The 3.5 Billion barrels reserves of Oil find present
Uganda with an opportunity of windfall revenue when oil production commences.
Commercial production is expected to commence 2017 and the estimates of oil
revenues are in the range of 2- 3.5 Billion dollars per annuam which is more
than 50% of the current cumulative national debt. The current reserves are
expected to last 20-24 years if production is at 200,000 bpd. In essence, if oil revenues are managed well,
they will not only go a long way in leveraging Uganda from its debt, but will
also deliver critical development infrastructure.
Oil Revenue Management will be guided by the Oil
Revenue Management Policy (2012) and the Public Finance Bill (PFB) currently before
parliament. The proposed law provides for a single petroleum fund
in Bank of Uganda (BoU) where all oil revenue collections will be deposited.
All oil revenue collections and administration will be done by Uganda Revenue
Authority while the Ministry of Finance, Planning and Economic Development will
be in charge of the petroleum fund with a delegated authority of management of
the petroleum funds to BoU.
The Petroleum fund has twin objectives of financing
the budget and Investing/saving for future Generations. The withdrawal of funds to cater for the national budget will be through Parliamentary
approval on a year-by-year basis. In the
short run, the oil funds will be limited to funding the non-oil Budget deficit
agreed as part of the Budget process. The withdrawals
of petroleum funds to the budget left to discretion of Parliament presents a clear risk that
political pressure that could result in revenues being spent rather than
invested.
The funds that then remain
on the petroleum fund will be invested in
accordance with the petroleum revenue investment policy issued by the Minister
in consultation with the Secretary to the Treasury and on the advice of the
Investment Advisory Committee. The members of the Investment Advisory Committee
shall be appointed by the Minister after approved by Parliament‖. The future savings provision withstanding, the
bill does not explicitly provide for the stabilization fund which would provide
a steady level of government revenue in the face of oil
price fluctuations.
There are various forms of
accountability and transparency provided in current bill which include the
Minister tabling table the annual report to parliament. The Office of the
auditor general will audit both the funds on the petroleum fund and the funds
transferred to the budget and present annual reports to Parliament.
The proposed legal
framework provides Uganda a strong foundation for management of oil revenues;
however the main challenge lies
in the implementation of its laws. The implementation gap between policies and regulatory frameworks on
the one hand, and actual performance on the other must not be allowed for the
petroleum sector in Uganda.
The legal framework provides the necessary foundation but to realize
full benefits, open transparency is key- information for all. As much as the proposed law requires the Government of Uganda
(GOU) to publish incoming revenue receipts, it does not specify how reported
receipts will be disaggregated, nor does it require companies to publicly
disclose the payments that they make to the GOU. A critical and more urgent
action for Uganda is to adhere to the International standards of transparency. An example of these International
standards is the Extractive Industries Transparency Initiative (EITI) which requires its
member Countries to publish all payments made by oil, gas,
and mining companies to government, and all revenues received by the government from those companies. EITI
implementers also commit to closely involving civil society in the design and
monitoring of the EITI process. Also the Dodd-Frank Act in the US and the
Accounting and Transparency Directives in the EU require all private oil
companies that fall under the jurisdiction of these requirements to publish
annually details of all revenue payments to the host governments, including
taxes, royalties, licensing fees and bonuses.
If the Uganda truly
intends to join the EITI, as it has repeatedly stated by President and the
respective ministers, it perhaps makes logical sense, harmonizing its reporting
requirements with the EITI Standard in
order to limit administrative burden going forward. In fact some international
companies, including Tullow Oil, Total E&P, Dominion Petroleum and CNOOC
will be required to report their payments to the GOU by virtue of their stock
exchange listings or home jurisdiction law. As such, it would be wise to
include a requirement in the Public Finance Bill to require companies to
declare their payments to the GOU in line with international transparency
requirements. In fact, Ghana which
signed to the EITI in 2003 has a separate EITI bill.
EITI compliance helps to prevent oil, gas or mining
revenues being mismanaged or lost to corruption. Experience shows it also leads
to improvements in the tax collection process and boosts public finances as it
has in Ghana and Nigeria. Nigeria’s first EITI audit
report found a discrepancy of $230 million between what the companies reported
to have paid, and what the Nigerian Central Bank reported to have received.
To attain shared benefits
for all from oil, it requires shared information for all. Informed citizenry, civil society organisations and the media are and will
be crucial healthy transparency and accountability organs
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