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EACOP is not only a pipeline, it is a trade corridor for East Africa – Mr. Patrick Mweheire Chairman UCMP

Day 28 #90Daysofoil 

Mr. Patrick Mweheire is the Chairman of the Uganda Chamber of Mines and Petroleum (UCMP) and also the regional group Chief executive of Standard Bank Group  Eastern Africa over seeing Uganda, Kenya, Tanzania, South Sudan, and Ethiopia.
He is also the former chairman of Uganda Banker Association. Discourse East Africa hosted him on twitter spaces on 14th August 2022. 
UCMP brings you part of the dialogue in this segment of the 90 Days of Oil and Gas. 

As the Chairman of UCMP, tell us what the Chamber is doing in the development of oil and gas. 

Mweheire: At the initial stages, we were mainly focused on lobbying and advocacy, but since we had the Final Investment Decisions (FID) for the Lake Albert Oil and Gas project, we are focused on local content and employment creation since this is a significant amount of money ($ 20 billion) that is coming from oil and gas in the next five years. Our focus is on how much of that money can be captured locally. How many indigenously owned Uganda companies have been awarded contracts and what is the value of the contracts and specifically how jobs will be created by those contracts?

Contracts worth $ 6 billion have been awarded but only about $1 billion (15%) have gone to local companies which is not acceptable. We are focusing on how to get that number up. Another thing is we are focusing on how to get access to finance and business support for Small and Medium Enterprises (SMEs).

How are you addressing those issues as a chamber? 

Mweheire: We are not yet where we desire. One of the challenges is having very few Uganda companies in the space because of a lack of information. Addressing information asymmetry is key in terms of how we share information between oil majors, tier one suppliers, and the local companies that need to participate. Our goal is to drive local content information. Like mentioned, our key areas of focus are local content, employment creation, access to finance and support, upskilling and training, stakeholder engagement, and advocacy.

As former chairman of the Uganda Bankers Association, how prepared is the financial sector in Uganda to facilitate the oil and gas industry? 

Mweheire: The banks are very much involved in funding the entire value chain that supports the oil and gas sector. The reality though is when you have $20 billion in capital coming into a GDP of $30 billion, there are going to be some limitations on what we can do from our financial perspective. The banks will continue to participate by supporting local content and that is really important. The beauty with oil and gas is that if you get a contract that is very transparent and clear, the bank can see through the risks they are going to be taking and fund you. I really believe that the banks are ready.

Can you give us possible synergies that can be exploited by ourselves and within the region?

Mweheire: We believe that Uganda’s GDP will double by 2028 from $ 30 billion to 63 billion. That is a significant movement in a short period of time. We also believe that the GDP of East Africa will rise from $180 billion to $400 billion by 2028. I don’t believe there is any other region in Africa that has that kind of growth momentum. The other fascinating thing about East Africa is that we are very connected, and trade with each other in a significant way- more than any other region like Southern African Development Community (SADC) and Commonwealth Market for Eastern and Southern Africa (COMESA). I believe that reactivating East African Community (EAC) has been so significant that is allowing us to tap into the synergies that are coming through. You think about the pipeline that is going to run from Hoima to Tanzania, and the sort of impact it is going to have. EACOP is more than a pipeline, it is a trade corridor that has been created between Uganda and Tanzania which did not exist before.

There are a number of small towns that are going to be impacted by that pipeline and their economic activities and ripple effects this is going to have on the Ugandan and the Tanzanian economies are huge. EACOP is a single large Foreign Direct Investment (FDI)  that has ever been made in East Africa and that is significant. But we also have the refinery and midstream development and supporting infrastructure that is being worked on. East Africa is on fire it is an amazing place to be and the investments point to that -$20 billion coming into Uganda has a ripple effect across the region.

Tanzania also has gas so we talking about having a reverse gas pipeline into Uganda and what impacts it will have on us, our energy will be cheaper, reducing our carbon footprint on climate change in terms of reduced reliance on charcoal and wood, and cutting of trees. It is all very positive.

How about Kenya tapping into this opportunity?         

Mweheire :Kenya is one of the most developed economies in the region; it has got a lot of depths in terms of skills which is the role Kenya is going to play.  A lot of regional corporates regard Kenya as their base. If you think about the ecosystem of East Africa, Kenya has a huge role to play in connectivity. What we have to be cognizant of is that we are connected as a region, there is going to be a lot of transfer of skills and capital within the region. It is bigger than any of us can accommodate. There is a huge amount of capital coming in externally. We need to organize ourselves to be able to participate from a local perspective. That means not only getting capital for local participants but also the skills and collaboration will actually bring us to there.

From a macro-economic view, how do you see the oil gas benefit the Uganda economy?

Mweheire: With GDP doubling in five years’ time, that is a huge impact. But at the end of the day, what counts is local participation. If you talk about $20 billion moving between Paris and Beijing, it does not affect our lives. What we need to see is how much of the $20 billion is going to agriculture, and how it is impacting SME’s in Kampala. That is really the price. 

What is the role of the African Export Bank and other credit institutions in this sector?

Mweheire: There is evidence that one of the quickest ways to improve our wealth and development is through trade and trade amongst each other. Africa hasn’t developed the network to trade amongst themselves. A lot of progress has been made in East Africa, for example one-stop border points reducing the amount of time goods move across the countries. That is the role that these banks can play to promote trade  among each other. We need to start being more connected as a region and so, the more capital we can put in removing friction around and supporting regional business, will only help us get bigger and stronger.

Does this project help us strengthen our ties with DRC? 

Mweheire: Absolutely. The fact we have this amount of capital flowing into East Africa just reinforces the destinations of these places- South Sudan and DRC will benefit from that. The recent addition of DRC to EAC is significant; it adds 80 million people. It forces DRC to harmonize trade, customs, and all other things an economy needs to do to be part of a larger economy and that is a good thing. There is a lot of trade happening between Uganda and Eastern DRC. 

How are SMEs doing and what is the landscape?

Mweheire: We still have some work to do and that is the honest truth. SMEs are the lifeblood of the Ugandan economy. 70% of employment is created by SMEs but a lot of people do not appreciate that.  To have economic growth and prosperity we have to focus on SMEs. It is absolutely critical. The Oil and gas industry requires huge compliance with standards that won’t be lowered. Our SMEs, unfortunately, haven’t built that muscle. It is a journey that we all must take. Building capacity is a massive issue and that is the goal of the Chamber. We are in partnership with the Petroleum Authority of Uganda (PAU), banks, and insurance companies. We have set up a goal to train up the 3,000 businesses every year. We are not there yet, but we need to focus on this area.

Owing to concerns by the Environment activists,       it may be more difficult in the future to finance this sort of project. What financial tools should Africans be using to finance mega projects?

Mweheire: The surest way is we have to save more. We have to create our own capital locally. Stanbic bank for example has the single obligor limit. It can lend to a single party about $ 80 million. Stanbic has about a 25% market share, so it means that all Ugandan banks can probably do $400-500 million for a particular transaction which is not acceptable given the requirements we have as a community. We do not save enough. 

Fifteen years from, what would be the opportunities for Uganda if we did everything right?

Mweheire: Ten years from now on the economic front, the trade corridor between us and Tanzania will be a big milestone. We anticipate we shall have real local winners, maybe some 10 local businesses that shall have billions of dollars in revenue. That will be great. I do not see any reason why we can’t have that.

The activists that have opposed EACOP are being unfair because the standards they are trying to use on a country like Uganda which has this massive resource potential to benefit and grow its economy and people are wrong. EACOP provides opportunities economically, jobs, etc. It is unfair to try to stop it.  We shall continue to have discussions with stakeholders and share our views.

How do we get youths to participate in oil and gas?

Mweheire: It goes back to skilling and training. We haven’t done a lot in skilling people to work as artisans. The country shunned from that but we need to accept that not everyone needs a degree. Many countries have been successful for example in Germany not everyone has a degree but those people have meaningful lives. In Uganda, 60% of workers in the oil and gas industry shall be craftsmen, 25% are unskilled and only require health and safety certifications as soon as they do, they are able to work in the camps. This is an entry point for the youth.

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