Uganda's oil A bonanza beckons

Uganda's oil

A bonanza beckons

Hope and peril for the Great Lakes
 | KAMPALA | From The Economist print edition

A DETERMINED push by Western wildcatters and big oil companies from fast-growing Asian economies such as those of China and Malaysia may change the fortunes of several countries in remoter and trickier bits of Africa once largely ignored by foreign investors. One of the most spectacular recent finds has been in Uganda. The reserves of the Albertine rift, which takes in the Ugandan and Congolese shores of Lake Albert (see map), are said to need $10 billion for development. All being well, Uganda will soon become a mid-sized producer, alongside countries such as Mexico. Foreign investment in Uganda may nearly double this year to $3 billion. The country expects to earn $2 billion a year from oil by 2015.

The windfall may well change the country's politics. But oil can be a curse. It is far from certain that all of the country's 30m people will benefit. Oil executives and loyalists of Uganda's president, Yoweri Museveni, say the bonanza offers a chance to overhaul the country's rickety infrastructure and to train a professional workforce. A deal in the offing will link Tullow, an Irish company much involved in the oil discovery, with Total, a French giant, and the cash-rich China National Offshore Oil Company (CNOOC).

However oil-rich Uganda becomes, Mr Museveni, who came to power in 1986, will still have headaches. He has spent much of his time in office papering over tribal and other divisions. A rebel militia, the Lord's Resistance Army, which has terrorised northern Uganda for more than two decades, has finally been driven into Congo, where it continues to perpetrate massacres. But other disputes fester. Oil riches could exacerbate rather than resolve them.

The Buganda kingdom, the largest of the country's four big ones, helped vote Mr Museveni, an Ankole, into office. Now the Baganda are less keen on him. They believe that more power should be devolved to their traditional rulers. And they want a lot more money—oil money—spent on their unemployed young men. They can make things awkward for Mr Museveni's ruling National Resistance Movement, especially around Kampala, the capital. Another kingdom, Bunyoro, is demanding a big cut of the oil revenues; most of the oil wells are being drilled on its land.

As well as grumbling monarchies, Mr Museveni must satisfy his party's own grandees. Sinecures help, starting with his own family. Mr Museveni has appointed a son, Muhoozi Kainerugaba, to command an army unit with specific responsibility for guarding the oil wells. It may be the first step in a handover from father to son. A bigger worry is the apparent lack of oversight on Mr Museveni and his government that oil may bring. Foreign aid-giving governments already tend to look the other way when Uganda's democracy falters, its environment is fouled up, or aid money is stolen. Yet foreign leaders have already begun to fawn. South Africa's president, Jacob Zuma, was the latest to visit Kampala with oil deals presumably in mind.

But China is likely to be the biggest winner. Mr Museveni seems dazzled by Chinese promises to help build an oil refinery and to help turn oil into Ugandan-produced plastics and fertiliser. That may be bad news for Uganda's opposition, which wants to oust Mr Museveni in next year's election. And several jealous Western governments and companies want to stall China's advance into the Congo basin, with its vast reserves of minerals and timber.