In March, we lost a cousin. Pearl Mamawi died alone during a rainstorm that cut power to the hospital ward where she had been admitted with respiratory complications. The facility had no backup generator. It had no alternative oxygen supply. Pearl took her last breath and died.
Pearl should still be alive. Her death like many others was avoidable. It is the kind of loss that leads many Ugandans to shrug and say ‘this is Uganda’, a phrase that is associated with the practiced cynicism of the disempowered citizen. Another that captures the psychology of the times is “tolina kyotugamba” or nothing you say matters, better explains where some Uganda’s are emotionally. The positive current in this is the bold pursuit of alternative futures that explain how young people are finding their own ( at times building their own paths like Sheilah Gashumba who represents the zeitgest). However the broad “rejectionism” extends to all counter currents. Over the years they (younger Ugandans) have tended to be hostile to their own elite efforts, turned their nose on official government programs and retreated from anything resembling a common social consciousness such as moving beyond outrage to action when something happens like a young woman losing her life in a hospital because it was a rainy night and the power went out. Ugandans carry this tortured confidence everywhere when confronting the promise of the country and its realities; roads that are a lottery of death, unsafe hospitals, education that is treated as a source of security rather than learning and industrial scale corruption that affects everything and everyone.
Optimism, even Catholic grade, under these circumstances is dismissed as naiveté or class illusion ( as a young leader once told me hope is a sign of wealth and luxury and has no place on the street). The week that Pearl passed on, the war in the Middle East was raging while the mess in the electricity sector ( in particular the human capital shortcomings of the national electricity company) was still being investigated- amongst others by State House. The economic storm brewing in the Gulf was easier to plot as a game changer. Indeed that it could touch say a hospital in Mutungo was practical logic. There would be higher prices and product shortages for sure. Ambulances running out of fuel, a common occurrence but before the crisis not the result of shortages or price, were events in the frame.
But how long Uganda should not tolerate some of these dependencies? Should young people continue to crash out when Uganda has its own oil? Even as a measure of small, small progress, when is that refinery getting built so that at least the products needed to avoid dead ambulances with dying patients inside them can be avoided or hospital managers not having to worry about diesel run back-up generators? We can speak separately about an in-built culture of service but should be not take the availability of resources off the board?
Writing about this on Africa day also raises questions about the overall logic of a refinery ( which we wrote about earlier here in “ The Ghost of Foster Wheeler). That is, being self sufficient is the ultimate flex of freedom and with it soveriegnity, that battered and bruised reference to self government. Uganda will soon name its crude oil. The naming of crude is one of the formal steps towards commercialisation, and it signals a new reality: Uganda will shortly be an oil producer. EACOP, the pipeline that will evacuate Lake Albert crude to the Tanzanian coast, is perhaps 80-85 per cent complete and targeting first exports before the end of this year.
Regardless the day Uganda’s first crude barrel enters the pipeline, it will still be importing every litre of petrol or diesel in its vehicles, every cubic metre of cooking gas in its hospitals and schools, every barrel of bitumen on its roads. In short we will still be unfree and exactly where other African oil producers are as exporters of crude and importers of refined products, bound to events that can shift fortunes radically such as the present war in Iran.
When the United States and Israel struck Iran on 28 February, killing Supreme Leader Ali Khamenei, and Iran responded by targeting Gulf energy assets and closing the Strait of Hormuz, energy insecurity took centre stage.
Brent crude, the most well known benchmark for prices, started the year at sixty-one dollars a barrel and ended the first quarter at approximately one hundred and eighteen (118$ per barrel) the largest quarterly price increase on an inflation-adjusted basis since at least 1988. The International Energy Agency now says this is the largest oil supply disruption in the history of global energy markets, exceeding every prior shock including the 1973 Arab embargo and the 1979 Iranian Revolution. What it really means is that the global political compact, such as it is, that underwrote the stability of these markets and allowed landlocked, oil import dependent parts of the world like East Africa to take supply side stability for granted had ended. Canada’s new Prime Minister Mark Carney used the words “rupture” to describe this era.
In Kampala, petrol that had cost around 4,900 shillings a litre before the conflict was selling for between 5,600 and 6,100 shillings by May, with upcountry areas reporting increases of more than 1,000 shillings per litre. It looks like the days when a litre of petrol was UGX 4900 will soon be ancient history. Prices will continue to remain elevated for the foreseeable future even if the conflict stops today as oil markets transfer to consumers the increases in the cost of freight, insurance and the rebuilding investment in damaged plants et cetera.
We have managed the immediate crisis better than any of our neighbours. The UNOC sole-importer arrangement gave the government purchasing power and sourcing diversity that served us well with pump prices in Kampala remaining the lowest in East Africa. Kenya, for example, raised its regulated price 24.5 per cent in a single cycle before its Principal Secretary for Petroleum, KPC Managing Director and EPRA Director General were simultaneously dismissed in a governance collapse caused directly by supply pressure. Tanzania also fired its energy regulator. South Sudan, which holds significant oil reserves, implemented rotating power blackouts in Juba because it could not procure sufficient refined diesel.
As the Ugandan government is reconstituted after the election and a new cabinet chosen, these events may mean that Hon. Ruth Nankabirwa, the present Minister of Energy and her Permanent Secretary Eng. Irene Pauline Batebe retain their posts ( or are given bigger portfolios within the government to “protect the gains”).
Uganda heldfast but is not immune from the disruption. The price volatility is a drag on foreign exchnage reserves (Treasury spent approximately 176 million dollars on petroleum imports in March alone. Every dollar of that bill is denominated in US currency, priced on international markets), the supply chains remain vulnerable in ways Uganda cannot influence plus the import corridor continues to experience shocks as Kenya, particularly grapples with domestic pressures. Recently loud compliants were registered for example over Uganda’s shares in the Kenya Pipeline Corporation. The share agreement was negotiated to give Uganda some guarantees on stable supply but is seen by some sections in Kenya as a loss of sovereignity. This chapter is not closed yet but lost is the lesson that both Kenya and Uganda are in the same raging waters essentially are in the same boat. Moreover Uganda is landlocked and without domestic refining capacity which would have altered the calculus for all.
One advantage of the crisis is that these facts have been well marketed. In response governments including Uganda have shown appetite for bringing forward a refinery or refineries.
But of course a refinery in Hoima, long in the books reaches deeper in its promise than a coastal refinery which could master the global challenges we face together in the region. For Uganda specifically, because we are landlocked fuel has to travel more than a thousand kilometres from the coast before it reaches consumers. Mostly trucked the logistics of supply adds a cost embedded in the price and eventually the full circuitry of the economy at rate 20-30% above our neighbors that do have a coast. Add this to the higher cost of product today, the freight premium from non-Gulf alternative sourcing, the war-risk insurance on cargo in disrupted waters, and the road transport cost from Mombasa or Dar es Salaam to say a petrol pump in Moyo Town next to the Sudan border and the compounded picture is complicated.
Thus from a Ugandan perspective, a refinery in Hoima alters not just the price but the mechanism behind it. We can arrive at cheaper price with a regional refinery of course. To date without Hoima, every movement in global crude markets has transmitted directly into the import bill. This includes imported inflation. In 2022, the last comparable supply shock, the Bank of Uganda raised the Central Bank Rate from 6.5 to 10 per cent in nine months. Each hundred basis points of that increase added approximately 300 billion shillings to annual government domestic borrowing costs. This is a real problem because domestic borrowing has overtaken borrowing from abroad according to recent reports. As national debt ( and debt servicing costs) widens it is passing the cost to the private sector through tighter credit and deferred investments. Anyone looking at this argument about the Hoima refinery can model what it would have meant for local credit performance if the effects of the Gulf Crisis were coupled with the financial crisis that would definitely have ensued if the Sovereignty Act had been passed with all embedded financial atherosclerosis that forced the Central Bank governor in a rare but useful rebuke the government.
A refinery processing Lake Albert crude at Kabaale, distributing through the 211-kilometre Namwabula pipeline, is structurally insulated from that chain. Its cleaner economic arterial system depend on domestic production costs, not on what the IRGC decides to do with tanker traffic in the Persian Gulf.
If that system turns off, like the oxygen supply did to Miss Pearl Mamawi (R.I.P), Hoima would be humming on and breathing new life into this part of the world.
PART TWO loading…
Internet Photo of Sheilah Gashumba (courtesy)
