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Is oil discovery in Uganda an opportunity or a looming curse?

PhD ceremony:Mr T. Ogwang
When:September 03, 2020
Supervisors:prof. dr. F.M.D. (Frank) Vanclay, dr. A. (Arjan) van den Assem
Where:Academy building RUG
Faculty:Spatial Sciences
Is oil discovery in Uganda an opportunity or a looming curse?

Is oil discovery in Uganda an opportunity or a looming curse?

Since Uganda discovered commercial oil deposits in 2006, there have been many extraction activities resulting in many social impacts. Uganda is still one of the poorest countries in the world. It does need opportunities for development if it is to escape the extreme poverty that grips it. In this PhD thesis, I discussed how the emerging oil industry in Uganda can be an opportunity if well managed, and how it will potentially lead to ‘resource curse’, ‘Dutch Disease’ and/or the ‘Nigerian Disease’ if poorly managed. I considered the implications of this for conflict and social development in Uganda. The research question explored in this PhD is: To what extent, and under which conditions, does the exploitation of natural resources lead to a resource curse? In order to answer this broad question, the emerging oil & gas industry in Uganda was examined by considering several subordinate questions: 1) What is the ‘resource curse’? 2) What are the potential benefits of resource development (particularly oil) in Uganda? 3) What are the possible negative consequences of resource development? 4) How can the possible negative consequences be better managed to reduce their likelihood of occurrence or their impact? 5) What can be done to ensure that the potential benefits of resource development are secured, and how can they be enhanced? 6) What are the significant socio-economic and political aspects (including potential for conflict) of the context (Uganda and the Great Lakes Region) and of resource development in general and oil in particular?

I used a range of qualitative data collection techniques including in-depth interviews, focus group discussions, field observation, and I reviewed relevant secondary sources. I primarily considered six issues. First, I examined the emergent social tensions and conflicts linked to the oil exploration and development in Uganda, and analysed how communities and different groups in society were affected by the multi-faceted intrusions brought about by the quest for oil. I explored the different mechanisms and interventions that have been undertaken to address these tensions. As there is still need for more land to accommodate the increasing demand for oil and gas infrastructure, it would be prudent to develop a clear description of the potential extent of displacement of people and a clear statement about compensation and livelihood restoration plans. A well-communicated compensation scheme should be provided in the Resettlement Action Plan to the potential and actual project affected persons.

In Chapter 2, I looked at the current and future impacts of the oil boom on the livelihoods of local people in the Albertine Graben region in Uganda. I examined some of the challenges associated with the development of the oil reserves in the Albertine Graben region. Oil development has led to the displacement of many people and has created much resentment, primarily because of the inadequate way in which the resettlement and compensation arrangements were implemented. The oil developments have created many social impacts, both positive and negative, and have fuelled conflict, fear and uncertainty. The extent of concern has prompted some aggrieved residents to sue the government in pursuit of fair compensation. There have also been killings of people because of landuse conflicts created by the oil developments. Potentially, oil production can bring benefits to the nation and region. However, as a large infrastructure project with a large landtake requirement, there will inevitably always be some consequences for people living in the places where oil is located. Nevertheless, when resettlement is done well and when all social impacts are properly addressed, harm can be minimised. By providing generous support to displaced peoples, it would be possible to have mutually beneficial outcomes. Instead of the court cases, killings, social harm and project opposition that has befallen Uganda, it should be possible to bring about a new situation of peaceful resolution of issues, with a fair sharing of benefits to all stakeholders, enabling the efficient implementation of this project of national significance.

In Chapter 3, I examined how rent-seeking practices have led to a local resource curse and social conflict at the community level in the Albertine Graben region. I also analysed the manifestations of the local resource curse, and discussed its impacts on local communities, and how these practices undermine the project’s potential benefits to communities. The research identified rent-seeking practices – including sophisticated land grabbing, corruption and bribery, unfair compensation rates, and speculation – and discussed the consequences of this for the different actors. With the discovery of natural resources, issues of weak governance, corruption, and patronage become more complex. I was particularly interested in understanding how rent-seeking practices undermine the potential benefits from the oil developments for local communities with the view of identifying how the resource curse syndrome might be avoided. I also examined how oil development has led to a range of social problems, including land grabbing, land scarcity and fragmentation, food insecurity, corruption, and ethnic polarization. These outcomes have been interpreted by local people as a local resource curse, and have led to social conflict within the local communities. These practices, which local people considered were ‘alien’ before the discovery of oil, are likely to undermine the potential benefits that might accrue from the exploitation of oil and gas. I also analyzed the manifestations of the local resource curse as being loss of property, economic displacement, and community disarticulation. I examined how the local resource curse leads to social conflict at the local level. Conflicts exist between different actors, such as between the central and local governments, Bunyoro Kingdom and the central government, local communities and the local government, and within communities. These conflicts lead to disharmony that will be detrimental to the future growth of the oil and gas industry and to Uganda at large. I identified that rent seeking takes many forms. The local resource curse was manifested in land grabbing, the displacement of people, the destruction of their property during land acquisition for project infrastructure, inadequate or delayed payment of compensation, changes in agricultural output that lead to local food shortages thus exacerbate social tensions, and conflict among local communities.

In Chapter 4, I assessed the social impacts of land acquisition for some major projects associated with the oil & gas development in Uganda. I argued that oil & gas development should not lead to a resource curse, instead, Uganda and other poor resource-rich countries in Africa should ensure that the negative consequences from resource exploitation, and especially from land acquisition, are fully addressed by adhering to international best practices. The potential and actual social impacts of these projects on the local communities are many and varied, including: increased levels of poverty, conversion of agricultural land to industrial purposes increasing food insecurity, inflation in the cost of goods and services, community disarticulation, and disruption of people’s lives and livelihoods. The influx of immigrants is viewed by local people as a threat to their survival due to increased competition for limited job opportunities. Since most land is communally owned, faced with the prospect of having their land acquired or expropriated, there are tensions within communities about how land might be kept sufficiently intact for viable agricultural production, and about how local communities might be able to benefit from any opportunities that might be created. Another challenge is how the proceeds from the sale of land should be used. Women are still socially excluded from owning land, which is a major concern when it comes to fair compensation and their future livelihoods. In most cases, they have been made worse off by the land acquisition for oil development in Uganda. On a positive side, these projects have created job opportunities for some people with the necessary qualifications, although not all of those who are qualified can be engaged. The new roads, dubbed locally as ‘oil roads’, have greatly improved accessibility to and within the region. The enhanced movement of goods and people has made many things easier and cheaper, although this has generated much in-migration.

In Chapter 5, I investigated the governance challenges related to “resource funded infrastructure” (RFI) development in Sub-Saharan Africa by looking at four Chinese-funded megaprojects in Uganda, which are being funded and built by Chinese companies. I considered whether these projects were likely to contribute to positive socio-economic development or be indicative of resource curse outcomes. I analysed the potential benefits and financial implications of each project. The four projects were: the Kampala-Entebbe Expressway; the Karuma Hydroelectricity Dam; the Isimba Hydroelectricity Dam; and the Malaba to Kampala section of the Standard Gauge Railway. Although RFI arrangements are viewed positively by some commentators, others (especially local traders and contractors) consider that these deals lack transparency, create unsustainable debt, promote China’s interests over the borrowing country, increase unemployment, unfairly compete with local businesses, engage in corrupt practices to win contracts, have poor working conditions, and result in substandard construction. Nevertheless, I concluded that Uganda and other Sub-Saharan African countries have generally benefited from Chinese-funded and built infrastructure, even though there are various issues. There is a greater risk of myth trap than debt trap. However, to ensure positive outcomes for all, national governments and Chinese companies should observe international standards and practice relating to: environmental and social impact assessment and management; human rights; benefit-sharing arrangements; and proper resettlement practice.

In Chapter 6, I examined the social and livelihood impacts from the Uganda section of the proposed East African Crude Oil Pipeline (EACOP). The EACOP Pipeline, which is expected to cost over USD $3.5 billion in total, will transport crude oil from Hoima in the Albertine-Graben region of Uganda to Tanga in Tanzania, a distance of 1443 kms. Although construction has not yet commenced, as at early 2020, the route planning and land acquisition for the pipeline had created many environmental and social impacts including: physical displacement, resettlement, economic displacement, disputed valuation, delayed compensation, livelihood disruption, food insecurity, uncertainties, fears and anxieties. The potential benefits when the project starts include employment opportunities (although many of these will be short term), improved infrastructure and accessibility, and oil revenue to the nation. Perhaps the major impact to date has been caused by delays to the project, which have exacerbated the anxiety and livelihood impacts. There is confusion around the meaning and implementation of the “cut-off date”, a mechanism intended to safeguard project developers from opportunistic behaviour of affected people. To regain their social licence to operate, I recommended that the various stakeholders give greater consideration to addressing the negative impacts, and to augmenting the benefits from the project. Furthermore, I argue that the international standards and procedures used in project land acquisition need to pay more attention to how the cut-off date is communicated to local communities, especially in relation to what it means for subsistence farming activities.

I concluded that, as Uganda prepares to get first oil, now perhaps around 2025, Uganda and other poor resource-rich countries should ensure that all negative consequences of natural resource developments are fully addressed and that all opportunities for benefit sharing are properly considered and implemented to avoid a situation where natural resource exploitation and development will paradoxically lead to a resource curse.