A weekly digest of the most important news, business and political developments. Sign up to get the Week in Review delivered to your inbox every Sunday.
Tullow Oil stake sale stalls. The London-based oil and gas exploration and production company is initiating a new sales process to reduce its 33.3% stake in Uganda’s Lake Albert oil project after a planned $900 million sale to joint venture partners Total E&P and the China National Offshore Oil Corporation failed to get clearance from the government. Tullow and its partners said they’d failed to secure another extension of the sale and purchase agreements. This was after failing to “agree all aspects of the tax treatment of the transaction” with the government.
Tullow said the Uganda Revenue Authority and Total E&P and Cnooc had failed to agree on tax deductions for the transaction price that the two firms would pay for Tullow’s assets. The government insists that the two firms should pay tax on the transaction. Earlier, it also rejected Tullow’s position that it should not pay capital gains tax on the transaction.
The development will further delay a final investment decision for the Albertine Graben’s upstream projects, which was expected by the end of this year, and also sets back discussions on the oil pipeline. The joint venture partners will not approve the project until the Tullow transaction is concluded, which means the final investment decision will most likely be made in 2020.
Meanwhile, Kenya made its first international oil exports from a project operated by Tullow Oil in Turkana’s Lokichar basin. The oil reserves were discovered in 2012. The country is still years away from full production and commercial shipments pending investments in infrastructure, including a pipeline.
Inflation slows in August. Consumer price growth slowed for the second straight month thanks to lower core inflation and food prices, bringing the annual inflation rate to its lowest level since June 2018. The annual headline inflation rate fell to 2.1% from 2.6% in July, largely due to a decline in core consumer prices to a 13-month low of 2.7% year on year.
Uganda Airlines made its maiden flight to Nairobi. The resurrected national carrier launched commercial operations with flights to Nairobi’s Jomo Kenyatta International Airport and Juba, South Sudan, on Wednesday, 27 August. The first flight had only eight passengers, although the numbers went up on subsequent flights during the week.
Other flights were to Mogadishu on Thursday and Dar es Salaam on Friday. The airline is currently operating four 76-seater planes and will initially fly to seven regional destinations that include Bujumbura, Mombasa, and Kilimanjaro. But there are plans to expand its network to destinations outside East Africa and Africa once it receives the two wide-body Airbus A330-800s it placed orders for.
Established in 1976, Uganda Airlines was closed down in 2001 because it had accumulated a pile of debts it could not pay. Plans to revive it took off in earnest in 2016, the rationale being that it would help promote tourism by connecting to source markets, reduce the cost of air transport (the Entebbe-Nairobi route had the reputation of being the most expensive), and promote exports. Plus, as President Museveni said in 2016, it was a “big shame” to not have a national airline, and social media chatter this week seems to largely share that sentiment.
Several government officials have said they expect the airline to become profitable over time. That could be a long time away, if the experiences of other national carriers on the continent are anything to go by. As The Economist points out, the larger and more-established South African and Kenyan national carriers rely on government bail-outs and are saddled with debt, respectively. The only profitable state-owned airline in sub-Saharan Africa is Ethiopian Airlines, which of recent has been helping other African countries launch their own carriers while taking a stake.
There is also the tricky issue of air transport agreements; as more African countries set up airlines, they’ll be more reluctant to open up their skies in order to protect their lines. Twenty-eight countries have so far signed up to the African Union’s Single African Air Transport Market, launched in January 2018: Uganda is one of those that are yet to join the agreement.
Bank of Uganda lost case against former Crane Bank owners. The Commercial Court in Kampala dismissed a suit filed by the central bank — acting as the insolvent Crane Bank — against the bank’s former owners seeking to recover Shs397 billion as compensation for failing to correctly manage the financial and business affairs of the lender. The suit asked the court to compel Sudhir Ruparelia and his company, Meera Investments Ltd., to pay back Shs397 billion — the computed amount of the alleged financial loss the owners caused to the bank through fraudulent transactions and land title transfers — as compensation for failing to respect their legal obligations as Crane Bank’s owners.
In ruling against the regulator, the court agreed with Mr Sudhir’s lawyers that Crane Bank lost its powers to sue or be sued when it was placed under receivership on 20 January, 2017. It added that the transfer of Crane Bank’s assets and liabilities to Dfcu Bank meant that it ceased to exist and ended the Bank’s role as receiver. The suit was dismissed with costs. Bank of Uganda said it will appeal the ruling.
Tax incentives cost Uganda 1-2% of GDP annually. An American economics professor advised the government to cut back on tax incentives to investors because they are usually redundant — investment would have been undertaken with or without them. Nada Eissa, a professor of public policy and economics at Georgetown University, said investment tax incentives cost Uganda Shs900bn to Shs1.3 trillion annually, the equivalent of 1-2% of GDP (this still dwarfs the cost of the policy in neighbouring Kenya and Tanzania). Focus should instead be put on improving the business environment, her co-presenter at the Economic Growth Forum in Kampala said.
Ebola claimed fourth life in Kasese. A nine-year-old Congolese girl who crossed into Uganda to seek treatment is the fourth fatality from the DR Congo’s raging Ebola outbreak. The first three causalities were two boys and their grandmother who were infected after travelling to Congo to bury a relative. The World Health Organisation said the outbreak is approaching 2000 deaths and 3000 infections, making it the second-deadliest Ebola outbreak on record.
President Museveni sued for blocking Twitter critics. A Ugandan student at Harvard University filed a suit against President Yoweri Museveni, the executive director of the Media Centre, Ofwono Opondo, and Asan Kasingye, the assistant inspector general of Police for blocking him on Twitter. Hillary Seguya said the three opened their Twitter accounts as public officials and use them in the same capacity, which makes it illegal for them to block him.
Bonang Power’s proposed hydroelectric dam rejected. The executive director of the Media Centre said that the cabinet rejected a proposal by a South African firm, Bonang Power, to construct a hydropower dam on near Murchison Falls over “environmental and tourism concerns”. Probably, but it is most likely because Bonang Power was never a serious player to begin with.
Museveni vetoed minimum wage and genetic engineering regulatory bills. The president said current law already deals with the issues the minimum wage bill seeks to address. In refusing to sign the national biotechnology and biosafety bill, Mr Museveni said the “commercial interests behind the promotion of this technology” have to “balanced against the needs to protect the ordinary Ugandan citizens from real or potential harm”. It’s the second time he’s vetoing the bill which he says doesn’t serve interests of Ugandans. The U.S. embassy expressed its disappointment with the decision and said “government officials and stakeholders should have a science-based dialogue to resolve differences.”
