Guyana examines Uganda’s Sovereign Wealth Fund model

Jul 08, 2016 News

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By Abena Rockcliffe- Campbell
Guyana’s Ministers of Natural Resources and Finance, Raphael Trotman and Winston Jordan, are currently in Uganda getting a firsthand understanding of the mechanisms that country has employed for the health of its oil and gas sector. The Ministers are accompanied by officers from the Ministry of Natural Resources and the Guyana Geology and Mines Commission.
Uganda has set up a Sovereign Wealth Fund, and Guyana is moving closer to the establishment of its own, said Minister Trotman “and so we are looking around trying to get the best model for ourselves.”
A Sovereign Wealth Fund is a government-owned investment fund. It has been set up by many countries with oil wealth, and there are several models to choose from.
Trotman said that his Ministry is working along with the Ministry of Finance on the establishment of the fund and “we are proceeding at a pace.” He said that the collaboration is necessary, as the Ministry of Natural Resources is tasked with developing policies to govern the incoming oil and gas sector, but the responsibility of actually setting up the fund is with the Ministry of Finance.
Trotman described his trip as a “study mission” as he explained, “we are to observe Uganda’s development of their oil and gas sector.”
However, the trip did not come out of the blue, nor was it Trotman’s idea.
The Minister said that Guyana was invited by Chatham House’s New Petroleum Producers Discussion Group to check out the Uganda model.
The Royal Institute of International Affairs, commonly known as Chatham House, is a non-profit, non-governmental organization based in London, whose mission is to analyze and promote the understanding of major international issues and current affairs.
It has established a group called New Petroleum Producers Discussion Group. This group aims to enhance the capacity of emerging oil and gas producers to establish context-appropriate rules and institutions for good governance of their petroleum sectors and to engage credibly with international partners.
Trotman said that Guyana accepted the invitation to get a firsthand view of Uganda’s set up as, “we thought it a good opportunity.”
Uganda discovered oil in 2006, around the same time as Ghana, which started production in 2010. Uganda is expected to start pumping in 2018, after delays due to court tussles over oil firm contracts and negotiations on building a refinery.
Over the past three years, the country has enacted laws and taken time to scrutinize production-sharing agreements to ensure it gets the best possible deals.
Last year, the Ugandan parliament passed the Public Finance Management Act, which details how oil revenues should be used. Included is the stipulation that oil money must be invested in infrastructure and to boost agriculture, rather than used for recurrent expenditure.
The act creates a petroleum fund where oil revenues will be saved. It includes provisions for the management of funds and a mechanism for sharing a small portion of royalties with local governments in the oil-producing region. It also creates a sovereign wealth fund – the petroleum revenue investment reserve – to help invest the oil money.
The government has instituted the National Oil Company to manage Uganda’s commercial interests within the oil and gas industry, and new rules bar international oil companies from appointing expatriates to positions that qualified Ugandans could occupy. With the sector expected to create hundreds of thousands of jobs, Ugandans are taking courses to understand the industry’s dynamics.
But there are signs of trouble, too. And in this regard, there is a hope that Guyana would not be patterning too much off of Uganda.
Uganda’s government oil agreements are shrouded in secrecy, keeping millions of Ugandans in the dark about events in the sector. There have been petitions urging the government to make the extractives sector more transparent.
Ugandans want government to sign up to the Extractive Industries Transparency Initiative (EITI), a global accountability platform that commits oil and mining companies to publishing what they have paid governments. Governments, in turn, publish how much they have received from oil companies.
Aside from the look at Uganda, Trotman said that Guyana is looking at other countries and is accepting all the advice it can get from a number of “development partners.’
The Minister indicated that petroleum experts and lawyers from the Commonwealth Secretariat based in England have been very involved. He said that Canada remains keenly involved in the process. The UNDP, the United States and the Mexican government are also working with Guyana.
Government has also been receiving individual proposals from foreigners and locals on the design of the fund.
The Minister said, “We are not saying no to anything, it is just a matter of streamlining. So by the end of this year we will be able to bring to Parliament the proposed framework for discussion and debate”.

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