Uganda recently marked significant milestones in its oil journey with the christening of its crude oil as "Pearl Sweet" at Kingfisher on September 2, followed by the groundbreaking of the Kampala storage terminal in Mpigi two weeks later. These events were celebrated as major steps in a national energy story that has been decades in the making. However, for many observers, these events may have appeared as the beginning of something new, but in reality, they marked the near end of a long journey of preparation.
The significance of these events lies not in the oil itself, but in the ecosystem that has been built around it. Crude oil buried underground has no economic value until it is extracted and processed. The value lies in the various sectors that support the oil industry, including engineers, welders, financiers, transporters, lawyers, insurers, contractors, training institutions, and entrepreneurs. Countries that fail to build this ecosystem often find that oil wealth leaves their domestic economies largely unchanged, a phenomenon known as the resource curse.
When oil deposits were first discovered in Uganda, industry stakeholders commissioned an industrial baseline survey to assess whether Ugandan businesses had the capabilities needed to participate meaningfully in the sector. The findings were sobering, revealing significant gaps in technical capacity, certification standards, skills development, access to finance, and industrial readiness. Without intervention, much of the opportunity risked being captured by foreign firms, leaving Uganda with production but limited participation.
The study identified major shortages in technicians, craftsmen, and specialized service providers, while calling for stronger local supplier development and access to capital. It outlined a path forward, suggesting that if local enterprises could be prepared to compete, Uganda's oil economy could support between 100,000 and 150,000 direct, indirect, and induced jobs. The challenge was to get Uganda's institutions and businesses ready to take advantage of the opportunities in the oil sector.
Stanbic, a major financial institution in Uganda, has been working to address these challenges through its Stanbic Business Incubator, established nearly a decade ago. The incubator has provided training and support to thousands of entrepreneurs, many of whom now operate as credible suppliers within the oil and gas value chain. These suppliers are winning contracts, employing Ugandans, and demonstrating that local content is an economic strategy that can drive growth and development.
The concept of local content is often misunderstood as protectionism, but its true purpose is to promote competitiveness. A supplier awarded a contract because of nationality alone creates dependency, while a supplier awarded a contract because it meets the highest standards creates prosperity. This philosophy informs Stanbic's support for strategic infrastructure, including projects such as the East African Crude Oil Pipeline, which aims to expand opportunity, raise incomes, and accelerate economic growth.
The recent milestones in Uganda's oil journey are a testament to the country's strategic patience and its efforts to build a stronger, more inclusive economy. The oil sector has the potential to drive economic transformation, but it requires careful planning and investment in productive assets. Stanbic's Positive Impact Agenda, which focuses on financial inclusion, enterprise development, job creation, infrastructure investment, climate resilience, and social investment, reflects the institution's commitment to helping finance a future for Uganda.
Key points
- Uganda's oil journey has been defined by an unusual choice: slow and cautious movement, which has allowed the country to build a strong ecosystem around its oil industry.
- The country's strategic patience has enabled it to prepare its institutions and businesses to take advantage of the opportunities in the oil sector.
- Local content is an economic strategy that promotes competitiveness and drives growth and development, rather than protectionism.
