Petrol pumps have become incongruous noticeboards of Uganda’s economic anxieties because every adjustment on the price board sends ripples through taxi parks, trading centres, supermarkets and households. It is a reminder to consumers that the cost of fuel shapes and determines their daily life.
In recent weeks, the price of petrol fuel has climbed as high as Shs6,600 per litre. This has increasingly necessitated the question about the viability of Uganda’s oil reserves, which were discovered nearly two decades ago. According to Prof Ezra Suruma, the oil could help ease the burden of expensive fuel.
Speaking to The Transcript, the economist, a former Finance minister, former deputy governor of Bank of Uganda (BoU) and former Chancellor of Makerere University, talked about oil with the caution of a man who has spent a lifetime studying how nations succeed and how they fail.
‘The real question is how oil can transform the economy,’ he offered, observing that Uganda currently imports most of its petroleum products, a dependence which leaves the country exposed to global price shocks, supply disruptions and foreign exchange pressures.
While oil production alone will not automatically translate into cheaper fuel, Prof Suruma believes strategic investments in refining, infrastructure and industrialisation could strengthen Uganda’s energy security and reduce some of its vulnerabilities.
Across Uganda, rising fuel costs have become a recurring concern for families and businesses alike. The economic pinch is felt by transport operators whose margins continue to shrink, then traders who have to pass on higher costs to consumers and manufacturers worrying about the impact on production expenses.
Prof Suruma notes that these realities reinforce the importance of thinking beyond the immediate gains associated with oil revenues. Natural resources, he argues, have little value if they do not contribute to broader economic transformation.
Childhood values
The former Finance minister’s remark speaks to the conviction that shaped much of his public life. Before he occupied some of the most influential offices in Uganda, Prof Suruma was a boy growing up in Kigezi, a region known for its terraced hills, hardworking communities and deep appreciation for education.
The lessons he learnt there would stay with him throughout his life. He speaks fondly of the values discipline, honesty, hard work and a belief in the transformative power of education.
These values-instilled by his family and community-have carried Prof Suruma through his academic journey and eventually to the United States (US), where he pursued higher education in economics and finance. The experience broadened his understanding of global economic systems while strengthening his desire to contribute to Uganda’s development.
When he returned home, Prof Suruma found a country navigating enormous challenges. Uganda’s economy was recovering from years of instability. Institutions were being rebuilt, and confidence needed to be restored. The economist became part of a generation of professionals tasked with helping shape a new economic direction.
Rebuilding Uganda
His work at Uganda’s central bank placed him at the centre of critical reforms aimed at stabilising the economy and strengthening financial institutions. Later, as managing director of Uganda Commercial Bank (UCB), he found himself involved in one of the most sensitive debates in the country’s financial history.
He remains passionate about indigenous participation in economic development and often speaks about the importance of building strong local institutions capable of supporting national growth. Ditto liberalisation.
‘In 1990, the managing director of the International Monetary Fund, Michel Camdessus, visited Uganda. I had just been promoted from director of research to the high-profile position of deputy governor of the central bank. After Camdessus arrived, he was immediately ushered into the State House to meet President Museveni, and I was privileged to be present. He immediately went to the issue of freely floating the exchange rate. The President answered that we were still contemplating the matter,’ Prof Suruma writes in his 2014 book Advancing the Ugandan Economy: A Personal Account.
‘Camdessus suggested that we could send a delegation to other African countries, which were floating their exchange rates, and learn from their experience. The President agreed. A few weeks later, I was instructed to head a team of five officials to visit Ghana, Malawi, and Mauritius to find out how those countries were managing their foreign currency rates. […] Upon returning, our team recommended that foreign currency bureaus be permitted to operate freely in Uganda,’ he adds.
His appointment as Finance minister further expanded his influence. The ministry gave him a front-row seat to Uganda’s development aspirations and challenges. During his tenure, the country experienced strong economic growth and increasing international confidence. He has, however, never shied away from the fact that Uganda pretty much remains a work in progress.
‘The main challenge is to convert Uganda’s macroeconomic level achievements (such as improvements in economic growth, reflected in an annual average growth rate of about 6.0 percent from 1987 to 2018) into economic development-that is, visible improvements in Uganda’s poorest households,’ he writes in Advancing the Ugandan Economy.
‘This challenge is perhaps best exemplified by the current situation: despite Uganda’s significant progress in macroeconomic performance, its poverty level remains a stubborn problem, especially in the rural areas where the absolute number of people living below the poverty line has actually been increasing,’ Prof Suruma adds in his 2014 book.
The resource curse
As a matter of fact, Prof Suruma remains cautious about celebrating growth figures in isolation. His argument is that economic progress must ultimately improve people’s lives in respect of employment and improved household income. Statistics are important, but they are only meaningful when they translate into tangible improvements for ordinary citizens.
This same philosophy informs his thinking on oil. Many countries have discovered valuable natural resources only to become trapped by corruption, wasteful spending and over-dependence on a single commodity. Economists call it the resource curse.
Prof Suruma argues that oil revenues should be invested in sectors which can generate lasting value through increased productivity and support for farmers and expanding value addition.
Manufacturing, technology, tourism and education feature prominently in his vision of economic transformation. Uganda’s future prosperity, he suggests, cannot rest solely on what lies beneath the ground but must also come from what citizens produce above it.
As our interview progresses, the conversation shifts from economics to leadership. The former Finance minister repeatedly returns to themes of stewardship and responsibility. He observes that leadership is about making decisions that benefit future generations.
His years as Chancellor of Makerere University deepened his appreciation for the role young people will play in shaping Uganda’s future. He believes Uganda’s most valuable resource is its people.
As such, investing in human capital offers the highest return any nation can achieve. The observation carries particular weight coming from someone whose own life was transformed by educational opportunities.
The resource blessing
Uganda’s oil story, he believes, will ultimately be defined by the wisdom with which those reserves are managed because the resource offers possibilities which shape hope for economic growth, but it also demands discipline if it is to be valuable for generations of Ugandans yet to come.
Two prongs on Uganda’s oil story are a takeaway in his 2014 book. He writes that, ‘the people of Uganda must wake up to the unprecedented amount of money that will be coming into the country from the sale of oil. […] When the oil companies sell the petroleum to other countries, they will first deduct the cost of producing the oil and then pay the government of Uganda an amount equal to about 65 percent of the balance from the oil exports. […] the companies are [also] required to pay a tax on their profits and a royalty payment for mining the oil in Uganda.’
He added: ‘In my estimation, as much as 50 percent of the net revenue from oil could be placed at the disposal of Uganda, by means of a ‘Uganda Petroleum Wealth Fund.’ […].’
For now, though, ordinary Ugandans are preoccupied with just how they will manage to fill their tanks amid global shocks that have pushed pump prices up to punishing levels.