PROVIONS DEALING WITH LOCAL CONTENT IN UGANDA'S OIL AND GASINDUSTRY ARE A JOKE AND DO NOT PROVIDE ANY LASTING BENEFIT TO THECITIZENS

By SimonPeter Kitimbo LLB4 Uganda ChristianUniversity Mukono-2014

ABSTRACTIt is now generally agreed that local content in the oil and gasindustry is a key driver for value addition in the domesticeconomy and the improvement in welfare of its citizens. Thispaper is basically meant to lay down the features of Uganda'sLocal content policy in comparison with particularly Nigeriawhich has a well structured and enforceable Local Content Policyin her oil and gas sector. This paper will also look at some ofthe issues that ought to be dealt with in order for Uganda toachieve a meaningful and efficient Local Content policy.

INTRODUCTIONThe hunt for oil in Uganda dates back to the early 1920’s when significant oil exploration was done by E.J.Wayland (Wayland Report 1925), a government geologist who documented substantial amounts of hydrocarbons in the Albertine Graben. This discovery was later to be followed by the first ever drilling of wells in 1938 by the Anglo European Investment Company of South Africa, inwhich some hydrocarbons were encountered, but no testing was doneon this new discovery. However the hunt did not stop there as later on in the 1940’s and 1950’s further exploration was carriedout and several shallow wells were drilled mainly for stratographic purposes. Despite having vivid signs of the countryacquiring its newly found wealth, Uganda was affected by World War II. The war had an adverse impact on the oil discovery; its impact was greatly felt as the next sound of oil in Uganda was not going to occur till the early 1980s, which saw the acquisition of aeromagnetic data across the entire Graben region.

The aeromagnetic surveys taken during 1983 and 1992 produced a ray of hope because it indicated three main depocentres conducivefor petroleum generation. They were also able to identify five sedimentary basins in the country. These were; the Albertine Graben, Lake Kyoga basin, Hoima basin, Lake Wamala basin and the Moroto-Kadam basin. These aeromagnetic surveys were to later be followed by ground surveys; these went on to show the most prospective sedimentary basin to date as the Albertine Graben.

The Albertine Graben in which oil has been discovered in Uganda is located in the western part of the country, mainly in Masindi,Kibale and Hoima district around Lake Albert which forms the northernmost part of the western arm of the East African Rift Valley. It is situated at the Uganda and Congo border further stretching to the border with Sudan.

According to the petroleum geologists, the Albertine Graben isgreatly enriched with oil. They assert that the Maputa and Waragaoil fields have approximately 100 to 400 million barrels of oil,whereas the Giraffe 1 is expected to total at least 400 millionbarrels of oil. Paul Atherton, chief financial officer ofHeritage Oil, stated that the wider field his company wasdeveloping, dubbed Buffalo-Giraffe, had several “billions ofbarrels of oil in place”, although it was unclear how much ofthis would be recoverable. Additional exploration findings haveestimated that there exists approximately 500 million barrels ofoil at the kingfisher well in Hoima. These oil discoveries haveled the government of Uganda into signing contracts withinternational companies to exploit the oil. This has seen fourout of the six exploration areas identified to have goodpotential for petroleum production in the country being licensedto international oil companies with the remaining areas awaitinglicensing by government of the prospective applicants.

The companies that have been licensed to carry out theexploration in Uganda are: Heritage Oil and Gas ltd inpartnership with Energy Africa (now Tullow oil), it was licensedon the 1st July 2004 and they are expected to carry out

exploration activities on exploration area 1 that is the Packwachbasin. The Northern Lake Albert basin was licensed to HardmanPetroleum Africa (pty) Ltd in partnership with Energy Africa Ltd(now Tullow Oil), licensed on the 8th October 2001. The southernLake Albert basin was first licensed to Heritage Oil, but waslater jointly licensed to Tullow and Heritage on the 8thSeptember 2004. The Rhino camp basin was licensed to NeptunePetroleum (u) Ltd, on 27th September 2005.The exploration companies that were licensed have madesignificant investment, and have moved forward in identifyingspecific areas for exploration. An evaluation of these places ledto the discovery of petroleum in; Waraga, Nzizi, Mputa and KaisoTonya, (exploration area two). The Kingfisher prospect inexploration area 3A is being undertaken and flow testing of theshallow zones of this prospect has been carried out. The resultsindicate that the Kingfisher prospect also contains oil. It’sexpected that more discoveries are yet to be made given theexpanse of the area yet to be tested for prospective development.Apparently the oil and gas potential covers 23,000sq km along theDRC/Uganda border and having a likelihood of stretching to SouthSudan and the Democratic Republic of Congo. The oil and gasindustry in Uganda boasts of a potential estimate of 100,000barrels of oil production per day, the production is expected totake between 15-30 years. However, it should be noted thatexploration is still going on in other areas.1

Study Objectives

To review the legal and policy regimes on local content inUganda, highlight gaps in the existing legal and policy regimesand recommend areas of reform, to highlight lessons learnt inlocal content regulation from countries dealing with extractivesin Africa and elsewhere so as to be able to recommend forapproaches that can be adopted to improve Uganda’s local contentand citizen participation policies in the oil and gas sector, torecommend key actions and reforms Uganda needs to take up to have

1 Oil and Gas in Uganda.www.oilandgasinuganda.com

an effective local content policy, legal and institutionalregime.

Study scope

This study is limited to legal, policy and institutional reviewsof local content in the oil and gas industry in Uganda. Itbasically reviews the existing laws and policies as well asinstitutions to support local content and local contentdevelopment in Uganda. The study also borrows on experience fromother countries in relation to how those countries have treatedlocal content issues in their laws

Many countries engaged in oil and gas or mining are introducingrequirements for participation commonly known as “local content.”This is increasing so in mostly Africa, Asia and Latin America.Local content requirements are mainly in form of policy andregulatory measures that focus at increasing use of the locallyavailable labour, technology and other resources in the oil andgas sector.2 The focus is on transfer of technology by companiesengaged in the extractive resource sector to the native people ofa particular nation with a hope of assuring them income,employment and ultimately sustainable development. Thedevelopment of local content has basically been a result ofrecognition that after years of oil and gas or mineralexploitation in many developing countries, little seems to betransferred to the citizens of these resource-rich countries inform of technology and employment. Many citizens of resource-richcountries especially in the developing world tend to be merespectators. This trend continues to exist in spite of the factthat many mining and petroleum companies in the developing worldare given incentives such as tax holidays with a hope that they

2 Magelah, P., G., (2014). Local Content in Oil and Gas Sector: An Assessment of Uganda’s Legal and Policy Regimes. ACODE Policy Briefing Paper Series, No.28, 2014. Kampala.

will be able to exploit the resource, provide employment for thenatives and develop infrastructure which would enable the economyto develop.

However, what is crucial to note about the local content is that there should be an added value to the domestic economy and improvement in citizen's welfare and a sustainable management practice. Local content therefore demands focused consistent pursuit of enabling policies, incentives and structural reforms in a conducive investment climate with conducive environmental management. Furthermore, local firms must overcome a number of hurdles to competitively participate along the supply/value chainof the oil and gas industry.Local content in the oil and gas sector in Uganda broadly focuseson involving citizens in the sector. This is through training andbuilding capacity for citizens, technology transfer, employment and service provision. Under objective 7 of the National Oil and Gas Policy (NOGP); government seeks to ensure optimum national participation in oil and gas activities. Similarly, objective 8 of the NOGP seeks to support strategies for development and maintenance of national expertise in the oil and gas sector. The government of Uganda introduced local content requirement inthe oil and gas sector operations in Uganda. The Petroleum(Exploration Development and Production) Act and the Petroleum(Refining, Gas processing and conversion, Transportation andStorage) Act to purposely provide for the local content inrespect to; the local content personal requirement, thetechnology transfer requirements and the local contentrequirement for equipment. To this end, every licensee undersection 713 is require to submit to the Petroleum Authority ofUganda for approval, a detailed programme for recruitment andtraining of Ugandans within 12months from the date of issuance ofthe license to them and on each subsequent anniversary of thegrant. The licensee is also required to make a report of theexecution of the above programme to the Authority. It should alsobe noted that section 126(4)4 of the Petroleum (Exploration

3 Petroleum (Exploration Development and Production) Act 20134 Ibid.

Development and Production) Act 2013 provides that where arecruitment and training programme is proposed to be awarded asrequired above, it cannot be varied without the permission of thePetroleum Authority. Section 71(4)(e)5 of the PetroleumExploration Development and Production) Act 2013 further providesthat a petroleum production license shall not be granted unlessthe applicant's proposals for employment and training of citizensof Uganda are satisfactory.

It should be note that whereas the foregoing programs andstrategies for training Ugandans are good for capacity building,there is need to reform Uganda’s education sector to meet thedemands for the industry. For example, there are no systems todetermine what kind of capacity is needed for the sector andwhether the training programs submitted by oil companies willmeet this capacity needs at present. There is no link between thePetroleum Authority which is the main regulatory agency and theMinistry of Education and Sports and The National CurriculumDevelopment Centre to develop training content that will enableUgandans take part in the sector.

On the other hand, our counter parts in Nigeria also do have alocal content policy. The Oil and Gas Industry (OGI) in Nigeriaplays a crucial role to the sustenance of the nation and fuelsher economic and development activities. It is therefore owing tothe above that Nigeria has found it crucial for a local contentpolicy to be over emphasized. The speaker of Nigeria’s House ofRepresentatives has been quoted as saying: “it is important to note thatwhile the oil and gas industry clearly dominates the Nigerian economy, asuccessful local content policy must be apart of a comprehensive industrial andeconomic growth strategy for Nigeria as a whole... it should include both a planfor domestic capacity building and infrastructure development to broaden thenational industrial base...” (Ogbodo, 2008).6

5 Ibid.6 Nigerian Content Policy in the Oil and Gas Industry: Implicationsfor Small to Medium-Sized Oil-Service Companies, Ugwushi Bellema Ihua, Chris Ajayi, Kamdi Nnanna Eloji (2008)

As regards employment, sections 28-35 of the Local Content Actprovide that; operators must give Nigerians first considerationfor employment and training in respect of all executed projects(emphasis is mine) and may be required by the Board to maintain areasonable proportion of employees from areas of significantoperations. The Act also requires that for each of itsoperations, an operator or project promoter may retain a maximumof five percent (5%) of management positions as may be approvedby the Nigeria Content Monitoring Board (NCBM) as expatriatepositions to take care of the interests of investors. This is notthe case in Uganda where top management is basically foreign andeven expatriates are still observed in the junior andintermediate cadres as its counterpart Nigeria. It is alsomandatory and priority is given to Nigerians short of it alicence is not issued. Further, the Local Content Act of Nigeria prescribes minimumthresholds for Nigerian participation in activities within theindustry through the utilization of Nigerian human and materialresources and services in the upstream sector of the industry. Itis also made mandatory for operators in the industry to provide aviable succession plan whereby Nigerians will understudy eachincumbent expatriate position for a maximum period of four (4)years, at the end of which the positions shall becomeNigerianised.7 The Local Content Act mandates that operators andcompanies operating in Nigeria shall only employ Nigerians intheir junior and intermediate cadre or any other correspondinggrades designated by the operator or company. All project orcontracts with a budget of more than $100 million are required tocontain a ‘Labour Clause” mandating a minimum % of Nigerianlabour in specific cadres. In Uganda option is left to theinvestor to decide who should be recruited and in most casessince Ugandans are not skilled enough, priority is given toexpatriates which is not the case in Nigeria where if a Nigerianis denied a job due to lack of expertise, the operator is obligedto acquaint him with the necessary skill and knowledge withinNigeria.8

7 ibid.8 Ibid.

The technology transfer

Section. 126 provides that a licensee shall, within twelvemonths after the grant of a licence, and on each subsequentanniversary of that grant, submit to the Authority for approval,a detailed programme for recruitment and training of Ugandans.This programme provides for the training and recruitment ofUgandans in all phases of petroleum activities and takes intoaccount gender, equity, persons with disabilities and hostcommunities. This section further states that the programme shallinclude a commitment to maximise the knowledge and skillstransfer to Uganda and to boost the capacity of Ugandans in themanagement of petroleum operations, technical capabilities andany necessary facilities for technical work, including theinterpretation of data. The technology transfer and trainingprogram should be designed prior to the application for thelicense. The technology transfer required is a sharedresponsibility between the Government and the licensee. TheRegulations which will prescribe the requirements and parametersfor the technology transfer of knowledge and skill to Ugandanemployees working in the midstream petroleum value-chain are yetto be formulated.

Similarly, the Local Content Act of Nigeria in sections 43-469

provides the same as above. However in Nigerian situation, anoperator may be mandated to set up a factory or a production unitfor purposes of technological transfer.

The local content requirement for equipment

Section 74 (1) (f) & 12510 of the Petroleum (EDP) Act and S.5411

of the Petroleum (Refining, Gas Processing and Conversion,Transportation and Storage) Act provide that companies licensed9 Local Content Act 201010 PEDP Act11 Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage) Act

under the Act, their contractors and sub-contractors shall givepriority to competent citizens of Uganda and registered entitiesowned by Ugandans in the provision of goods and services.Petroleum production license shall not be granted unless theapplicant’s proposals with respect to the procurement of goodsand services available in Uganda are satisfactory. All licenseesunder the two laws shall within sixty days after the end of eachcalendar year furnish the Petroleum Authority with reports oftheir achievements and those of their contractors and sub-contractors, in utilizing Ugandan goods and services during thatcalendar year. Further under section. 125 (2)12 it is espousedthat where the goods and services required by the contractor orlicensee are not available in Uganda, they shall be provided by acompany which has entered into a joint venture with a Ugandancompany provided that the Ugandan company has a share capital ofat least forty eight percent in the joint venture. It should benoted that much as the Act juxtaposes that within 60 days afterthe end of each calender year, the licensee is obliged to providethe Authority with a report of its achievements and itscontractors and sub-contractors' achievements in utilisingUgandan goods and services during that calender year, it isstill not compellable enough to the operator to strictly obligehimself to the Act's provisions. The problem with this provisionis that it only directs the operator to give priority to a localservice provider. Our counterparts in Nigeria oblige the operatorto strictly seek goods and services from the a local companyincorporated under Nigeria's Companies Act and under section 63of the Local Content Act, non-compliance is punishable by a 5%penalty of the project sum for each project in which the offenceis committed or cancellation of the project. The case in Ugandais pretty different!

Peter Magelah Gwayaka in his paper13 argued that Uganda'sgoverning Act puts emphasis on “registered entities” as opposedto “companies.” The use of the word “registered entities” in boththe PEDP Act and the Petroleum( Refining, Gas processing and12 PEDP Act 201313 Magelah, P., G., (2014). Local Content in Oil and Gas Sector: An Assessmentof Uganda’s Legal and Policy Regimes. ACODE Policy Briefing Paper Series, No.28, 2014. Kampala.

conversion,Transportation and Storage) Act do not wholly promotelocal content because there are situations where foreignersregister business entities in a country and this does not makesuch entities local entities. For example Section 252 of theCompanies Act 2012 mandates all companies incorporated outsideUganda with businesses in Uganda to register with the Registrarof Companies as a pre-condition to operating in Uganda. Basicallythe companies Act on this aspect tries to separate“incorporation” from “registration”.The former being a process offorming a company while the latter a mere administrativerequirement! On the other hand using the place of incorporationas a determinant of a Ugandan company without proper restrictionswould also leave out citizens by allowing foreigners to register/incorporate companies in Uganda which would qualify as Ugandancompanies. It is also not clear how the law treats a companyregistered outside Uganda by Ugandan citizens14

The Nigerian Oil and Gas Industry has developed, focusing onincreasing indigenous participation in the industry. This isreflected through the Nigerian government initiative ofincreasing Local Content and ensuring that indigenous companieshave a greater part in developing oil and gas assets. Toconsolidate the objective of increasing Indigenous participation,the Government introduced the Nigerian Oil and Gas IndustryContent Development Act 2010 (the “Local Content Act”)

The Local Content Act requires project promoters and operators toconsider Nigerian content when evaluating any bid. It furtherprovides that where bids are within 1% of each other atcommercial stage, the bid containing the highest level ofNigerian content shall be selected provided the Nigerian contentis at least five percent (5%) higher than its closestcompetitors. This thus ensures participation, income, employmentand ultimately sustainable development to the people of Nigeria.The Nigeria Content Monitoring Board was established under theLocal Content Act to represent the industry watchdog for theimplementation of Local Content; to ensure compliance everyoperator bidding for any licence or permit and before carrying

14 Ibid.

out any project in the Nigerian shall submit a Nigeria ContentPlan it demonstrating compliance with the Nigerian Contentrequirement.15

To this end, the Local Content Act under section 3(1)16 offersNigerian operating companies a great opportunity for growth andexpansion. Such a company is to be given first consideration inthe award of oil blocks, oil field licences, oil lifting licencesand in all project awards in the Nigerian oil and gas industry.These provisions ensure a steady growth in Nigerian participationin the industry as well as increased local capacity and industryknowledge and expertise. This is not the case with Uganda's LocalContent which provides no such privileges to a Ugandan company tobid favourably.

Sections 49 to 5317 of the Local Content Act mandate operators toutilize local insurance, financial and legal services in theirproject implementation. Operators must also submit a bi-annualreport to the Board detailing the nature of the services soutilized, the budget as well as actual and projected expenditure.Where legal services are required to engage in any operation,business or transaction in the Nigerian Oil and Gas industry,operators are obligated to only retain the services of a Nigerianlegal practitioner or a firm(s) Nigerian legal practitioners withits office located within Nigeria. On the other hand, Ugandan oiland gas operators usually hire experienced lawyers from abroad tohandle there arbitration cases or may involve one or two Ugandaadvocates. This is implemented through the provision of a LegalService Plan (LSP) to the board every six (6) months which shallextensively provide a report on the legal services utilized inthe last 6 months by expenditure, a forecast of legal servicesrequired during the next 6 months and the projected expenditurefor the services. In addition, a list is be provided highlightingthe external solicitors utilized for legal services in the pastsix (6) months, the nature of work done and the expenditure made15 Nigerian Content Policy in the Oil and Gas Industry: Implicationsfor Small to Medium-Sized Oil-Service Companies, Ugwushi Bellema Ihua, Chris Ajayi, Kamdi Nnanna Eloji (2008)16 Local Content Act 2010 17 Ibid.

by the operator. On the other hand, to engage in any form ofbusiness, operations or contract in the Nigerian Oil and Gasindustry all interested parties must insure all insurable risksrelated to its oil and gas business with an insurance company,through an insurance broker registered in Nigeria.

An operator, contractor or subcontractor who carries out anyproject contrary to any of the provisions as highlighted underthe Act, will be committing an offence under section 68 and uponconviction will be liable to a fine of five percent (5%) of theproject sum for each project in which the offence is committed orcancellation of the project. It therefore allows compliance bythe operators at all cost to avoid penalties.

A major challenge with the joint venture suggested under Uganda’spetroleum laws is the requirement for the businesses enteringinto joint venture to have same or similar capacities with theforeign companies. The capacities needed here will basically bethe need to provide capital, skills and knowledge as well astechnology. The fact that most of the skills and technology willbe provided by foreign companies makes it easy to have jointventure companies where Ugandan companies are merely fronted forthe sake of winning the tender and the actual work and control ofbusiness is done by foreign companies with experience.

It is important to note that the trend across Africa and severalother developing countries has been developing specifiedpolicies, laws and institutions for managing local content issuesfor oil and gas or mining sector. Having such arrangements isaimed at ensuring the local content requirements are properlyimplemented in the extractives sector. A similar trend has beenadopted by financial institutions including the World Bank indetermining the local participation in oil, gas or miningsectors. Below is a summary of how different institutions andcountries have handled the issue of local content

World Bank The World Bank does not have specific provisions for localcontent. However, it provides guidance for local procurement.

Local procurement here is determined based on three majorpillars.18

i. Level of participation of citizens in the company. This ismainly across ownership, management and employment. Localcompanies are judged based on who owns the company, ts management(control of the company) and the number of citizens employed inthe company

ii. The level of value addition. This is based on amount of localinput in the product. This is based on use of localmaterials, local technology or local human resource in the makingof the product. This test focuses on the real contribution of theproduct to the economy in terms of use of local resources,employment and technology.

iii. Whether a product is manufactured locally, or a service isdelivered locally. This focuses on the geographical location ofthe company. Preference is given to companies located in thecountry or in the region. Sometimes, this also deals with thelocal location of the company. Companies located within the localvicinity of the petroleum or mining establishment are givenpriority.

African Development Bank The African Development Bank (AfDB) adopts nearly a same standardas the World Bank. It focuses on ownership of the company and thecontrolling mind of such a company. Focus is put on shareholders,management of the company and employment of citizens.19

Generally, the World Bank and AfDB standards have greatly shapedthe nature of local content laws and policies as seen in manycountries. Below are some of the recent laws and policies fromselected countries.

18 World Bank (January 2012) Increasing Local Procurement By the Mining Industry in West Africa. Report No. 66585-AFR19 African Development Bank (undated) Rules of procedure for procurement of goods and works available at http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-related- Procurement/Rules%20of%20procedure%20for%20procurement%20Goods%20and%20 Works.pdf accessed on 10/04/14

Nigeria Nigeria passed the Oil and Gas Industry Content Act in 2010. Thelaw is meant to enforce the local content policy. It aims atproviding for the development of Nigeria Content in the NigerianOil and Gas industry; for Nigerian Content Plan; forsupervision,coordination, monitoring and implementation ofNigerian content and for matters incidental thereto20 impotant tonote from the Nigerian law is that it provides a definition oflocal should be and also determining what kind of participation(content) such a company should be involved in. focus is put onusing Nigerian human resources, products or raw materials. Localcontent is defined as:

“the quantum of composite value added to or created in the Nigerian economyby a systematic development of capacity and capabilities through deliberateutilisation of Nigerian human, material resources and services the Nigerian oiland gas industry.”

Focus is also put on value addition for products used in theindustry. The Nigerian law defines a local company as;

“A company formed and registered in Nigeria in accordance with the provisionsof Companies and Allied Matters Act with not less than 51% equity shares byNigerians”

Unlike Uganda’s law which focuses on registration of companieswhich creates confusion as discussed earlier, the Nigerian lawaddresses this by setting conditions for formation andregistration of a company in Nigeria. The three conditions for acompany to qualify as a Nigerian company are21

i. The company must be formed in Nigeria ii. The company must be registered in Nigeria and Nigerian law iii. Majority shareholders of such a company must be Nigerians

20 Preamble/long title to the Oil and Gas Local Content Act, 201021 Act 821

The Nigerian law creates a Nigerian Content and Monitoring Boardwhich is tasked with monitoring compliance with local contentrequirements. In addition to the board, there is a NigerianContent Consultative Forum whose role is sharing information onlocal content issues such as procurement information, companyrequirements and involvement of citizens.

Ghana Ghana made its local content policy in 2010. This was followed bythe Petroleum Commission Act, 2011 which gives the Ministerresponsible for energy powers to make regulations for localcontent and citizen participation in the oil and gas sector. Thepolicy provides for mandatory local content in oil and gas. Thepetroleum law defines local content as: The use of Ghanaian human andmaterial resources, services and businesses for the systematic development of nationalcapacity and capabilities for the enhancement of the Ghanaian economy.22

A more refined definition of local content is given in theregulations which define local content as:

The quantum or percentage of locally produced materials, personnel, financing,goods and services rendered in the petroleum industry value chain and whichcan be measured in monetary terms.

From the above it can be said that Ghanaian law provides forbroad areas for local content. According to the local contentregulations, at least 5% stake in the oil and gas sector must bereserved for Ghanaian companies. An indigenous Ghanaian companyis defined as:

A company incorporated under the Companies Act, 1963 (Act 179) (a) that has at least fifty-one percent of its equity owned by a citizen of Ghana;and (b) that has Ghanaian citizens holding at least eighty percent of executive andsenior management positions and one hundred percent of non- managerial andother positions;

22 S. 28 Petroleum Commission Act of Ghana

From the above, it is clear that a local company has a strictdefinition and includes such companies where citizens are thedriving engine of the company as well as are the main beneficiaryfrom the company. The regulations also create a Local ContentCommittee whose role is to monitor compliance with the legal andpolicy requirements for local content.

Liberia Liberia passed its new petroleum law which provides for thegovernance of the oil and gas sector in 2012. The law setsconditions for involvement of local companies, training andemployment of citizens. The purchase of goods and services fromLiberian citizens is conditioned on their competitiveness.Citizen companies and service providers must be able toeffectively compete.

The difference between Liberia and other countries such as Ghanaand Nigeria is that the citizens abilities to take part in theoil and gas sector are considered. For example S. 2.5.8 of thePetroleum Law of Liberia provides;

The holder of petroleum contract, as well as his subcontractors, shall givepreference to Liberian companies for construction, supply, and service contracts,provided they offer equal quality, price, quantity, time and performance andpayment conditions.

Provisions like the ones above are good for the smooth running ofthe industry and easily attract investment for being flexible,however they may work against the interest of citizens since inmany African countries the local companies and citizens have notdeveloped much capacity to competitively compete with European,American or Asian companies in the extractives sector. In the endmany citizens may be left out as being incompetent.

Trinidad and Tobago The Trinidad and Tobago local content framework focuses onincreasing citizen participation through capacity building,employment and service provision. The policy focuses on local

participation of citizens or local companies. Local companies aredefined and determined according to ownership, management andfinancing (must be owned and managed by majority citizens). Theframework also seeks to maximize use of local resources in theextractives sector. The framework creates institutions formanaging and overseeing compliance with the sector.

A look at the different countries and institutions above revealsthat though there are different approaches to local content inoil and gas and extractive industry generally, most countrieshave tended to protect their citizens and citizen businesses totake part in the oil and gas sector through training, employmentand provision of goods and services. Whereas this is a goodapproach, the local capacity of local businesses should beconsidered in taking different approaches. This is necessary toensure smooth running of the industry while balancing the needfor citizens to take part.

Make a Law on Local Content Parliament should pass a law to provide for local content.Specifically the new law should provide for a better definitionof Ugandan business entities, an independent authority to monitorcompliance with national local content plans as well as monitorthe development of national capacity among others.

Create Institution to Manage Local Content Many countries have managed the local content aspect by creatinga dedicated institution to manage the local content aspect notonly in oil and gas but also in other sectors. Such aninstitution should have powers to oversee and monitor compliancewith the policy and legal requirements for local content inUganda including powers to punish businesses that violate thelocal content requirements. Parliament should by law create thisinstitution which with powers to audit compliance with localcontent policies and laws in Uganda

Policy recommendations for Uganda

Mainstream other sectors in the oil and gas and extractivebusiness

At present, there are disjointed efforts for the oil and gassector. There is need to coordinate the work and activitiesleading to local participation in the oil and gas sectorincluding coordinating sectors such as education, agriculture,fishing, tourism, manufacturing,, transport, insurance, and otherservice providers. Government should come up and mainstream theother sectors and line them to provide goods and services or tobenefit from the oil and gas sector.

Build Capacity for Industry Players Capacity should be built for training institutions which aretargeting providing labour for the oil and gas market. Thisshould be expanded beyond UPIK to include other institutions.Focus should also be put on developing capacity of institutionsthat will provide support services; this includes a wide range ofareas such as business, agriculture, tourism, etc. Deliberateefforts should be dedicated to improving the performance ofUgandan businesses which in the long term should focus on makingthese businesses attractive to regional markets within the EastAfrican Community and beyond.

Increase Inclusion in Decision Making In order to increase inclusion and participation of citizens,there is need to formalise the existing participation forums andensure there are formalised processes of consultations atdifferent levels. This should also enhance feedback at thecommunity level and community involvement in decisions such asCorporate Social Responsibility (CSR), local participation andlocal content as well as other company or governmentinterventions.

ABOUT THE AUTHOR

Simon Peter Kitimbo is a Law student at Uganda ChristianUniversity. He is the currently the General Secretary of UgandaChristian University Law Society. He is also the Deputy LegalAdvisor of Basoga Nsete-UCU charter. He is a member of East

African Community Students Association-UCU charter and an activemember of the National Youth Crime Preventers Forum.