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Analysis: New law fails to ease oil concerns in Uganda


IRIN NEWS

KAMPALA/NAIROBI, 13 December 2012 (IRIN) – Uganda’s parliament recently passed a law to govern the exploration, development and production of the country’s estimated three billion barrels of oil, a resource whose extraction will directly affect the livelihoods of tens of thousands of people.

While the law streamlines the burgeoning industry, analysts have raised concerns over transparency and over who controls the sector.

“The new law helps set clear guidelines under which the oil sector is to be run and managed, and makes clear who is in charge of what roles,” said Tony Otoa, director of Great Lakes Public Affairs (GLPA), a Uganda-based think tank focusing on oil and governance. “However, there are some concerns about transparency and too much power within the oil industry in the hands of the president.”

The bill was passed on 7 December after weeks of wrangling over its controversial Clause 9, which gives the energy minister wide-ranging powers, including authority over the granting and revoking of oil licenses, negotiating and endorsing petroleum agreements, and promoting and sustaining transparency in the petroleum sector. Many members of parliament (MPs) felt these powers should be held by an independent national oil authority.

“Essentially, the standoff, which has ended, was about the withdrawal of trust from a government that is battered by corruption scandals. Also the way the cabinet operates is that, in the past, the feeling has been that some key ministries, like finance, are effectively run by the presidency after being stuffed by yes-men or -women. The pushback against Clause 9 also comes as the Central Bank opened its vaults to a large withdrawal in 2010 [US$740 million to buy six fighter jets] only for approvals to be sought retrospectively,” said Angelo Izama, a Ugandan journalist and oil sector analyst.

“Loss of trust”

“This loss of trust is behind the resistance to greater control by the executive,” he added. “The executive has not been a bad shepherd of the process so far. Uganda’s negotiating position has been tougher with the oil companies, ironically, without the oversight of parliament. However, public scandals elsewhere have negatively affected the ability of the president to convince lawmakers – especially of his party – that he means well.”

A number of donors – including the UK and Ireland – recently suspended aid to Uganda following allegations of deep-rooted corruption in the Office of the Prime Minister. The prime minister, the former energy minister and the foreign affairs minister were all accused of taking kick-backs from oil companies in 2011, charges that remain unproven but that nevertheless damage the reputation of the government.

“The country lacks trust in the state… Institutions and officials have lost legitimacy, and for such an important bill to vest too much power into a political appointee is a recipe for disaster,” said Stephen Oola, a transitional justice and governance analyst at Uganda’s Makerere University Refugee Law Project.

“Granting and revoking licenses and negotiations are technical in nature. We need an independent commission or authority made up of people of good competence, technical ability and experience, and good morals to guard our oil,” said Frank Gashumba, a local businessman and social activist.

Proponents of Clause 9 say licensing powers are safer in the hands of the cabinet than under an oil authority. “The authority is open, easy to bribe and manipulate. Cabinet is bigger than the authority – members of the executive are answerable to Ugandans because they are elected leaders,” said Kenneth Omona, a ruling party MP.

Those opposed to it say they will challenge the law, which was passed with 149 votes in favour and 39 against; some 198 MPs did not turn up to vote.

“The fight is not complete; the passing of the bill is liable to be challenged in courts of law,” said Theodore Ssekikubo, ruling party MP and chair of the parliamentary forum on oil and gas. “If we fail to go to court, we shall subject the matter to a referendum for all Ugandans to pronounce themselves on this strategic resource. We want to ensure transparency and accountability in the oil sector.”

Transparency

There are also concerns about the law’s confidentiality clause, which limits the amount of information accessible by the public.

“The law is lacking transparency – it imposes confidentiality on officials working within the sector, even after they leave office, so there is no opportunity for whistle-blowing or for the public to have access to information on, say, production-sharing agreements,” GLPA’s Otoa said.

He noted that Uganda still hasn’t joined the Extractive Industries Transparency Initiative (EITI), an international scheme that attempts to set a global standard for transparency in oil, gas and mining, further compounding the sector’s lack of transparency. As a member of the EITI, Uganda and oil companies involved in the country would be required to publish all payments and revenues from the industry.

While Total and the China National Offshore Oil Corporation (CNOOC), two of Uganda’s major oil partners, are listed on Wall Street and are therefore subject to the Dodd-Frank Wall Street Reform and Consumer Protection Act – which requires disclosure of payments relating to the acquisition of licenses for exploration and production of oil, gas and minerals – the Irish firm Tullow Oil, another of Uganda’s main oil partners, is not under any similar obligations.

“I am worried we [legislators] and the public can’t access and scrutinize these agreements. You can imagine the recently negotiated and signed oil agreements have not been accessed by the public, not even by members of parliament,” Beatrice Anywar, former shadow energy minister, told IRIN.

The impact of the oil sector has so far been most acutely felt by communities around Lake Albert, thousands of whom have had to move – some willingly and some forcefully – to make room for an oil refinery, which is expected to take up 29sqkm and displace some 8,000 people.

Land issues

“The government is prosecuting the refinery resettlement by the book. However, managing public expectations and the process of multiple decision makers in Uganda’s complex land legal system [Uganda has multiple land systems, including customary, leasehold and freehold] has contributed some volatility to the process… What is adequate compensation? And who determines that? Is it the market or should this be done by the government?” said journalist Izama.

“As a partner to the oil companies, it’s questionable too if the government can make the best decisions for the affected people as it would look to keep project costs fairly low,” he continued. “It is still a dilemma which is jurisprudential as well as political.”

He noted that much of the oil is in game reserves and a sensitive basin with lakes, rivers and a rare biodiversity, and borders the Democratic Republic of Congo, which could also pose challenges for peaceful production; there has already been some tension between the two countries over their boundaries within Lake Albert.

“The process of consensus-building is still weak, and regardless of how it’s arrived at, displacements will create uncomfortable realities, including land and job pressure.”

According to Otoa, Uganda’s lack of a comprehensive land policy makes compensation issues more complex. “We need clear land policies to ensure people are properly compensated – there is a Resettlement Action Plan in place, but it has not been implemented, and a draft land policy has not been actualized, leaving these communities vulnerable,” he said.

He noted that the lack of education among the local population, both in the oil-rich areas and the rest of the country, had contributed to the continued problems in the sector.

“We have focused too much on educating MPs on the implications and importance of good oil governance. We need to move to people-centred approaches and encourage dialogue in the public sphere, which will lead to people demanding accountability from their MPs and the government,” he added.

Ultimately, Izama said, responsible actions by the government will be the difference between Uganda’s oil making a significant impact on the country’s economy or causing conflict and greater poverty.

“Pressure on public institutions prior to commercial oil production is an effective way of counteracting the resource curse. If this public engagement falters, if the transition [from President Museveni to his successor] is volatile, some of the scenarios of the so-called oil curse are possible,” he said. “Overall the tensions are high, but responsible actions by public and political institutions like the past debate show progress is possible.”

Ghana: Terms of Super Oil Contracts Must Favour African Governments – Kan Dapaah


AllAfrica.com

BY LAUD NARTEY

July 20th, 2012

It has been suggested that the trend in which super attractive oil contracts tend to favour foreign interest must change in favour of revenue capture to finance much needed development in African countries.

The proposal is not oblivious of the worrying dangers associated with increased revenue capture such as encouraging attitudes on the part of private sector to reduce taxable income through transfer pricing, thin capitalization and justification for declaring losses. Besides, there is also the potential for abuse of revenues, corruption and rent seeking in the management of resources among public officials.

Hon Albert Kan Dapaah, Chairman of Public Accounts Committee (PAC) of Parliament, made these suggestions when he addressed the official opening of the Summer School of the Africa Regional Extractive Industries Knowledge Hub at the Ghana Institute of Management Public Administration (GIMPA) last Monday in Accra. The school brought together experts in the extractive industry from around the African continent.

According to him, the implementation of such an idea has become more compelling against the backdrop of reduction in exploration risks profile in the oil and gas industry as well as the decline of political risk factors in most African countries.

In the face of these potentials, he urged that government must continue to negotiate terms of contracts with openness and in the spirit of partnership to ensure that interest of all parties were fairly balanced.

Hon Dapaah, who is also Member of Parliament for Afigya Sekyere West, accordingly called for the strengthening of Parliament and other institutions of State to ensure due diligence in contract ratification, budgeting and generally strong oversight in the management of extractive industries.

Similarly, revenue collection agencies must be supported with the capacity and will power to audit the cost of oil and mineral companies and collect appropriate revenues due the State.

He lamented poor development outcomes in many resource rich countries have led to citizens demanding that governments collect large shares of resource rent to finance development. He cited Ghana, Tanzania and Zambia as examples of countries which have embarked on reforms in their respective sectors to increase revenue.

In a speech read on his behalf, the Minister for Energy, Dr Joe Oteng Adjei, noted that Ghana had signed on to the Extractive Industry Transparency Initiatives (EITI) for the purpose of strengthening transparency and accountability in relation to revenue and payments from operators within the sector.

The initiative, which hitherto, was limited to the mining sector, has now been extended to the oil and gas sector.

He said government has given expression to its desire to ensure transparency in the sector by preparing a draft EITI Bill ready for submission to Parliament.

The purpose of the Bill, he said, was to provide the legal framework, and ultimately to enhance transparency and accountability in relation to payments originating from the natural resource sector of the economy and receipts by government.

A participant from Zambia, Lucy Bwalya Munthali, in an interview with the Public Agenda said, she expected that this year’s Summer school would equip her with new skills which would help her contribute to reformation of the extractive industry in her country.

She noted that African leaders were not doing enough as far as the industry was concern and this stemmed from the implementation of inappropriate policies.

Burundi: A Deepening Corruption Crisis


Africa Report  N°18521 Mar 2012

Translation from French.

EXECUTIVE SUMMARY AND RECOMMENDATIONS

Despite the establishment of anti-corruption agencies, Burundi is facing a deepening corruption crisis that threatens to jeopardise a peace that is based on development and economic growth bolstered by the state and driven by foreign investment. The “neopatrimonialist” practices of the party in office since 2005 has relegated Burundi to the lowest governance rankings, reduced its appeal to foreign investors, damaged relations with donors; and contributed to social discontent. More worrying still, neopatrimonialism is undermining the credibility of post-conflict institutions, relations between former Tutsi and new Hutu elites and cohesion within the ruling party, whose leaders are regularly involved in corruption scandals. In order to improve public governance, the Burundian authorities should “walk the talk” and take bold steps to curtail corruption. Civil society should actively pursue its watchdog role and organise mass mobilisation against corruption and donors should prioritise good governance.

Since Burundi became a republic in 1966, state capture, mostly by the Tutsi elite, was at the centre of politics, and the unfair wealth distribution fuelled conflict. While the 1993-2003 civil war has not threatened the Tutsi political and economic domination, it has increased corruption and favoured the rise of an ethnically diverse oligarchy.

When the CNDD-FDD (Conseil national pour la défense de la démocratie-Forces de défense de la démocratie) rebellion came to power in 2005, it intended not only to transfer political power from the Tutsi to the Hutu but also to improve governance. The new authorities pledged to fight corruption and created state structures to this effect. However, the first corruption scandals involving the CNDD-FDD dignitaries and state officials watered down the hope of a more equitable wealth distribution.

In addition to the politicisation of the civil service, the ruling party captured the public sector and its resources. It is coveting the private sector by trying to extend its control over the banking sector. It is also interfering in privatisation processes, thwarting efforts to improve the business climate. In such a small economy, where the state maintains a prominent role, the monopolisation of public and private resources risks derailing the peacebuilding process.

The president took the lead in the fight against corruption to improve Burundi’s declining image and address the impact of this pervasive corruption on foreign aid – which amounts to half of the state budget. He launched a “zero tolerance” campaign and designed a national strategy for good governance. However, as the core problem has not been correctly identified, this approach is doomed to fail. The solution is not to “get the talk right”, to “get the institutions right” and to “get the legal framework right”; it is to change the power relations that undermine good governance.

The national strategy for good governance includes all the necessary technical ingredients to fight corruption: improved legal framework, citizens’ access to information, independent monitoring and regulatory organisations, depoliticised civil service managers, transparent tendering processes and public servants recruitments, and reform of the natural resources sector.

What is missing is a clear political agenda. Civil society organisations should create a mass movement against corruption through the establishment of an anti-corruption forum gathering the private sector, rural organisations and universities. They should also conduct independent citizens’ surveys and assessments and scrutinise the government’s anti-corruption performance. Donors should prioritise the fight against corruption and reconsider their engagement if governance does not improve. Now that the anti-corruption agenda has become a public policy through the national strategy for good governance, it is up to civil society and donors to create the conditions for its implementation.

RECOMMENDATIONS

To create independent institutional checks and balances

To the Government and the Parliament:

1.  Establish the High Court of Justice as required by articles 233, 234, 235 and 236 of the constitution and strengthen the statutory safeguards for the independence of the judiciary, such as the revision of the composition and powers of the Superior Council of the Judiciary and the principle of tenure of judges.

2.  Review the anti-corruption law to extend the powers of the anti-corruption agencies, strengthen the control of illicit enrichment and protect informants.

To the Government:

3.  Remove the supervision authority of the executive branch over the General State Inspectorate and the regulatory agencies so that they become independent administrative authorities.

To improve governance and transparency in the public sector

To the Government:

4.  Activate the recruitment committee of the civil service ministry, integrate civil society in its composition and publicise widely the recruitment and appeal procedures.

5.  Ensure the declarations of assets and conflicts of interest are mandatory and public for all politicians and senior members of the Burundi Revenue Agency, procurement units, and privatisation and anti-cor­rup­tion institutions.

6.  Include civil society representatives in the procurement units within the ministries; limit by decree the categories of public contracts with a secret nature incompatible with any publicity or competition; and change the composition of the committee in charge of the qualification of these contracts by entrusting the chairmanship to a senior judge.

7.  Pass a law on access to administrative documents and publish on the Internet financial details of the state and public companies, such as the budget adopted and implemented by ministries and agencies, budget amend­ments, other public accounts, procurement contracts, etc.

8.  Reform the legal and institutional framework of the oil and mining sector, drawing on international good practice and civil society involvement, and join the Extractive Industries Transparency Initiative (EITI).

To create the conditions for the implementation of reforms

To Civil Society:

9.  Establish the anti-corruption forum set out in the national strategy for good governance involving companies, universities and rural and urban associations, and establish a citizen’s oversight commission to mon­i­tor public procurement practices, influence peddling, corruption in the land administration and illicit enrichment of public servants and politicians.

10.  Conduct social audits and an assessment of the “national integrity system”, the government’s anti-cor­rup­tion performance, the business climate and privatisation processes.

To the European Union:

11.  Ensure the fight against corruption features prominently in the dialogue with Burundi, prioritise governance in the eleventh European Development Fund and conduct an assessment of the aid by the European Court of Auditors.

To the other donors (African Development Bank, World Bank, Belgium, the Netherlands, Norway, Germany, France, the U.S., Japan, etc.):

12.  Support civil society efforts against corruption, including training to improve knowledge of public finance, procurement and legal control.

13.  Include social audits in development projects and suspend projects where corruption has been proved.

14.  Link budget support to the implementation of independent institutional checks and balances and to progress in terms of governance and transparency of the administration.

15.  Conduct a performance audit on donor-backed institutional checks and balances and support them only after securing guarantees of their independence and conducting a performance audit.

16.  Ask the United Nations Office on Drugs and Crime (UNODC) to publicly release its assessment of the implementation of the UN Convention against Corruption.

Access the full report here


Transparency and Your Natural Resources


Huffington Post

Marcelo Giugale, World Bank’s Director of Economic Policy and Poverty Reduction Programs for Africa

March 7th, 2012

Wouldn’t you want to know how much money your government gets from the companies that exploit your country‘s oil, gas or minerals? It doesn’t have to be exact, but a ball-park figure? And how about taking a peek at the contracts that your leaders sign on your behalf (remember, you and your fellow citizens are the real owners of your national wealth)? And aren’t you curious about where the money goes–or went? It is a bit of a puzzle that only 35 countries in the world have agreed to join the “Extractive Industries Transparency Initiative” (EITI), an invitation dating back to 2003 to publish who pays how much to whom in the business of exploiting natural resources. Of those 35, only one (Norway) can be considered “developed” and 25 are African–respect to them.

You would think that, by now, citizens and markets would have forced more countries and more companies to open their books. After all, commodity extraction is a five trillion dollar a year industry that is projected to grow even bigger, as China and other newly-developed countries compete for access to wells and mines. And that’s only for the portion of the resources that we know about. To give you an idea, it is estimated that only a tenth of Africa’s natural riches have been found (it would take a billion dollars to produce a full geo-data map of the continent). So, with prices bound to stay high and plenty of potential for new discoveries, you would expect breathing-down-their-necks public scrutiny of the whole thing. Nope. It hasn’t happened. Why? Read more.

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