The development of Uganda’s oil and gas sector presents substantial opportunities for Small and Medium Enterprises (SMEs).
However, to fully capitalize on these opportunities, SMEs must enhance their operational capabilities and align their strategies with the specific needs of the sector.
This has been a major forcus of key industry players who have laboured so hard to depict the Oil and Gas Value Chain as a very vast and intense one, replete with many opportunities that SMEs can exploit, especially in the local context.
Opportunities in the oil and gas value chain include a wide range of jobs created plus the provision of services and goods in the downstream operations. With more than 15,000 workers to be employed directly, there will be a big need for food, accommodation, and health services, among others.
Strengthening Operational Capabilities
During a recent X Space event organized by the Uganda Chamber of Mines and Petroleum (UCMP), a meticulous examination of the role of SMEs, the challenges they face, and the strategies they can adopt to thrive in the oil and gas industry were well presented and discerned.
During the event, John Walugembe, the Executive Director of the Federation of Small and Medium-Sized Enterprises Uganda (FSME), emphasized the necessity for SMEs to bolster their capabilities in standards, supply chain management, financial management, and emerging areas such as environmental, social, and governance (ESG) issues.
This multifaceted approach, he said, is crucial because the oil and gas sector demands high standards and rigorous compliance. By enhancing these capabilities, SMEs can position themselves not only to survive but also to thrive as the sector evolves.
“We have encouraged our members to continue enhancing their capacity in terms of standards, supply, financial management, and emerging sector needs such as environmental, social, and governance issues, even as we await the first oil production. This will enable them to not only survive beyond oil but also thrive,” Walugembe said.
Of noteworthy mention, capacity-building programs play a pivotal role in preparing SMEs for opportunities in the oil and gas sector. Walugembe highlighted that programs facilitated by the Stanbic Business Incubator and the African Development Bank have already benefited some SMEs.
Additionally, the Industry Enhancement Centre, funded by TotalEnergies, continues to encourage further participation in capacity-building activities. However, despite these efforts, there is a consensus that more work is needed to fully prepare SMEs for the upcoming opportunities.
Thomas Ayebare Rukundo, the Manager Economic & Financial Analysis -Petroleum Authority of Petroleum Authority of Uganda (PAU) underscored the importance of diversity, equity, and inclusivity in SME capacity-building efforts to attract contracts from oil companies.
He pointed out numerous opportunities in ring-fenced goods and services such as transportation, security, catering, human resource management, and civil works. The existence of these opportunities, he said, indicates that with proper preparation and strategic alignment, SMEs can significantly benefit from the sector’s growth.
Economic Impact and Employment
The oil and gas sector’s potential to create jobs and stimulate economic growth is immense. Rukundo reported that over 13,000 jobs have already been created, with 90% of these positions filled by Ugandans, including many from host communities.
This highlights the sector’s role in local employment and community development. Moreover, SME capacity-building programs have reached 5,000 beneficiaries, with more expected to benefit in the future. This indicates a growing recognition of the need to equip local businesses with the skills and knowledge necessary to participate in the sector.
“We are pleased to report that some SMEs in Uganda are already beneficiaries,” Rukundo asserted. He added that contracts worth a total of US$7.9 billion have been signed in the oil and gas sector, with around US$1.7 billion awarded to Ugandan companies.
It should be noted that the oil and gas value chain in Uganda, encompassing upstream, midstream, and downstream segments, offers numerous opportunities for local SMEs. The upstream segment involves drilling, construction, and civil works, while the midstream segment includes the 1,400-kilometer oil pipeline from Hoima to the Tanga Port in Tanzania. The downstream segment, which involves delivering final oil products to consumers, presents a variety of opportunities for local entities.
Uganda has implemented policies and regulations to encourage local SME participation in the oil and gas sector. These policies include the local content policy, which mandates that certain sector activities be ring-fenced for Ugandan companies.
This policy framework provides a favorable environment for SMEs to enter the sector. However, the effectiveness of these policies hinges on the ability of SMEs to meet the required standards and compete effectively.
Access to finance remains a critical challenge for many SMEs aspiring to participate in the oil and gas sector. The sector is capital-intensive, and businesses need time and support to develop and become attractive to financing.
Additionally, SMEs need to engage with sector actors, seek partnerships, and understand the intricacies of the sector to position themselves for success.
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