By Insight Post Uganda
The Ugandan Parliament has passed the Petroleum Supply (Amendment) Bill 2023, providing the Uganda National Oil Company (UNOC) with an exclusive mandate to import and supply all petroleum products destined for the Ugandan market.
This strategic amendment aims to eliminate middlemen in the oil supply chain, perceived as culprits behind the fluctuations in oil pump prices.
The bill, which gained parliamentary approval on Tuesday, 14 November 2023, is seen as a crucial step toward ensuring stability and transparency in the country’s oil industry.
UNOC, a government-owned entity established to manage the government’s commercial interests in the petroleum sector, will play a pivotal role in reshaping the dynamics of petroleum product distribution.
According to Hon. Emmanuel Otaala, the chairperson of the Committee on Environment and Natural Resources, which scrutinised the bill, Uganda currently imports 90 percent of its petroleum products through Kenya and 10 percent through Tanzania.
The existing system involves three layers of overseas middlemen, each adding a profit margin that contributes to the final pump price.
The committee’s report highlighted the adverse effects of this structure, including inflated prices and insecurity in the supply of petroleum products.
If the bill receives presidential assent, UNOC’s exclusive role will enable direct negotiations for fair prices for Uganda, addressing the current challenges posed by dependence on middlemen.
This, in turn, is expected to build UNOC’s capital base, fostering better negotiation capabilities and ultimately benefiting the Ugandan consumer.
Members of Parliament expressed overwhelming support for the bill, stressing its timeliness in breaking free from Kenyan brokers who have been accused of disadvantaging Ugandans in terms of timely access to petroleum products in the required quantities.
Stephen Baka (NRM, Bukooli County North) likened giving UNOC a monopoly to strengthening the nation’s child, asserting that eliminating middlemen would secure more significant profits for Uganda.
However, not all MPs were in favour of the bill. Hon. Paul Akamba (NRM, Busiki) presented a minority report, drawing attention to past experiences with monopolies, such as UMEME, the Enrico agreement, the Iron ore agreement, and Dura cement agreement, which, according to him, have cost the country money and set a bad precedent for monopolies in Uganda.
Akamba argued that creating a monopoly might be unconstitutional as it could inhibit fair competition.
The debate also highlighted concerns about UNOC’s agreement with the international oil company Vitol, which will act on UNOC’s behalf to purchase oil from international refineries.
Some MPs, including Hon. Nathan Nandala-Mafabi (FDC, Budadiri County West), expressed apprehension that this arrangement might lead to increased fuel prices, benefiting Vitol more than the Ugandan population.
As the bill awaits the Presidential assent, its implications on Uganda’s oil industry and the broader economy remain subjects of intense debate and scrutiny.