Ugandans are likely to dig deeper into their pockets to finance the construction of the country’s $4 billion oil refinery after its East African Community partners failed to take up their full allocation of shares in the facility.
Uganda will take up an additional 11.5 per cent shareholding in the Hoima-based refinery, bringing its total shareholding to 19.5 per cent. French oil giant Total SA has taken up a 10 per cent stake.
Uganda, Kenya, Tanzania, Rwanda and Burundi had been allocated a combined 40 per cent shareholding in the refinery, translating into an eight per cent stake for each, with 60 per cent of the shares reserved for private investors.
However, only Tanzania took up its full share of eight per cent. Kenya took up 2.5 per cent.
Rwanda and Burundi had not expressed interest in the facility by the expiry of the period set aside for the partner states to take up the shareholding. The initial deadline was 2014. It was then extended to June 2016.
Uganda’s Energy Minister Irene Muloni said that Kampala would have to acquire the shares that were not taken up.
“Total is taking 10 per cent, Tanzania eight per cent and Kenya 2.5 per cent. Uganda will take the remaining 19.5 per cent shares if no other country expresses interest,” she said.
The Ugandan government has contracted a consortium led by American multinational General Electric to build the 60,000 barrel-a-day plant, which is expected to start producing oil in 2020.
Other partners in the GE-led consortium are Yaatra Ventures LLC, Italy’s Saipem SpA and Kenya-based Fireworks Capital.
The project will be 70 per cent funded through debt, with shareholders expected to inject the remaining 30 per cent.
According to the World Bank, public–private partnerships can help Uganda raise the money it needs to invest in its infrastructure. The Bank notes that budgetary constraints have made alternative options for financing necessary to supplement government resources.
According to the Bank, Uganda has a financing gap of about $1.4 billion a year for infrastructure investment, but the cost of inefficient infrastructure spending is also high, estimated at $300 million a year, due mainly to corruption and the sector’s inability to complete projects within budget and on time.
Uganda’s share of PPP projects in the sub-Saharan African region is estimated at 8.3 per cent, with the largest sector being energy.
The project was proposed following a study of regional refineries that was commissioned by the EAC in 2008.
A taskforce comprising officers from the petroleum sub-sector in the member countries was created and tasked to undertake the study. The taskforce advised that a refinery be constructed near the then recently discovered oil fields in Uganda.