“LIKE SHOE polish”, is how one oilman describes Uganda’s black stuff. It is waxy when heated and solid at room temperature. Some 6bn barrels lie in the western region around Lake Albert, of which 1.4bn may be recoverable. Commercial discoveries were first made in 2006—the biggest onshore oil finds in sub-Saharan Africa for two decades. But if the oil moves slowly, so too does oil development. Production is not expected to begin until 2022 at the earliest.
Waiting is hard. Researchers have long worried about a “resource curse”, as oil distorts economies, corrupts politics and fuels wars. Now some warn of a “presource curse”, which strikes even before the first drop is pumped. Ghana and Mozambique found large reserves, of oil and gas respectively, at around the time that Uganda did. Both lurched into economic crises. Uganda is trying to learn lessons.
The main one is patience. Ghana borrowed heavily, eager to cash in on future oil revenues. By 2012, even with the oil flowing, the government was racking up big deficits; in 2015 it needed the IMF to bail it out. Mozambique sold bonds and took out hidden loans, then plunged into a debt crisis when they were exposed. As part of a restructuring deal the government has promised bondholders a share of gas revenues, which are still four years away. Its former finance minister is now in a South African jail, fighting extradition to America.
Borrowing binges are often based on inflated expectations. In a paper from 2017, James Cust of the World Bank and David Mihalyi of the Natural Resource Governance Institute, a think-tank, analysed 236 oil discoveries around the world between 1988 and 2010. They looked at IMF growth forecasts made after oil was found, then checked to see if the predictions were right. On average, countries grew slower than anticipated, even before any oil was pumped: in the six years after a discovery, forecasts fell short by 0.8 percentage points per year. In places with especially weak institutions the gap was 1.4 percentage points.
That bodes ill for Uganda, where Yoweri Museveni, the president, keeps a tight grip on power. But when it comes to oil his political dominance has made it easier to plan long-term, argue Angelo Izama, a Ugandan analyst, and Sam Hickey of the University of Manchester. In Ghana, which is more democratic, leaders struggle to think beyond the next election. They rushed to the pumps before rules were in place. In Uganda, by contrast, the government held out for better deals from the oil companies. Technocrats were given space to work.
The Ugandan fields are being developed jointly by Total, a French oil major, CNOOC, a Chinese state-run giant, and Tullow, a British firm. They have tussled with the government over tax, a refinery, and the tariff charged to get oil to the Tanzanian coast, down what will be the longest heated pipeline in the world. Disagreements have delayed a final investment decision on the oil project, now expected later this year.
The worry is that Uganda’s patience will run out. The country has less oil than many Ugandans think. Shared out equally, each citizen would get about two barrels a year at peak production (against 39 in Angola and 261 in Norway). Within three decades it will be gone. The government, prudently, has not issued dollar-denominated bonds. But public debt, which stands at 43% of GDP, has doubled in a decade. Some of it will need to be renegotiated if oil does not arrive on time, warns Adam Mugume, head of research at the central bank. The government has dipped into the Petroleum Fund, which holds tax revenues collected from the oil companies, to plug budget holes.
Mr Museveni is increasingly resorting to patronage politics as his popularity dwindles. He shields the oil sector from scrutiny. Lawyers in the western region report a spike in land conflicts; civil-society groups complain they have been blocked from visiting affected villages. Innocent Tumwebaze, one of 7,000 people displaced to make way for a refinery, is already disillusioned with oil. “Maybe it will benefit others,” he says, “but not me.”