Local Content and Employment in Uganda

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Article 128 of Uganda's Petroleum Bill states that licensees in the oil and gas industry should give priority to citizens of Uganda in their hiring practices and preference to local goods and services.[1] The document does not set any specific requirements however; likewise the country's National Oil and Gas Policy suggests the need to identify opportunities where Ugandans can participate in the oil industry but does not set down any concrete rules.[2]

A September 2011 study on national participation commissioned by Uganda's Ministry of Energy and Mineral Development noted that while the petroleum bill would establish the legal basis needed for the government to enforce a national content policy, neither an enacted law nor the government would spur the capacity building necessary to generate sufficient national content within Uganda's oil and gas industry.[1]

Outlook for local content

The Ministry of Energy and Mineral Development study argued that the number of permanent jobs in Uganda's oil and gas sector is not likely to exceed 10,000 when the activities peak, and possibly only 2,000 permanent jobs during the phase of production. But there may be up to 30,000 - 50,000 permanent indirect jobs when production takes place. Oil and gas activities are expected to contribute marginally to the total workforce in Uganda, according to the report, providing no more than about 0.2% of the total number of jobs in the country. Wages in the petroleum sector are expected to be well above the country average however, giving the industry a wider economic impact than the expected employment figures suggest.[1]

The report found that, through the contracts entered into between the oil companies and the service providers up to 2009, 14% of investment was retained in Uganda of the total foreign investments made. The report noted that Tullow Oil said 550 Ugandan suppliers have been providing goods and services to its operations, and that the company has stated a Ugandan share in terms of contract value of 38%. However the study noted that this share is established based on the nationality of the contract holder, and strongly recommended against this principle for national content formation because of the likelihood that a contract with a "shell company" acting as an agent for a foreign company would qualify as national content.[1]

Challenges and opportunities

The report points to macro and institutional level constraints to national content building in Uganda that were referenced in the government's National Development Plan, including: a poor institutional support network; access to credit; lack of necessary skills; low level of technology and lack of indigenous capability for technological mastery; inadequate physical infrastructure; low Science, Technology and Innovation (STI) capabilities; lack of serviced industrial parks; poor (unreliable) supply of inputs.[1]

There are also constrains at the micro level, mainly to do with the informal nature of many of the companies supplying petroleum activities in Uganda with goods and services: only 35% of 55 such firms surveyed in 2011 were registered with Uganda Revenue Authority; and 85% of firms surveyed did not have accounts with formal auditing. The report warned that formal requirements are relatively strict in the oil industry, and that current practices of many Ugandan firms would not comply with what the industry would require.[1]

However the report was optimistic that training and capacity building around oil would serve Uganda well, because the competence developed to serve the petroleum sector would also have relevance for other sectors, and suggested that Uganda could serve as a competence center for the oil and gas sector in the East African region. The location in Uganda of regional regional offices of key international service companies could also contribute to a more attractive business environment.[1]

References

  1. 1.0 1.1 1.2 1.3 1.4 1.5 1.6 "The National Content Study in the Oil and Gas Sector in Uganda", Ministry of Energy and Mineral Development, September 2011.
  2. "Uganda’s local content paradox as oil jobs beckon", CEO Magazine, 25 June 2012.