report Shs 125 and 200 billion was withdrawn from the Petroleum Fund to finance budget priorities for the financial years 2017/2018 and 2018/2019 respectively.

    According to the Appropriation Act, 2019, government will further withdraw Shs 445.8 billion from the Petroleum Fund to finance budget priorities for this financial year (2019/2020). As at December 30, 2018, the balance in the petroleum fund stood at Shs 288.7 billion.

    “Parliament should amend sections 58, 59 (1) – (7) of the PFMA, 2015 to introduce a cap on how much oil revenues can be appropriated to the consolidated fund or the investment reserve by Parliament,” the report reads in part.

    The Public Finance Management Act (PFMA) 2015, ring fences oil revenues for only infrastructure projects and development. However, the MPs noted in the report, it was not clear whether the oil revenues so far withdrawn from the petroleum fund have been spent on infrastructure projects. The Auditor General has noted in various reports, that there are no assurances as to whether the withdrawals from the Petroleum Fund are actually financing infrastructure and development projects because the Appropriation Act often does not disclose the purpose of the withdrawals.

    “The law [Public Finance Management Act, 2015] should be amended to sufficiently provide a format for the Appropriation Act which shows, purpose, activities and amount of petroleum funds to be appropriated under the consolidated fund or transferred to the investment reserve account,” MPs further recommend in the report. This will ensure that oil revenues will be managed for the benefit of current and future generations.

    MPs also noted the lack of an investment policy and profile to guide infrastructural and developmental projects eligible for financing by petroleum revenues.

    “An investment profile of oil revenues should be developed so as to guide the balanced growth and sustainable development of Uganda. This would be essential in profiling infrastructure and development projects eligible for financing by petroleum revenues,” MPs recommended.

    Weighing in on the proposal, Didas Muhumuza, the Extractives Governance Coordinator (and Managing Editor of the Oil in Uganda magazine and website) at Action Aid International Uganda (AAIU) said a review of the law is long overdue.  “The proposal is a good mechanism that will provide the much needed checks and balances for better control of the financial in-flows and out-flows from the Petroleum Fund and ensure better management of oil revenues for the present and future generations,” Muhumuza noted. 

    However, with weak enforcement of laws plus regulations, it remains unclear whether a review of the law can curtail government’s appetite for oil revenues.

    by: Edward Ssekika,Edited by Muhumuza Didas

  • Local governments demand exclusive rights to licence artisanal miners

    Mineral–rich districts of Uganda want to be granted exclusive rights to licence and regulate artisanal miners in their respective districts.  “In the new law, licensing of artisanal miners should be made a preserve of local governments in the mining areas,” Mr. John Asiimwe, Buhweju district chairman said.  Buhweju is one the gold mining districts in the country.

    Asiimwe was speaking during a consultative meeting on the Mining and Minerals Bill, 2019 at Oxford Hotel in Mbarara.  The meeting was organised by the Ministry of Energy and Mineral Development (MEMD) in partnership with Global Rights Alert – a civil society organisation.

    Asiimwe argues that the current Mining Act, 2003, centralizes licensing authority in the Directorate of Geological Survey and Mines (DGSM) which is even under-staffed to inspect and monitor the activities of artisanal miners.

    “This power [to licence artisanal miners] should be decentralised. Let licencing and regulation be left to respective districts. However, the bill maintains the old order of licensing that excludes local governments,” he emphasised.  

    In its current form, the bill takes away licencing powers of the Director of the DGSM and vests them in the Minister of Energy and Mineral Development except for building substances (development minerals). Asiimwe expressed gratitude that the bill at least recognises the rights of artisanal and small scale miners. The bill establishes a framework for licensing, regulation and monitoring of artisanal mining activities and collection of revenues from artisanal miners. It replaces location licences with artisanal mining permits.

    According to the bill, artisanal mining permits are a preserve of only Ugandan citizens, cooperative societies, registered associations comprising of exclusively Ugandan citizens or registered companies where 100 percent of shares are held by Ugandans.

    In its current form, the bill only grants powers to local governments to licence and regulate artisanal exploitation of building substances (development minerals) in collaboration with the DGSM. Building substances also known as Low Value Minerals or development minerals include stones (quarrying), sand, clay and murram. These were previously un-regulated under the Mining Act, 2003.

    ROYALTIES

    Asiimwe also expressed concern over the sharing of mineral royalties. According to the Mining Act, 2003, royalties are shared among central government (80 percent), local governments (17 percent) and land owners (3 percent). The bill maintains the formulae for sharing royalties.

    “What criteria were used in determining the formulae? We need an equitable format for sharing of royalties and not the central government taking everything and leaving left-overs to local governments and land owners,” Asiimwe said.

    Participants in the meeting proposed a change in the formulae of sharing royalties. They proposed central government should take 50 percent, district local governments, 40 percent while the 10 percent should go to the land owners.

    Vicent Kedi, the Principal Engineer in charge of mining at the DGSM welcomed proposals from stakeholders, especially mining communities.  “The draft bill is just a working document to direct discussions. Therefore, consultations are meant to come up with a document [law] that is agreeable to all Ugandans,” Kedi said. Recently, government launched national-wide consultations on the bill, before it is tabled in parliament for enactment.

    By; Edward Ssekika, Edited by Muhumuza Didas

  • CSOs want EITI principles to be enacted into a local law

    CSOs’ argument is based on the voluntary nature of EITI principles and therefore there is need for legally binding local framework with sanctions for non-compliance.

    A section of civil society organisations wants Uganda’s government to enact Extractives Industries Transparency Initiative (EITI) principles into a local law.  In an open letter dated August 12, 2019 and addressed to the Minister of Finance, Planning and Economic Development (MoFPED), Hon. Matia Kasaija – in whose docket EITI falls, civil society organisations argue that since EITI principles on transparency and accountability are voluntary, there is need to translate them into a legally binding local law with sanctions for non- compliance.

    “Government has set October 2019 as the month in which the country will formally apply to join the EITI. However, while we appreciate government’s efforts to join EITI, we note with grave concern that events taking place in the country today show that government is not ready to join and make proper use of the EITI,” a letter signed by 15 civil society organisations reads in part.

    In their letter, CSOs argue that there are many cases that show lack of commitment to transparency on part of government including failure to implement relevant laws such as the 2015 Public Finance Management Act (PFMA). Since the enactment of the PFMA in 2015, government has continued to violate its provisions on transparency and accountability with impunity, CSOs claim. The PFMA provides for the collection, management and utilisation of Uganda’s oil revenues in a transparent and accountable manner.

    “In the presence of such abuses, it is clear that unless fundamental reforms in government are undertaken as part of the EITI process, there is little hope, if any, that joining EITI will help address the problems of lack of transparency and accountability for Uganda’s oil revenues,” the letter reads.

    For instance, the Shs 6 billion reward paid to 42 government officials for their participation in the Capital Gains Tax (CGT) negotiations and engagements against Tullow Oil in Landon – popularly known as the ‘Presidential handshake’ is a clear illustration of wasteful expenditures.  In addition, government has since not fully implemented the recommendations from the report on Committee on Commissions, Statutory Authorities and State Enterprise (COSASE) that investigated the reward.

    “Such a government cannot be trusted to comply with EITI principles which are voluntary. An executive that refuses to be held accountable and disrespects parliamentary decisions is unlikely to comply with EITI principles,” CSOs argue in their open letter.

    The letter adds, “This non-compliance with a binding law creates suspicion that government will not respect and comply with the EITI principles which are voluntary,” the letter reads in part.

    “Government should ensure that after joining EITI, an EITI bill is tabled before parliament to enact an EITI law in Uganda. To enable compliance to the EITI law, the law should provide for formation of a multi-stakeholder committee with representatives from government, CSOs, cultural leaders, religious leaders, academics and the private sector. The committee should among other things be the overall overseer of the Petroleum Fund, the Petroleum Investment Fund and should be responsible for the selection of development projects to be funded with oil revenues. The law should provide that the decisions of the committee are binding on government,” the letter reads.

    Ntegyereize Gard Benda, the Chairperson Publish What You Pay (PWYP) Uganda chapter concurs. “The only sanction that the EITI provides is a suspension which may not matter to government. Therefore, it is important that we have domestic safeguards in terms of a law to compliment the voluntary EITI principles,” Benda argues. 

    By: Edward SsekikaEdited by Muhumuza Didas

  • Nampewo Mbowa replaces Mugerwa as Tullow Uganda General Manager

    Tullow Uganda Operations Pty Ltd recently appointed Mariam Nampeera Mbowa, a seasoned lawyer with vast experience in the oil and gas sector, as the company’s General Manager. Nampeera, replaces Jimmy Mugerwa who was recalled to Tullow Oil Plc headquarters in Landon in mid-August 2019, as a director in charge of infrastructure and operations.

    Tullow Uganda Operations Pty – is a subsidiary of the British oil giant Tullow Oil Plc. Tullow Oil is one of the five oil exploration and production companies in Uganda and it holds 33.3 percent interests in Exploration Areas (EA) 1, 1A, 2 and 3A in the Albertine graben.

    It was not clear why Mugerwa was moved from Uganda at the time when the company is in the process of making a Final Investment Decision (FID). Tullow is also embroiled in negotiations with government of Uganda over the payment of Capital Gains Tax (CGT), on the proposed farm-down of part of the company interests to Total E&P Uganda BV and CNOOC Uganda Ltd.  

    His recall could be attributed to the troubled reign as board Chairman of DFCU Bank and his failure to conclude negotiations with government over Capital Gains Tax. In its half year results report of 2019, released in July, Tullow expressed its dissatisfaction with the sluggish nature of negotiations with Government of Uganda that has led to delays in completion of the farm-down. DFCU bank has been embroiled a series of scandals arising out of the controversial take-over of Crane Bank Limited under the stewardship of Mugerwa as the board chair –  something that was in turn tarnishing Tullow’s international image.

    CONTROVERSY OVER CGT

    Mugerwa broke barriers as the first Ugandan to head an oil exploration and production company in Uganda. However, the last two years of his tenure in Uganda, Tullow has been in protracted negotiations with government over the payment of capital gains tax. His recall could be attributed to the company’s frustrations with government of Uganda overall.

    In January 2017, Tullow announced that it had agreed to farm-down (sell) 21.57% of its 33.33% interests in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total E&P Uganda B.V (and CNOOC Uganda limited) for a total consideration of $900 million. However, the farm-down has to be approved by government upon satisfaction that the relevant taxes –  in this case, Capital Gains Tax has been paid.  The tax dispute is over a $ 167 million (approximately Shs 617 billion), a bill Uganda Revenue Authority slapped on Tullow for its sale of $ 900 million worth of assets to Total and CNOOC.

    However, Tullow objected the bill on grounds that given the costs it had incurred, $167 million tax bill was not correct – sparking a stalemate. Though Tullow and Total want a political settlement to a tax dispute, President Museveni has in the last meetings in January and April 2019, insisted that the tax dispute should be settled with URA and not him. This has prolonged the disagreement with no quick end in sight, further complicating the Final Investment Decision (FID) and consequently ‘first oil’ target.

    Once the farm- down is completed, Tullow will remain with only 10 percent interest in the up-stream and mid-stream (mainly pipeline) and with no management role. Mugerwa’s recall to Landon comes at the time when Tullow Oil Plc announced a major discovery in the Orinduik block in Guyana, raising expectations that it could move to develop the oil fields there.

    WHO IS MARAIM NAMPEERA MBOWA?

    Nampeera is no stranger to the oil and gas sector. Prior to her appointment, she has been working as General Counsel – East Africa where she headed Tullow Uganda and Kenya legal teams. She worked as company secretary and legal advisor for Shell Uganda between 1998 and 2003 and she also served Shell International BV in different capacities. She also worked as legal officer for Uganda Petroleum Company Limited (formerly Mobil Oil Uganda) between 1994 and 1998. She holds a Bachelor of Laws degree of Makerere University, Master of Laws from Landon School of Economics and a Diploma in Legal Practice from the Law Development Centre.By: Edward Ssekika,Edited by Muhumuza Didas

  • UNOC appoints Ms Proscovia Nabbanja as Acting CEO

    Nabbanja become the company’s second CEO following the resignation of Dr Josephine Wapakhabulo.

    The Board of Directors of the Uganda National Oil Company Limited (UNOC) appointed Ms Proscovia Nabbanja as the company’s Acting Chief Executive Officer (CEO) following the final departure of Dr. Josephine Wapakhabulo. “Uganda National Oil Company Limited [UNOC] Board of Directors [BoD] unveils the Acting Chief Executive Officer – Ms Proscovia Nabbanja as Dr Josephine Wapakhabulo concludes her journey, August 13,” a tweet from UNOC read announcing the appointment.

    Nabbanja replaced Dr Josephine Wapakhabulo who resigned in May this year citing family and personal reasons. However, her resignation took effect on August 13, 2019. This means that Wapakhabulo officially handed over office to Nabbanja on Tuesday August 13, 2019.

    In a short video posted online by UNOC, Emmanuel Katongole, the Chairman Board of Directors (BoD) praised Dr Josephine Wapakhabulo, the out-going CEO that she has been “a terrific leader”.  

    Ms Nabbanja 41, is a Geologist with 19 years’ experience in the Oil & Gas industry and gas been the Chief Operating Officer – Upstream at UNOC for the last 3 years. Before joining UNOC, Nabbanja worked as a Geologist with the Ministry of Energy and Mineral Development under the Petroleum Exploration and Production Department.

    UNOC is a private company wholly owned by the state and takes care of the state’s commercial interests in the sector. Proscovia has 17 years of experience in oil and gas industry. Formerly served as a Principal Geologist in the Petroleum Exploration & Production Department under the Ministry of Energy and Mineral Development. She headed the Technical Division and was at the forefront of reviews of technical proposals especially field development plans and petroleum reservoir reports.

    She headed the estimation and reporting of the oil resources and reserves in the country, field operations monitoring and management of petroleum data.

    She has sat on a number of inter-ministerial committees and also worked on a number of Donor funded programs such as Norway’s Oil for Development and those supported by the USAID. Proscovia holds a BSc (Chemistry, Geology) – MUK; MSC Petroleum Geoscience – Imperial College of Science Technology and Medicine; Diploma in Petroleum Management and Operations; and Masters of Business Administration – Imperial College Business School.

    by: Edward Ssekika,Edited by Muhumuza Didas

  • Government embarks on multi-stakeholder consultations on the new mining bill, 2019

    Civil society organisations describe the new Mining and Minerals Bill, 2019 as progressive.

    Government started country-wide consultations on the new Mining and Minerals Bill 2019 that seeks to improve the management of the minerals sub-sector. The Mining and Minerals Bill, 2019 will repeal the Mining Act, 2003. Uganda has a huge mineral potential that once exploited and revenues well managed has potential to spur economic growth and development. However, the weak and obsolete legal and regulatory framework has been blamed for the sluggish development of the sub-sector.

    Launching the stakeholders’ consultations on the bill at Imperial Royale Hotel, the Minister of State for Minerals Development, Hon. Peter Lokeris emphasised the need for stakeholders especially mining communities to provide their views on the bill.

    “Please note, at this stage the bill [Mining and Minerals Bill 2019] is a working document and we look forward to your input to enrich it so that it effectively addresses the challenges in the mineral sub-sector in this country,” Lokeris said.

    Onesmus Mugyenyi, the Deputy Executive Director of Advocates Coalition for Development and Environment (ACODE) welcomed the Mining and Minerals Bill 2019 as a step in the right direction. “Under the Mining Act 2003, if you want to apply for a licence, it was first come, first serve. So, those individuals who had information about the minerals sub-sector, would take that advantage and put in applications. Now, what the new bill is proposing is competitive bidding which is a good step,” Mugyenyi explained.

    He added, “What the new bill is looking at is how does the country formalize and empower the sub-sector so that the citizens can maximize benefits”

    Vincent Kedi, a Mining Engineer at the Directorate of Geological Survey and Mines (DGSM) in the Ministry of Energy and Mineral Development (MEMD), says the bill provides for punitive sanctions for none compliance. “Importantly, the bill provides for very strong fines, penalties and sanctions regime. The current law [Mining Act, 2003] has a maximum fine of about Shs 2 million. But the new bill provides for improvements regarding penalties for violations and none compliance,” Kedi explained.

    He adds that the bill also seeks to regulate substances which were excluded in the definition of minerals in the Constitution. These that are often referred to as development minerals include: sand, clay, marram and stones which when exploited on a commercial basis will be categorised as mining and thus their exploitation regulated by government.  According to the Bill, no person will be authorised to exploit sand, clay, marram and stone on a commercial basis without a licence.

    Speaking at the same event, Simon Peter Kinobe, the President Uganda Law Society (ULS) said the new law should promote local content and preservation of the environment. “As Uganda Law Society we are insisting on the local content element, Ugandans should benefit, the government should benefit and so should the investors. Our environment should be preserved and the best practices emphasized,” Kinobe said.

    Arthur Bainomugisha, the Executive Director of ACODE asked government to aim at creating a law that promotes meaningful investment in the sector. “We must create a law that attracts serious investors that will create good jobs for our people in the mining industry,” he explained. 

    By: Edward SsekikaEdited by Muhumuza Didas

  • Ministry of Energy struggles with low staffing levels

    The ministry has lost 70 percent of its well trained and experienced staff to UNOC, PAU and oil related companies due to better salaries.

    The Ministry of Energy and Mineral Development (MEMD) has suffered a mass exodus of its well trained and experienced staff due to poor pay, Robert Kasande, the Permanent Secretary revealed. Kasande shared that at least 70 percent of the staff have left the ministry to Petroleum Authority of Uganda (PAU), Uganda National Oil Company Ltd (UNOC) and other oil and oil-related companies in the last few years. The low staffing levels, he explained have crippled the ministry’s performance.

    Kasande was recently appearing before the Public Accounts Committee (PAC) of parliament to answer queries raised by the Auditor General in the 2016/2017 Audit report. Kasande told the Committee that the ministry could not absorb the funds due to limited number of staff. He attributed the exodus of staff to poor pay at the ministry compared to better salaries at PAU, UNOC and other government parastatals and oil companies. “This exodus has left the ministry with only 30 percent staffing level,” Kasande told the Committee. 

    Some of the notable staff that have left include; Ernest Rubondo, the executive director, Petroleum Authority of Uganda, Dozith Abeinomugisha, Proscovia Nabbanja, Irene Batebe, Gloria Sebikari and Peninah Aheebwa, Ibrahim Kasita among others. Many more of the ministry staff continue to exit to join the UNOC, PAU and other oil related companies. Many of the companies and parastatals are under the watch of the Energy and Minerals Development Ministry.

    He said the ministry returned Shs 2.9 billion meant for staff salaries to the Consolidated Fund due to staff exodus. Nathan Nandala Mafabi, the Chairperson of the PAC, said the 30 percent staffing level is an indication that the performance of the ministry is also at 30 percent.

    “You know there are people in civil service who are looking for money and these companies want people who have knowledge in that area and that is the reason many of them decided to run to these entities for better pay,” Mafabi said. He asked the ministry officials to table their ministry’s salary structure, and the list of those who have left to the Committee.

    According to the Ministry of Energy and Mineral Development Briefing Paper released in May 2019, under the theme; Uganda’s Mineral and Mining Sub-sector: What can be done to harness its full potential, low staffing levels was highlighted as one of the key challenges facing the ministry.

    “In particular, there are a number of unfilled vacancies in the Directorate of Geological and Mines [DGSM]. About 50 percent of the mineral sub-sector staff structure is filled. Most staff are being shared among the three departments of; Geological Survey, Geothermal Resource, and Mines. This has caused limited effective implementation of activities and in turn delayed execution of works,” the briefing paper reads in part.

    “The Ministry of Energy and Mineral Development in conjunction with the Ministry of Public Service should fast-track filling of the vacant positions in the mineral sub-sector structure as a matter of urgency,” the briefing paper recommends. With poor salaries in the ministries, staffing exodus to government parastatals with better salaries is inevitable overall.

    by: Edward Ssekika,Edited by Muhumuza Didas

  • Tullow, Government in a fresh protracted fight over capital gains tax

    Tullow Uganda Operations Pty Ltd is embroiled in a fresh protracted row with government of Uganda over the payment of the Capital Gains Tax (CGT) from the farm-down of part of its   assets to Total E&P Uganda and CNOOC Uganda Ltd.  A reliable source who preferred anonymity has told Oil in Uganda that top company officials have held a series of meetings with President Yoweri Museveni and senior government officials, but no agreement has been reached.  Tullow wants to pay less tax from the farm-down on grounds that the money will be re-injected into the East African Crude Oil Export Pipeline project (EACOP). Tullow is demanding to pay the taxes in instalments, but government has rejected these proposals.

    In January 2017, Tullow Uganda announced that it had agreed to farm-down 21.57% of its 33.33% interests in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total E&P Uganda and CNOOC Uganda Ltd for a total consideration of $900 million (Approximately Uganda Shs 3.2 trillion). Completion of the farm-down is subject to certain conditions, including the approval of the government of Uganda. In its December 2017 report, Tullow had expected to complete the farm-down by June 2018. However, protracted negotiations over capital gains tax has delayed the completion of the farm-down to date.  It is not clear when the company will reach a deal with government and proceed with the sale.

    Tullow hinted on its frustration with Ugandan government over the issue in the company’s 2019 half year results report released on July 24th 2019. “In Uganda, following meetings in January 2019 between the CEOs of Tullow and Total, and President Yoweri Museveni of Uganda, where principles for the tax treatment of the farm-down to CNOOC and Total were agreed, the Joint Venture Partners have worked to finalise an agreement based on these principles,” the report reads in part. However, the report blames government on going against what had already been agreed upon.

    “Tullow and its joint venture partners, have, so far, been unable to finalise this agreement with the government of Uganda. We continue to work constructively with our joint venture partners and the government of Uganda to agree a way forward to complete the farm-down and determine the subsequent timing of Final Investment Decision (FID),” the report notes.

    “Nevertheless, although negotiations continue, Tullow is now also considering all options in pursuing the sale of its interests in Uganda,” Paul McDade, the Chief Executive Officer Tullow Oil Plc noted in the report. 

    According to the report the joint venture partners continue to work towards reaching the Final Investment Decision (FID) for the development project in the second half of 2019 with the project’s technical aspects now completed,” the report reads in part.  However, it remains unlikely that the joint venture partners will make a FID this year – it could be further delayed to 2020.

    Once the farm-down is completed, Tullow will cease to be an operator in Uganda. The company will only retain a presence in-country to manage its non-operated position. However, overall the company performed well in half year results.

    The company is upbeat by the approval of Tilenga project Environmental and Social Impact Assessment (ESIA) and the Kingfisher ESIA public hearings which were successfully concluded.

    by: Edward Ssekika,Edited by Muhumuza Didas

  • Oil money: Is gov’t emptying the Petroleum Fund?

    Finance Minister Matia Kasaija

    Latest reports on the inflows, outflows and assets of the Fund reveal a patterns of irregular withdrawals of monies to the consolidated fund to finance budget deficits.

    A new report from the Ministry of Finance, Planning and Economic Development reveal that has withdrawn Shs 200bn from the Petroleum Fund to finance budget deficits. A semi-annual report to Parliament on the inflows, outflows and assets of the petroleum fund for the period ended 31st December, 2018 indicate the money was withdrawn to finance the 2018/2019 budget priorities. The report is authored by Matia Kasaija, the Minister of Finance, Planning and Economic Development.

    According to the report, by June 2018, the Fund had Shs 507 billion mainly from Capital Gains Tax, surface rentals, technology and training fees from oil companies as well as signature bonuses from the signing of Production Sharing Agreements with Nigeria’s Oranto Petroleum Limited and Australia’s Armour Energy Ltd.

    According to the report, the Fund stands at Shs 288.7bn as at December, 2018.  “This is a reduction in the Fund value reported as in June 2018 report, which stood at Shs 507 billion,” the report notes. “The report details the status of the Fund for six months ending 31st, December, 2018.

    “In accordance with section 61(1) of the Public Finance Management Act, 2015 as amended, this is to lay on table the semi-annual report of the Petroleum Fund for the financial year 2018/2019,” Kasaija’s wrote in a letter forwarding the report to the Speaker of Parliament. Kasaija’s letter is dated March, 28th, 2019. The Public Finance and Accountability Act, 2015, mandates the Minister of Finance to report to parliament on the status of the Fund in terms of inflows, outflows and assets every after six months.

    Justifying the withdrawals, Lawrence Semakula, the Accountant General recently said, “We have all these priorities such as financing infrastructure, so what do we do when we have a deficit. Rather than go out and borrow, we would rather use the money from the Fund,” he told Members Parliament.

    The report notes that since production has not yet started, nil volumes and values of petroleum production have been reported.

    “The further notes that during the reporting period, URA collected petroleum related taxes worth Shs 30.3bn of which Shs 2.5bn had not been submitted to the Fund by closing of the reporting period,” the report reads in part.

    WORRYING TREND

    Analysing the audited reports from the Petroleum reveal a trend of withdrawals that the Office of the Auditor General (OAG) has sometimes described as irregular.  For instance, a report for 2017 reveals that in November, 2017 Shs 125 billion was transferred from the Petroleum Fund to the consolidated fund to finance budget. Another Shs 200bn was also withdrawn from the Fund to the consolidated fund to finance 2018/2019 budget priorities.

    The Auditor General in a report to parliament described the withdrawal as irregular since it didn’t follow the procedures and processes laid down in the Public Finance and Accountability Act, 2015. The same Act, ring fences oil revenues to finance only infrastructure projects following an Appropriation Act.

    BANK ACCOUNT IN NEW YORK

    The Petroleum Fund is maintained in two separate accounts in the Bank of Uganda (BoU) –one account denominated in Uganda Shilling (UGX) and another in United States Dollars. “Another account was opened in the Federal Reserve Bank of New York to facilitate investments of the fund under the Petroleum Revenue Investment Reserve,” the report reads in part.

    Edward Ssekika

  • Hope as Uganda embarks on EITI signup process

    Government has so far formed a Muti-Stakeholder Group (MSG) – acritical body towards the implementation of EITI.

    Uganda has embarked on a journey that could see the country become the newest implementing country for Extractive Industries Transparency Initiative (EITI).  For a country,

    where the exploitation of oil, gas and minerals is shrouded in secrecy and with accusations of corruption, joining EITI is an important milestone in entrenching transparency, accountability and good governance of the extractive industry.

    Cabinet decision in January, 2019 to EITI followed ten years of advocacy mainly by civil society and some government officials. Established in 2003, EITI is a global standard for good governance of oil, gas and mineral resources.

    Under the initiative, an implementing country is required to publish an annual EITI report – disclosing information on; contracts, licences, volumes of oil, how much is produced, how much is paid and received, how revenues from the sector is utilised.

    To become an EITI implementing country, Uganda has to complete the 5 sign up steps.  Step 1 is the establishment of a Multi-Stakeholder Group (MSG) with clear objectives and an agreed work plan for EITI implementation.

    With the help of MSG, government will submit the EITI candidature application to the EITI board. Once the board admits Uganda as an EITI candidate, the implementing county publishes the 1st annual report in line with EITI standards within eighteen (18) months. After, the annual EITI reports, an implementing country undertakes a validation process that enables the country become EITI compliant member. Currently, there are 53 countries, implementing EITI out of which, 25 are African.

    MULTI-STAKEHOLDER GROUP

    In February this year, cabinet decision was followed by a public declaration by the Finance Minister, Matia Kasaija of country’s intention to join the EITI. As part of its commitment, Government has already constituted a Multi-Stakeholder Group (MSG) to spearhead the implementation of the initiative.

    The MSG is currently comprised of 20 members drawn from Ministries, Departments and Agencies (MDAs), private sector and civil society. However, the membership is expected to rise to twenty-seven members.

    The MSG is Chaired by Moses Kaggwa, the director of Economic Affairs at the Ministry of Finance, Planning and Economic Development (MoFPED). Kaggwa’s deputy will be elected from among the members.  Other members of the MSG are;

    Elly Karuhanga (Chairman, Uganda Chamber of Mines and Petroleum – UCMP).

    Allan Kyeyune (Uganda National Oil Company – UNOC)

    Kush Amin (Private Public Partnership Unit, Ministry of Finance)

    Allen Bucyana (Ministry of Justice and Constitutional Affairs – MoJCA)

    Obad Noah (Oranto Petroleum Limited)

    Gloria Akatuhurira (Uganda Revenue Authority)

    Tom Buringuziza (Armour Energy limited)

    Philip Andrew Wabulya (Bank of Uganda)

    Nathan Morgan (TOTAL E&P Uganda)

    Robert Tugume (Ministry of Energy and Mineral Development)

    Jean-Yves Petit (TOTAL E&P Uganda)

    Allen Tebugulwa (National Planning Authority)

    Godfrey Mucurezi (Uganda Revenue Authority)

    Timothy Tibesigwa (Ministry of Works and Transport)

    Winfred Ngabiirwe (Global Rights Alert)

    Margret Lomonyang (Karamoja Region Indigenous Women Association) Siragi Magara Luyima (Civil Society Budget Advocacy Group – CSBAG)

    Onesmas Mugyenyi (ACODE)

    Ntegyereize Gard Benda (World Voices Uganda).

    MSG has so far convened its inaugural meeting and will be meeting on a quarterly basis. “Standing observer slots will be allocated to the Office of Auditor General (OAG) and the EITI International Secretariat. All observers will be able to engage in discussions at the MSG but will not have a right to vote,” a member of MSG who preferred anonymity told Oil in Uganda. He added that additional seats will be provided for nominated experts to who shall invited to speak on specific issues.

    The MSG is currently reviewing its own Terms of Reference (ToRs) and defining their scope.

    IS IT A PANCEA?

    Once fully implemented, EITI is expected to improved transparency, accountability and good governance of the sector. “EITI increases public information, thereby empowering the public to put to task their government to account for every penny of the resource revenues, which many governments in Africa tend to fear,” argues, Gard Benda, the Country Executive Director, World Voices Uganda.  The initiative enhances public debates which improves governance of the extractive industry.

    For instance, Tanzania joined EITI in 2008. According to 2017 EITI progress report for Tanzania, reveals that debates on payments of income tax by mining companies operating in the Tanzania, resulted into Acacia company – one of the mining companies paying $ 14 million in unpaid income tax.

    But critics argue that EITI is not a panacea for transparent and accountable governance of the extractives industry since it lacks sanctions. Countries that are not compliant can on be delisted from the initiative but can join the initiative again. For stance, countries like; Central African Republic, Democratic Republic of Congo, Tanzania, Sierra Leon, Yemen, Indonesia, Madagascar, Guentamala have been suspended and re-joined the initiative.

    With the Multi-Stakeholder Group in place, the next step will be for Uganda to formally apply to the EITI International Board for candidate status.