Accounting for Uganda’s oil money

International transparency body boss visits Kampala to follow-up on pledges

ANALYSIS | RONALD MUSOKE | Following Uganda’s recent validation by the Extractive Industries Transparency Initiative (EITI) Board in May this year; Mark Robinson, the Executive Director of the EITI, visited Uganda on Aug.22-23 to follow-up on the recommendations the Board suggested to the government to improve transparency and accountability in the country’s oil, gas and mining sector.

Over two days, Robinson alongside Suneeta Kaimal, the President and CEO of the Natural Resources Governance Institute (NRGI), an independent non-profit organization whose focus is on helping oil, gas and mineral-producing countries improve governance of their natural resources, met senior government officials from the Ministries of Finance, and that of Energy and Mineral Development, as well as representatives of the Office of the Auditor General; civil society and members of the country’s EITI Multi-Stakeholder Group.

Robinson and Kaimal are members of the UN Secretary General’s Panel on Critical Energy Transition Minerals and were recently in Nairobi for a high-level meeting on critical minerals.

Robinson told The Independent on the sidelines of the meeting with civil society representatives in Kampala that he had made a detour to Uganda’s capital to follow-up on the country’s validation that was completed early this year.

“My mission is to follow-up on some of the recommendations in the report on what we call corrective actions which are intended to help move the EITI to even greater heights,” he told a group of civil society representatives who work on transparency and accountability in Uganda’s extractives industry. Robinson said the EITI Board approved the findings of Uganda’s validation without much dissent.

Uganda’s EITI score

In May this year, the EITI Board gave Uganda a “moderate” score of 78.5 points out of a possible 100. Uganda’s validation score was based on the implementation of the 2019 EITI standard. According to the EITI validation classification, a score of 0 – 49 is categorized as “low”; 50 – 69 is “fairly low,” 70 – 84 is ranked as “moderate,” 85 – 92 is classified as high, while 93 – 100 is very high.

The EITI Board noted that Uganda’s overall score reflects an average of three component scores on stakeholder engagement, transparency, and outcomes and impact. Uganda’s highest score (85 points) was registered on the component of “outcomes and impact” and the EITI commended the Uganda National EITI Secretariat (UGEITI) for its outreach efforts (publishing reports and carrying out dissemination activities in oil and mining regions).

Uganda which only joined the EITI process in 2020 also registered a score of 82.5 points on stakeholder engagement following UGEITI’s rallying of stakeholders from government agencies, oil and mining companies as well as civil society (EITI multi stakeholder group) to routinely work and agree on key documents such as work plans, annual progress reports, as well as disseminating and debating the findings. On the transparency component, Uganda scored 67.5 points owing to among other issues “unexplained discrepancies in gold mining and processing data.”

However, Robinson noted during the meeting with civil society in Kampala that “Uganda actually achieved so much in such a short time.” “It’s quite hard for a relatively new country joining the EITI to score that well on its first validation,” he said. Robinson thanked the MSG for creating the basis for what the EITI is in Uganda.

Filling the holes

Still, although Uganda was commended by the Oslo-based EITI, its board also pointed to the government particular areas to improve including; transparency in the disclosure of oil and mining contracts as well as discrepancies in gold production and export data.

The Board noted that Uganda would also have to disclose the beneficial, as well as legal owners of all corporate entities that apply for or hold a participating interest in oil, gas or mining licenses. This would also include disclosing financial information and regulatory frameworks related to activities of state-owned enterprises in the mining sector.

The EITI Board also recommended to the government to disclose the prevailing rules and practices on loans or loan guarantees to mining, oil and gas companies. These disclosures should cover all expenditures that could be considered quasi-fiscal, such as payments for social services, public infrastructure, subsidies and national debt servicing, among others, undertaken outside of the national government budgetary process.

Within the mining sector, the EITI Board also tasked Uganda to publish estimates of informal mineral exports volumes and values, in order to fulfil the objective of providing a basis for addressing export related issues in the mining sector. It recommended that government entities comprehensively disclose and harmonise export data.

Uganda was also encouraged to describe the methods for calculating export volumes and values and disaggregating by projects and regions. It should also ensure comprehensive disclosures of company payments and government revenues from oil, gas and mining disaggregated by company, revenue stream and government beneficiary, and by project.

The EITI Board also urged the government to ensure the availability of funding for UGEITI, the national EITI secretariat, in the mid to long term. “This is to ensure sustainability of the EITI in Uganda, including the feasibility of a national secretariat that continues to be well resourced while financially viable.”

‘Contract disclosure a must, not an option’

Robinson noted that according to new EITI regulations passed in 2021, the disclosure of contracts by all EITI member countries is “a must, not an option.” All countries that are members of the EITI need to comply with that requirement, he said.

He quickly added that following “active conversations” with the Minister of Finance on what needs to be done to make that happen, the EITI boss was convinced “that there are clear steps and actions being taken to move that objective forward.”

On the issue of beneficial ownership transparency; Robinson noted that identifying the real owners of companies including those owned by people who have political interests (politically exposed persons) is another EITI requirement. He said since politicians will always have an interest and stake in companies, the records of those companies need to be put in the public domain.

And, although early steps are being taken by the government to gather the data on company ownership, none of the data is yet public. “It’s accessible with payment of a fee to the Registrar of Companies but that needs to be in a form which is publicly accessible.”

Another component that the government should work on urgently is making sure that the state-owned enterprise (UNOC) publishes its audited accounts. “That is not happening at the moment with your state-owned enterprise—the Uganda National Oil Company (UNOC).”

“It’s a very simple thing to do and quite a powerful thing to do because that is the state agency that’s going to be responsible for the management of a huge amount of resources coming into the country intended for the citizens of Uganda.”

Robinson also noted that considering there is great interest around the world around the issue of traceability of minerals (especially gold), it is important for the government to come clean on its gold production and export figures.

“Where does (Uganda’s) gold come from? Who produces it? And how much is exported? We know there are discrepancies between the figures and some of our conversations have been on how to iron out those discrepancies and how to strengthen traceability mechanisms in Uganda.”

He said he was sure when Uganda next presents its validation in the next three years, it will demonstrate progress and it will be way up there with one of the strong EITI performers in the EITI family.

Benefits of EITI membership

Robinson insisted that Uganda stands to benefit from the EITI process it joined only four years ago. He said the EITI process will particularly help Uganda realize the huge revenue potential from its natural resources sector.

“We are only seeing the early days of this because oil is not yet on stream; and mining is in its infancy but the revenue potential of the sector is transformational if the resource is used for the right purposes (funding public services, expansion of energy access and meeting Uganda’s Vision 2040 aspirations).”

Besides mobilizing more investment (domestic, regional and international), Robinson further noted that the EITI would help to create confidence among potential investors. “It creates a level-playing field for investors.”

He said the EITI process also helps build citizen trust. “The EITI needs to provide confidence in the citizens in the intention of the government to use natural resources wisely. That trust is so fundamental for a country like Uganda which has gone into a complex, turbulent political trajectory.”

Indeed, many civil society representatives attributed the relative openness in the sector to the EITI process. Henry Bazirah, who is a member of the MSG and has been working on issues of transparency and accountability in Uganda’s oil and gas sector for over a decade told the meeting that the EITI is a tool that has enabled Uganda’s civil society get exposed to revenue information that they would otherwise not have had access to.

“The Multi-Stakeholder Group is the first kind of group where civil society, government and the private sector sit in one room, deliberate on a matter, come to a consensus and leave the room peacefully without anybody fearing that something may happen to them because of the things they have said.”

But Bazirah also expressed some misgivings about the EITI process being somewhat limited in a natural-resource rich region which has some countries that are not members. “You find some countries reporting under the EITI framework and yet others are not reporting; yet they all have natural resources being exploited by multi-national corporations in those jurisdictions,” said Bazirah.

In response, Robinson noted that there is indeed a dozen countries from around the world (including some from the eastern Africa region) which the EITI Board is having discussions on joining the EITI. “(But) you are right; we don’t want to end up with a situation where you have a highly transparent set of countries like Uganda and others which are conforming with EITI standards and then you have those that may be on the other end of the spectrum.”

“But it’s worth remembering that those countries which are both not members of the EITI and practice bad governance are not going to be places which investment is going to find a happy home. So, do remember that having EITI actually is a bonus as compared to some of those countries,” he said.

Fatma Nyambura, a Policy Manager at the EITI International Secretariat told the same meeting in Kampala that the EITI is now in its 21st year and is now a “legal adult” worldwide.

“What that means is that it is now a mature standard; it is a standard that has gone from just looking at revenues but is now looking at cross-cutting topics that are pushing the barriers such as beneficial ownership, contract disclosure, production and export cost audits.”

“These are all topics that are pertinent to the Ugandan context,” she said. Nyambura lauded the Ugandan MSG for putting out good building blocks for the EITI. She said any solid institution is built on a firm foundation.

“As the first MSG; the first head of the secretariat, you had to operate under challenging circumstances to bring government, civil society and industry to work together for the common good of the country.” “I cannot wait to see how Uganda’s EITI Secretariat and the MSG will be in the next 10 years. That being said, the journey has just begun, with First Oil expected next year,” Nyambura said.

Pointing to the innovative ways in which some EITI member countries such as the Philippines have used the tranparency and accountability standard to improve women participation in artisanal mining and Guyana (oil and gas contract disclosure), Nyambura told the civil society representatives that the EITI is very much a flexible tool; adding that it is as innovative as the MSG would like to make it. “But it is a journey; nothing good comes easy; it takes time, commitment and sustained advocacy.”

Suneeta Kaimal, the President of the Natural Resources Governance Institute (NRGI) who was in Kampala alongside Robinson emphasized the importance of transparency and accountability in Uganda’s natural resources sector.

“We fundamentally believe that natural resources belong to the people and they are managed on behalf of the people by the state. So, as a result, the people’s voice is incredibly important to decisions that are taken in about how natural resources are managed.”

“And those voices are not just voices of sophisticated elite civil society which are wonderful, important and valuable but (I mean) also the voices of people who are impacted by those projects.” Kaimal said her organization which has worked in Uganda over the last decade with civil society is invested in continuing to engage at the community level and to ensure that those voices are amplified at the national level.

“It’s the same thing that we do at the global stage. As we (always) say, what’s missing from the global conversation on fossil fuel phase-out and energy transitional minerals is those voices from low- and middle-income resource-rich producing countries like Uganda that are being overlooked in the global dialogue about what the future for the global energy transition should be.”

“Fundamentally, NRGI does believe that we, as a world, need to move to a fossil fuel phase-out and that’s something we are committed to but we believe that those who need to move fastest are those big polluters and emitters and the world’s wealthiest countries.”

Kaimal said on the current energy transition journey, her organization is working to support poor but resource-rich countries be able to benefit from their fossil fuels now in ways that is mindful of the environment and mindful of the future trajectory of the sector.

Overall, Robinson told The Independent that what he found striking during his visit to Kampala was “how committed all stakeholders are; all the way from the Ministry of Finance to civil society working on the ground.”

“The EITI seems to have carved out a space in Uganda for genuine, free, and open conversations of these complex issues around the extractives industry in Uganda,” he said.