Besides the direct revenues that will accrue to the country from the sale of crude oil, there are several expected indirect effects of the oil investments on the mainstream (non-oil) Gross Domestic Product (GDP) through the creation of linkages with other sectors of the economy like agriculture, health, tourism, housing, and transport, among others.
Studies have shown that every US$ 1 directly invested in the oil and gas sector is expected to yield indirect growth of the GDP by US$ 0.6. Therefore, a direct investment of up to US$ 20 billion in the oil and gas sector is expected to yield about US$ 12 billion even before commencement of commercial production.
Uganda’s Vision 2040 deems the development of the country’s oil and gas resources as crucial in spurring the national economic growth and development. In that regard, the National Oil and Gas Policy, 2008 and the National Environment Act, 2019 were put in place to ensure that oil and gas activities are undertaken in a manner that conserves the environment and biodiversity, the backbone to Uganda’s tourism sector.
Despite Uganda’s economy exhibiting resilience, growing by 3.3 percent in FY 2020/21, after a considerable slowdown in FY 2019/20 (2.9 percent) mainly due to the COVID-19 pandemic, harnessing the opportunities for expanding the economic base from an estimated US$ 40 billion in June 2021 remain of utmost importance.
The advent of the COVID-19 pandemic had a negative impact on the tourism sector with travel receipts, a major component of tourism activities reducing by 78.7 percent, mainly attributed to international travel restrictions and closure of business activities implemented globally to contain the spread of the virus.
Moreover, 70 percent of jobs were lost, 80 percent hotel businesses registered cancellations in bookings, 448,996 hotel room bookings were cancelled between March and June 2020, and 90 percent tour businesses registered cancellations in bookings.
The renewed momentum in Uganda’s oil and gas sector, therefore, presents a unique opportunity for the country to achieve accelerated growth through boosting the development of the tourism sector, together with other key sectors of the economy.
The nurturing of linkages between the oil and gas sector and the tourism sector is particularly important since the sector not only provides an opportunity to increase the country’s GDP and tax revenue earnings, but also improvement in the country’s balance of payments position and reduction in the increasing unemployment rate.
For instance, in 2018 the sector registered 1.5 million tourists and contributed about UGX 8 trillion to the national GDP and US$ 1.6 billion to the Uganda export earnings. Additionally, in the same year it is reported to have generated over 667,000 jobs.
The signing of key agreements for the oil and gas projects and the subsequent launch of the Tilenga, Kingfisher and East African Crude Oil Pipeline (EACOP) projects in April 2021 have ushered Uganda’s oil and gas sector into a phase of increasing and broader opportunities. Uganda’s oil projects are among the few that have been sanctioned globally in the wake of the COVID-19 pandemic. This gives hope and confidence in the profitability of the sector.
Although the tourism sector is one of the hard-hit areas of the economy, Uganda’s oil and gas sector offers an excellent opportunity for reviving the tourism sector and setting it on a higher recovery path to achieve and surpass pre-COVID levels of contribution to the economy.
This is especially true since the Albertine Graben is a biodiversity hotspot with more endemic species than any region in Africa.This is attributed to the landscape’s micro-climate, diverse and healthy ecosystems such as water bodies, savanna grasslands, tropical rain forests, protected areas, and Ramsar sites. The Graben is the number one destination for tourism in Uganda.
Equally the East African Crude Oil pipeline districts have natural tourism potential including a variety of ecosystems, both terrestrial and aquatic, diversity of flora and fauna, archaeological sites, historic, traditional, and cultural sites as well as forts and caves.
Additionally, the oil and gas sector activities have the potential to attract an influx of about one million people into the Albertine region during the construction phase, out of which 10,000 are estimated to be expatriates. This presents a huge opportunity for the tourism sector.
Putting in place the infrastructure required to produce and commercialize the country’s oil and gas resources, is expected to bring into the country investments of between US$15 to US$ 20 billion in the next 3 to 5 years. In addition, an estimated 160,000 direct, indirect, and induced jobs will be created because of these investments. The increased economic activity provides a boost to the tourism sector.
Furthermore, the tourism sector can leverage on some of the supporting infrastructure being setup to support the oil and gas development and production. The infrastructure has potential to improve access to the tourist sites in the region for both local and international tourists. In addition, to the information on the uniqueness and biological diversity of the Albertine Graben being documented by the oil and gas sector.
Key among the supporting infrastructure is Uganda’s second international airport being constructed in Kabaale, Hoima district and the 700kilometres of critical roads and two bridges being constructed across the Albertine region and EACOP pipeline districts.
Furthmore, the Petroleum Authority of Uganda is ensuring that the best industry practices and deployment of the best available technology in the oil and gas activrties r are implemented by the licensed international oil companies to minimize the impacts and project footprint. The PAU will therefore continue ensuring the maintenance of the ecosystem and ecological functions which are key factors in the attraction of tourists.
Other essential services like electricity, ICT services and clean water supply are being extended to different parts of the Albertine region and EACOP districts providing additional impetus for development of tourist sites in the areas.
Finally, the oil and gas activities have also triggered construction of hotels and recreational places, extension of financial as well as telecommunication and internet services to the Albertine region, all of which further improve the attractiveness of the area to both local and foreign tourists. With the vaccination drives and the partial lockdown, the tourism sector will not remain in limbo.
Therefore, in preparation for the undeniable benefits, the Petroleum Authority of Uganda is educating various stakeholders on the opportunities therein through National Content conferences and other Information, Education and Communication initiatives. The business community in the Albertine region has been positioned to take advantage of the opportunities in the oil and gas sector through capacity building initiatives like the Agriculture Development Program among others. In addition, the PAU is building synergies with research centres to quantify and document the projected benefits of the linkages and their overall potential to positively impact the different sectors of the economy.