The Ugandan Politicians are sharpening their canines ready for a kleptocratic bite and have abnormally raised Citizens’ hopes.
Citizens have been told, oil production could be a panacea to many economic problems the country is straitjacketed with– from low salaries to poverty alleviation. But it seems that enthusiasm should naturally be waning.
Three years from now Uganda expects to begin harnessing from its rich underground natural resource, which has been a global gem until about two years ago when its price sharply plummeted to $40 from over $140 a barrel.
Some European countries are moving to purge production and sale of petrol and diesel engine cars. France and UK have set 2040. Netherlands and India’s bans are too soon, 2025 and 2030 respectively.
In preserve of environment, these economies have decided they should produce Electric Vehicles (EVs). China the world’s largest car producer is also a country with a highest degree of pollution.
Where does this leave economies dependent (Nigeria among others) and about to depend on oil revenue like Uganda? In shambles.
As Uganda is upbeat about oil production in three years, other naturally oil producing economies in Africa like Nigeria and Angola are still recuperating from falling oil prices.
Recently, fearing economic disaster, Saudi Arabia, one of the leading exporters of oil had a shift of economic policy. It began establishing manufacturing industries, moving away from total oil revenue dependence to avert an economic tsunami.
The impact of a western shift of motor production will be enormously disastrous. It means oil exports into these countries will automatically drop by over 40% knowing they are also among the biggest importers of oil products.
So where will Uganda sell her oil? Uganda may sell to local market because it may take time for EVs to dominate.
Dollars may not flow into the economy as previously anticipated. However to a certain extent, Uganda’s oil production will cut importation of oil from abroad- in away the balance of trade may stabilize a little.
Since European oil demand may reduce in about 10 years, Uganda may only have continental oil markets, but in low price since all oil producing economies including Russia will be struggling for a small market to sell their oil stock.
Oil may only be needed for industrial machinery.
Uganda should learn from economies like Nigeria and Angola that have had a recession because of over dependence on oil trade. Instead of fully focusing on oil industry alone, the country should make sure, quality of her manufactured goods are enhanced to attract foreign market.
Uganda has over 70% arable land that can be used for agriculture, however not all is utilized. Agriculture is a ready venture the country could massively tap in.
Adoption of scientific and technological methods of farming will increase agro outputs quality and quantity. Farmers should also be educated and facilities put up to handle after harvest losses due to shortage of proper storage facilities.
Uganda could become Africa’s food basket, unfortunately the country has not invested enough on agriculture. The sector is under financed yet it employees majority of Ugandans, though on small scale practice.
The country should widen export destinations for her goods, instead of depending on uncertain markets like South Sudan that is plagued by political instability that has cost Uganda millions of dollars in exports since 2013, when war broke out.
Before these countries reach their deadlines of banning production of petrol and diesel engine vehicles, Uganda could still earn some dollars only if the oil exploration is expedited and handled corruption free.
Bottom line is, there is no need for euphoria. If you are so optimistic about oil dividends in a long run, then you should think again.