UGANDA’S RECORD FDI AND THE MAN ON THE STREET

In November audit firm Ernst & Young (E&Y) released a report on Africa’s economic prospects.

"In the report “Pivot to growth” E&Y reported that Uganda attracted a record $10b in foreign direct investment in 2022 or seven in every ten dollars of FDI that came into East Africa that year....

This was driven by projects in the oil & gas sector.

The news left the man on the street scratch his head at how come he never saw this money.

The confusion comes from our not understanding how FDI is reported and secondly, how such monies when they do come, trickle down to the everyday man.

Reading the report one realises that when they talk of $10b in FDI booked, they are reporting the monies committed for a project. So in our case for example, our share of the $10b East African Crude Pipeline (EACOP)for which final investment decision was reached in  2022 would be included in this number.

The funds of course will not arrive in one lumpsum but will mostly be parceled out over the duration of the project.

Why we did not see immediate improvement in the contents of our pockets is largely a function of what the project will need or buy locally.

The planning, design, plant and machinery will be  bought abroad and paid for there but are factored in as project costs. Foreign contractors may very well be paid in  to their accounts at home.

Local contractors, suppliers, hospitality and service providers are beginning to smell the money.

But as we all know there is no one as quiet as a man who has been paid. The loud ones are the one who are not in the slip stream of the money...

In years after commercial viability of our oil finds was determined in 2006, government has written into law what sectors of the industries servicing the oil & gas sector can be ringfenced for Ugandans. These were mostly food, hospitality, security, logistics and other low capital intensive sectors.

So if you are a friend, relative or business partners of the local businessmen who have already seen some contracts you are not complaining.

But also while the oil & gas sector may very well effect some major changes in the greater scheme of things our 200,000 barrels per day at full capacity, is really not much to write home about.

Nigeria last year averaged 1.35 million barrels per day, Angola came in second at 1.1 million barrels per day and Algeria at 908,000 barrels per day.

That being said businessmen are reporting that they are beginning to feel an uptick in demand, starting the middle of last year and one may imagine some trickle down is beginning to show its head.

The relative stability of the Uganda shilling which traded in a a narrow band of sh3750 – sh3850  may also indicate that some of that oil money is already coming and supporting the shilling.

Kenya across the border saw its currency cross the sh160 to the dollar mark before Christmas, a trend that continued into January. Some of the reasons were falling commodity prices and a flight for the exit on indications our eastern neighbour is set to default on some key international loans.

Whether you will earn from the oil & gas sector or not will depend on how you are positioned. As a worker the industry has stringent accreditation standards that have to met before they can look your way, for contractors and suppliers the same.

"The expectation is that at least $20b will spent until first oil in 2025 and so it may not be late to position oneself to draw from the oil wells...

The money will not come dripping with oil and easily recognisable as coming from the sector, but it will come.

Many have been called to partake  but few will be chosen.