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.
