OCCIDENTAL COLLEGE

CSR UgandaA Case Study of Corporate Social Responsibility

(CSR) in the Ugandan Petroleum Sector

Samuel J. Pastor – Diplomacy and World Affairs Department, Occidental College –

sampastor89@gmail.com

3/21/2014

Authors Note: This research is made possible with generous support from the John Park Young Fund and the Undergraduate Research Institute’s Fund for Corporate Social Responsibility. I would also like to express gratitude to Professor Sanjeev Khagram who provided guidance throughout the project and to Professor Lawrence Bategeka at the Economic Policy and Research Center for introducing me to the local

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Contents Abstract: 2 ...........................................................................................................................................

Literature Review: 5 ...........................................................................................................................

What is CSR? 5 ..............................................................................................................................

Model of CSR 7 ..............................................................................................................................

What happened to the Niger Delta? 11 ...............................................................................................

Oil and Gas on the Niger Delta 11 ..................................................................................................

CSR on the Niger Delta 15 .............................................................................................................

The Case of the Akassa: 17 .........................................................................................................

A Very Brief History of Uganda 20 ....................................................................................................

History of Oil in Uganda 23 ...........................................................................................................

CSR in Uganda: 25 .............................................................................................................................

Policies 26 .......................................................................................................................................

Programs: 28 ...................................................................................................................................

Environment 28 ..........................................................................................................................

Development: 31 .........................................................................................................................

Outcomes 40 ...................................................................................................................................

Legislation and enforcement 40 .................................................................................................

Freedom of the Press: 42 ............................................................................................................

Security: 44 .................................................................................................................................

Local Communities: 46 ..............................................................................................................

Conclusion: 49 ....................................................................................................................................

References: 52....................................................................................................................................

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Abstract:

Over the last 50 years, the development of the petroleum industry on the Niger Delta has resulted in the destruction of the environment and oil extraction has failed to be a catalyst for economic and social development in local communities. The failure of government to curb abuses has led for increased calls upon oil companies to mitigate the impact of their operations and contribute to sustainable development. Today, Uganda is in the early stages of oil discovery and exploration. Major questions remain about whether oil will be a curse or a blessing for the people who live in the region where oil has been found. Drawing on field research conducted during the summer of 2013, this paper analyzes the Corporate Social Responsibility (CSR) projects of the three major oil companies operating on the Albertine Grabin. Oil companies have initiated a wide range of programs from replanting roads and exploration sites to investing in education and health. In line with the theory of strategic philanthropy, the results indicate that the most successful programs are aligned with core business interests and result in a “win-win’ for the business and society. Meanwhile the least successful programs are outside of core business activities. Four conditions – legislation and enforcement, freedom of the press, security and local community participation – underlie the effectiveness of CSR programs. Overall, I am pessimistic about the future of CSR for protecting the environment and achieving transformational social and economic effects.

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CSR Uganda: The Case of Corporate Social

Responsibility (CSR) in Ugandan Petroleum Sector

What is the future of Corporate Social Responsibility (CSR) in Uganda? The goal of this

research is to identify individual programs with the unusual potential to transform communities

and the conditions underlying their success. Over the last 50 years, the extraction of oil on the

Niger Delta has had devastating results for local communities. Like Nigeria, Uganda is a poor,

resource-rich country with a post-colonial history marred by extended periods of violence. Now

that Uganda is in the early stages of oil exploration and development, it is time to ask important

questions about what oil companies are doing to protect the environment and promote

development for local communities.

I begin by defining CSR and introducing the Woods Model that I will use to assess the

effectiveness of CSR initiatives in Uganda. Then I map the history of oil in Nigeria with a

particular focus on the CSR projects of international oil companies. While overall prospects for

the future of the Niger Delta are dim, the case of the Akassa can provide inspiration. After briefly

reviewing the socio-economic history of Uganda and the history of oil exploration on the

Albertine Grabin, I turn my attention to the CSR programs, policies and outputs of the three oil

companies currently operating in Uganda. I find that the most effective CSR programs are

integrated into core business practices and result in a “win-win” for the company and society.

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Finally, four conditions underlie the effectiveness of CSR: legislation and regulation, freedom of

the press, security and local community participation. Overall, I am pessimistic about the future

of CSR for protecting the environment and achieving transformational social and economic

effects. In the conclusion I summarize the results and present some possibilities for future

research.

Literature Review:

What is CSR?

Despite the proliferation of the term Corporate Social Responsibility (CSR) and its

popularity both in academic and corporate circles no single generally accepted definition exists.

Two of the most popular definitions of CSR are offered by the World Business Council for

Sustainable Development (2006, pg. 3). who write that “corporate social responsibility is the

commitment of business to contribute to sustainable economic development, working with

employees, their families, the local community and society at large to improve their quality of

life,” and by the European Commission (2011) who define CSR as “a concept whereby

companies integrate social and environmental concerns in their business operations and in their

interaction with their stakeholders on a voluntary basis.”

More appropriate for our purposes is a definition specific to oil and CSR in Africa.

Drawing from their research on the CSR programs of oil companies in Sub-Saharan Africa,

Browfield and Frynas propose that CSR is “an umbrella term for a variety of theories and

practices that each recognize the following: (a) that companies have a responsibility for their

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impact on society and the natural environment, sometimes beyond that of legal compliance and

the liability of individuals; (b) that companies have a responsibility for the behavior of others

with whom they do business (e.g. within supply chains); and (c) that business needs to manage

its relationship with wider society, whether for reasons of commercial viability or to add value to

society” (Blowfield & Frynas, 2006). What all three of the above definitions share in common is

that they recognize business has an obligation to society sometimes beyond the pursuit of profits

and the threat of legal retaliation. All these definitions recognize that CSR is voluntary.

Additionally, it is hard to differentiate CSR from a host of related terms including

Corporate Citizenship, Corporate Social Performance, Corporate Accountability, and Corporate

Social Responsiveness. According to Schwab (2008), CSR is an “oversimplification that has led

to a great deal of confusion.” He says that the idea of corporate engagement is infused with five

core ideas which require unique definitions: Corporate Governance, Corporate Philanthropy,

Corporate Social Responsibility, Corporate Social Entrepreneurship and Global Corporate

Citizenship. Drawing examples from Uganda, explicit zero tolerance policies for corrupt

practices and internal mechanisms for reporting violations (Tullow, 2012b: Total, 2012) are

examples of good Corporate Governance. When Tullow donates $50,000 to the Kingdom of

Bunyoro to build a cultural center (Miirima, 2011) this is Corporate Philanthropy. When Tullow

trains suppliers to comply with a certain standard of conduct (Tullow, 2013) this is CSR. When

Total roles out the Asango line of solar cells to improve rural electrification in hard to reach

places (Total, 2012) this is Social Entrepreneurship. What all of these concepts have in common

is that they are concerned with the relationship between business and society. For our purposes

all five of these terms fit under the umbrella of CSR.

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Model of CSR

There are two basic theories of CSR. In Capitalism and Freedom, Milton Friedman

writes “there is one and only one social responsibility of business – to use its resources and

engage in activities designed to increase its profits so long as it stays within the rules of the

game, which is to say, engages in open and free competition without deception or

fraud” (Friedman, 1962). Freeman argues that firms should create value not only for shareholders

but for all stakeholders. Stakeholders are “any group or individual who can affect, or is affected

by, the achievement of the corporation’s purpose. Stakeholders include employees, customers,

suppliers, stockholders, banks, environmentalists, government and other groups who can help or

hurt the corporation” (Freeman, 1984). Key stakeholders in the Ugandan petroleum industry

include the Kingdom of Bunyoro, the Wildlife Conservation Society (WCS), the World Wildlife

Foundation (WWF), the Petroleum Production and Development Department (PEPD), the

Ugandan Wildlife Authority (UWA), the Ugandan Ministry of Mineral Development, local

communities in Hoima, Buliisa and Butiaba, customers, employees etc.

From Friedman’s perspective, when corporations engage in CSR they do so to prevent the

advent of expensive regulation. Oil company participation in the CSR process is part and parcel

of a hegemonic strategy to control the direction of the CSR agenda (Utting & Ives, 2006). Oil

company participation in the process has allowed them to divert attention away from regulation

and towards alternatives (public-private partnerships). This is what Greenpeace would call

“greenwashing” - using CSR as a façade to mask the true human and environmental costs of oil

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production. The problem with Friedman’s theory of CSR is that it fails to explain the various

ways in which CSR benefits the company.

Early research on stakeholder theory revealed the relationship between CSR and financial

performance and some good reasons for business to engage in CSR. Stakeholder theory

hypothesizes that a firm which creates value for all major stakeholders, not just shareholders,

will be more profitable (Freeman, 1984). This hypothesis has generated an enormous amount of

literature which addresses the connection between CSR and financial performance. A meta-

analysis of this research suggests a slight positive relationship (Margolis and Walsh, 2003:

Woods, 2010). Another major theme in the CSR literature is studies that look at the impact of

responsible behavior on the firm itself. The goal here is often to justify engagement in CSR by

the firm. “There is a solid business case for CSR, which is associated with “win-win” strategies;

doing good environmentally and socially can simultaneously improve a company’s competitive

advantage, reduce costs, enhance staff morale and reduce staff turnover” (Porter, 2006). In terms

of the oil industry “win-wins” include environmental protecting innovations that can lead to

patents. “Win-win” also often have the advantage of reducing costs such as by purchasing food

locally or sourcing local healthcare.

According to Woods (2010), the problem with previous research is that the focus is too

narrow. There are two branches of literature which invoke CSR. Business Ethics is concerned

with identifying the reasons why firms should engage in CSR, what the effect of that engagement

is on the firm itself and differentiating CSR from a host of related terms (Porter, 2006: Freeman,

1984: Margolis and Walsh, 2002: Schwab, 2008). In the literature on international relations, the

second branch of literature to invoke CSR, CSR figures in as a footnote in conversations about

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how to avoid what is popularly known as the “Resource Curse. ” The general idea behind these 1

articles is that the amount of money earmarked for CSR pales in comparison to transfers of

wealth to host governments as a result of production sharing agreements, taxation and other in-

kind transfers (Shephard, 2013: Bainomugisha, 2006: de Kock, 2012). While at the macro-level

CSR may be a drop in the bucket compared to government spending on development programs it

still deserves our attention because of the immediacy of its effects on local communities. Thus, I

am not interested in the contribution of CSR to the firm’s bottom line; I am interested in the

factors which will determine the impact of CSR on the communities in which firms operate.

The most prominent model of CSR was proposed by Archie Carroll. The Carroll model is

a pyramid which separates the responsibilities of the firm into four parts - economic, legal,

ethical and philanthropic responsibilities. The two bottom layers of the pyramid are economic

and legal responsibilities. The basic idea is that the social responsibility of the firm is to create

value for all stakeholders and that it needs to be done in accordance with regulation at both the

international and local level. The top two layers of ethical and philanthropic responsibilities

govern what a firm should do. Ethical responsibilities are the “standards, norms, or expectations

that reflect a concern for what consumers, employees, shareholders, and the community regard as

fair, just, or in keeping with the respect or protection of stakeholders' moral rights” (Carroll

1991, 41). Both of the top two levels are voluntary acts on behalf of the firm even if they result

from stakeholder pressure.

The problem is that most Sub-Saharan African countries lack the ability to effectively

enforce regulation. In these countries economic responsibilities remain the priority, however,

Define Resource Curse – Talk about Natural Gas in the Netherlands 1

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philanthropic responsibilities may be a greater priority than legal or ethical responsibilities

(Visser, 2006). A better model of CSR is proposed by Woods who urges us to consider the inputs,

throughputs and outputs of CSR. Inputs include CSR policies, throughputs include how these

policies are operationalized via programs and outputs include the effects of these programs on

“people and organizations, natural and physical environment and institutions and social systems"

(Woods, 2010, pg. 54). The advantage of Woods’ model is that its structural/functional

foundation is better suited to Uganda than Carroll’s model with its normative implications.

In addition to being hard to define, CSR is notoriously hard to measure. One common

method is to compare companies using indexes like the Sustainable Development 1000 or the

Dow Jones Sustainability Index. The problem with these types of indexes is that they do not

include small or medium sized oil companies. A more appropriate measure of CSR for this study

is “disclosure” (Woods, 2010, pg. 69). Disclosure is measured by self-reported data from

company websites, annual reports, codes of conduct and corporate social responsibility reports.

A complementary way of measuring CSR is through field research and interviews.

During the course of this research I visited Uganda for a period of one month to conduct

interviews with various stakeholders including academics at the University of Makerere, rangers

in Murchison Falls National Park, representatives of NGOs administering CSR projects for oil

companies and local communities in Kyehorro, Buliisa and Kibiru. I also had the chance to visit

CSR sites in Hoima district and to travel in and around Murchison Falls National Park. The

result of these interviews and information gained from observational study are presented in the

next section. These results are supplemented with the results of research conducted earlier this

summer while working at the Undergraduate Research’s Fund for Corporate Social

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Responsibility. The advantage of using all three sources of data is that it becomes possible to

triangulate results (Roselle & Spray, 2008). Before I turn to Uganda, I briefly review the history

of oil in Nigeria so as to show the negative potential of oil exploration and development.

What happened to the Niger Delta?

Oil and Gas on the Niger Delta

The history of oil in Nigeria demonstrates how the extraction of oil can ravage the

ecosystem and destroy communities. On the Niger Delta, the environment has been devastated

by oil spills, road construction and gas flaring. Not only have local communities failed to

receive the benefits of oil wealth but their government has actively colluded with oil companies

to suppress their legitimate concerns. In recent years, militant groups have emerged in response

to the failure of non-violent activism to solve the Delta’s problems. Big Oil companies have

spent tens of millions of dollars on CSR projects. As a whole, CSR has done little to improve

quality of life for those living on the Delta. However, a partnership between StatOil and Pro-

Natura has shown promising results. Only with an in-depth understanding of the dangers of oil

extraction can we understand the risks that local communities in the Albertine Grabin are likely

to face in the coming years and decades.

The Niger Delta is the 3rd largest Delta in the world and once was an incredible site for

biodiversity. However in the last 50 years the Delta has ingested 7000+ oil spills or the

equivalent of the BP Deep Horizon spill every year. Oil contamination has polluted the

waterways and killed many of the fish which local people depend upon for sustenance. When

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communities report oil spills, oil companies routinely claim that the damage is due to sabotage

because under Nigerian Law they are absolved of responsibility (EA, 1999). The result is that

mangrove forests have been decimated and species like the Delta elephant and white-crest

monkey have become endangered (EA, 1999).

Gas flaring is a major source of environmental degradation. Gas flaring on the Niger

Delta is the single largest source of greenhouse gas emissions in Sub-Saharan Africa and if

harnessed could power the whole continent (Frynas, 2008). Gas flaring goes on 24/7, often in

close proximity to local communities, and the “Sauna Bath” effects of gas flaring can reach

temperatures of 1400 degrees Celsius (Ibenau, 2000, pg. 23). Further, gas flaring is responsible

for acid rain which pollutes waterways and destroys crops. A particularly vivid example of the

negative effects of gas flaring can be seen in what it does to Zinc roofs which now need to be

replaced every year or two instead of every ten. The people of the Delta have turned to asbestos

roofing which is more resistant to acid rain but presents serious health risks (EA, 1999). When a

US delegation met with Mr. Bobo Brown, Shell Nigeria’s Eastern Division public relations

officer in the mid-1990s, he denied that gas flaring has harmful effects on local communities and

even claimed that local communities benefit from these flares because they could dry their

foodstuffs for free by setting them near the burning gasses, “a visibly ridiculous cost-benefit

estimate” (EA, 1999, pg. 5).

The inappropriate disposal of toxic waste and poor road construction are two other

sources of environmental degradation. Oil produces byproducts that must be disposed of

appropriately. On the Delta the waste is often deposited in unlined chemical pits. As a result of

toxic waste, gas flaring and general pollution, local communities report “respiratory problems,

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coughing up blood, tumors, gastrointestinal infections, different forms of cancer and

malnourishment” (EA, 1999). Road construction has been poorly planned. For example, in the

late 1990s, a Shell “access road to the central processing facility was cut through community

forest rich in biodiversity and containing sacred sites, breeding grounds for aquatic species and

fishing ponds. The gas pipelines to the central processing facility are routed through community

settlements including the Ogboloma cemetery grounds.” (Ereba & Dumpe, 2010, pg. 33). These

projects show that development is not based on local consultation and Environmental Impact

Assessments (EIAs) are ineffective at best.

The degradation of the environment fostered unrest in local communities on the Niger Delta

which finally exploded as violence during the early 1990s. In 1990, a Shell manager at

Umuechem made a written request for protection to the Mobile Police, one of the most

notoriously brutal arms of the Nigerian Military, leading to the deaths of eighty people (Human

Rights Watch, 1999, pg. 20). This event, more than any other, explicitly showed the close

collaboration between the Nigerian military and the oil companies. It provided proof of the role/

complicity of Shell in on-going human rights abuse. The incident can be seen as the spark

eventually leading to the birth of CSR on the Delta.

Playwright Ken Sera-Wiwa and other activists mobilized tens of thousands of people to

protest oil related injustices on the Delta. In 1993, Shell was forced to “close its production in

Ogoniland following mass protests at its facilities, citing intimidation of staff” (Human Rights

Watch, 1995, pg 15). The government responded with force. Thousands of Ogoni were killed,

raped and beaten by the Rivers State Internal Security Taskforce, a Nigerian security force

specifically created to suppress the protests of the Movement for the Survival of the Ogoni

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People (MOSOP) (Nixon, 1996; Human Rights Watch, 1999, pg. 15). Then protests culminated

in 1995 when the government executed Ken Sera-Wiwa and eight others after a sham trial for

allegedly committing murder (Boele, 2001).

International human rights organizations played a role focusing international attention on the

plight of the Ogoni and the other indigenous tribes of the Niger Delta. Amnesty International

and Human Rights Watch published major works detailing the environmental degradation of the

Niger Delta and the brutality of the Nigerian police/army/special forces in suppressing any and

all forms of popular resistance. Environmental Action/Friends of the Niger Delta, a homegrown

NGO led by Oronto Douglas, helped build the coalition. Their actions led, in part, to the

sanctioning of Nigeria by the British Commonwealth (BBC, 2005) for the execution of Ken

Sera-Wiwa.

Shell responded by becoming the industry leader in Corporate Social Responsibility. Shell

signed international conventions regarding human rights and the Kyoto Protocol. In Nigeria

Shell undertook an Internal Review to prevent close collaboration with the security forces in the

perpetuation of abuses. Shell’s Internal Review resulted in the adoption of a Code of Conduct

which specifically endorses the Universal Declaration for Human Rights and details the

responsibility of the oil company to draw attention to Human Rights Abuse. They also developed

mechanisms for helping managers to respond to human rights abuses when they occur (Human

Rights Watch, 1999, pg. 165). Today, Shell is a member of the Global Compact and the Global

Reporting Initiative. They attend every conference on Corporate Social Responsibility.

However, these initiatives only had limited success. Human Rights Watch had correctly

predicted that “unless corrective action is taken, protests in the oil areas will become violent in

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an organized and concerted way, with consequent reprisals and an ever-worsening security

situation that will harm all those with interests in the Delta region, whether residents or

companies” (Human Rights Watch, 1999, pg 23). The Ijaw, a nearby tribe on the Niger Delta,

followed in the footsteps of the Ogoni. In 1998 they issued the Kaiama Declaration where they

requested more control of oil revenues and better environmental practices. They were met with

violence by the Nigerian Security forces and many Ijaw, particularly young unemployed Ijaw

men, lost their lives.

Today, despite $600 billion in oil wealth the people of the Niger Delta continue to live on less

than $1/day. The vast majority of the Delta’s 35 million plus residents have no running water or

electricity. They lack access to education, healthcare and other basic services. Unemployment,

especially among the youth, is very high (Jackpore, 2012: Amnesty, 2008). The failure of non-

violent activism to bring an end to environmental and human rights abuse led to the creation of

the Movement for the Emancipation of the Niger Delta (MEND), a terrorist group responsible

for kidnapping oil workers and sabotaging pipelines (Briggs, 2013).

CSR on the Niger Delta

Over the last 20 years Shell and other oil companies have pumped millions of dollars into

CSR projects. As we have seen in the case of Nigeria, CSR emerged in the early 1990s as a

response to human and environmental rights abuse. Around the world, many of the biggest

Western oil companies suffered similar negative attention. In 1989 Exxon-Mobile came under

fire for an oil spill off the coast of Alaska and Chevron took criticism for paving roads in

Ecuador with oil sludge. Partly to protect their reputation, partly to avoid regulation and partly

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from ethical motives, oil companies began to embrace CSR. Research from the Delta illustrates

that environmental CSR has been the most successful because it results in “win-wins” for the

company and society. Development programs initiated by large oil companies have largely

failed to help local communities (Frynas, 2009). Nevertheless, there is some hope to be derived

from the case of the Akassa.

The greatest success of CSR in the oil industry has been in the environmental sector

where improvements in technology have resulted in “win-wins” for the oil companies and the

environment. On the Delta, a major success has been in changing the piping used to transport oil

from production facilities to ports or refineries. In the words of one oil company executive "a

steel tube may only last for several years in a tropical environment, whereas a chrome tube may

last for twenty years" (Frynas, 2009, pg. 79). Finally, gas flaring has been reduced because

carbon recapturing is profitable.

After the Rio +20 conference Greenpeace published a report entitled “Greenwash +20: How

Some Powerful Corporations are standing in the way of sustainable development.” Shell is

highlighted as one of the worst offenders. Shell is a master at creating beautiful ads – “ads that

have later been banned as “greenwashing” (Bruno, 2012, pg. 17). When Shell joined the Kyoto

Protocol they promised to reduce carbon emissions and increase investment in alternative fuels.

They have not. The report finds that “despite all the years of rhetoric, Shell is increasing carbon

intensity… and reducing its investments in renewable energy” (Bruno, 2012, pg. 6).

Overall, research shows that social programs have had mixed results. “An external review

of Shell’s projects in the Niger Delta found that ‘of the 81 projects visited . . . 20 did not exist, 36

were partly functioning or partially successful and only 25 worked properly” (Utting and Ives,

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2006, pg. 20). In another Niger Delta scandal, Shell was found to be using community

development projects to secure concessions from local authorities along the route of a new

pipeline. Once the pipeline was built the company promptly shut down the account (Frynas,

2009).

Perhaps, one of the reasons why development programs have failed is because many of

the greatest skeptics of CSR programs reside inside the subsidiaries of Multinational

Corporations (MNCs). Extensive interviews conducted with oil company executives and others

involved in the Nigerian oil industry reveals a deep seated pessimism about CSR (Nwokeji,

2007).These results seem to support allegations by Greenpeace and others that corporations are

using CSR to “greenwash” their operations.

Research on multinational oil companies other than Shell operating on the Delta hasn’t

produced optimistic results about the contribution of CSR to development. An external review of

Chevron’s CSR programs found that local communities were dissatisfied with the delivery of

services because they were not relevant to the needs of the community (Alabi, 2012). A

comparison of the CSR programs of the four major oil companies on the Delta found that none

of them has an adequate response to preventing the resource curse (Skjaeseth, 2004). Still, there

is some hope because at least one oil company has had some success.

The Case of the Akassa:

In 1997 StatOil (the state-owned Norwegian Oil company) acquired a large share of a

major off-shore drilling site. An Environmental Impact Assessment (EIA) indicated that the

people of Akassa, in Bayelsa State were the most likely to be negatively affected by an oil spill.

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In response, StatOil formed a partnership with Pro-Natura Natural (PNI) to set up their CSR

programs to target the thirty thousand people who live in the nineteen villages which make up

the clan. I will refer to the successful methodology deployed by PNI as the ‘Akassa Model.’

(What about environmental CSR for the Akassa? What does PNI do to prevent

environmental abuse?)

The first major step in the “Akassa Model” is the establishment of a Community

Development Foundation (CDF). The CDF is established within a federally defined geographic

area so that it is inclusive of minority groups. The CDF has an elected board of directors and the

accounts are verified by an external auditor. Budgets are published quarterly and all members

must be residents of the community. Each year the board prioritizes the programs that demand 2

the most immediate attention. Meetings of the CDF are attended by representatives of the local

community. Among the programs Community Development Foundations fund are basic services,

small infrastructure, micro-finance projects, sports leagues, sustainable fishing and forestry, and

many other community oriented projects (PNI, 2013).

The Akassa Model is successful because it is a community-led development process. In

the early stages PNI works to minimize the influence of traditional patronage systems and

undermine the power of traditional elites in the service of empowering local host communities to

make their own decisions about the needs of the community. Once democratic institutions have

been established and residents of the community are making decisions about which projects need

funding, then PNI can exit the community. Thus, PNI gives local communities the tools to take

charge of their own development. Ultimately, the goal is for the CDF to partner with local

How often they post their budget is variously stated “as every month in public spaces including posting it on 2

boards” and “every three months in a newspaper,” my guess is that the truth is more like once a year ☹ (add citation)

! 19CSR Uganda

government to become a sustainable engine of growth. Oil companies can be a catalyst for

growth by planting the seed money, but they cannot be expected to take on the role of

government such as providing social services, maintaining and developing infrastructure etc. A

CDF has been successful when it becomes independent of PNI. This is the case in Akassa and

Eket although early stage CDFs were ongoing in several other communities. The “Akassa

Model” has been successfully replicated in Eket with funding from Total (Draper, 2007).

In the last 50 years, oil extraction on the Niger Delta has ravished the ecosystem of the

third largest Delta in the world. Some, $800 billion dollars of oil-equivalent petroleum have

been extracted from beneath the feet of the Delta peoples but they have seen little return. The

terrible consequences of oil extraction garnered world attention during the 1990s. This led Shell

to join international organizations explicitly supporting the UN Declaration of Human Rights,

the Global Compact and the Kyoto Protocol. In addition to adopting internal Codes of Conduct

related to corruption and human rights, oil companies have actively pursued programs to mitigate

their environmental impact and catalyze sustainable development in host communities. Research

from the Niger Delta suggests that these programs have done little to improve the quality of life

for local communities. While CSR hasn’t been able to save communities that have already been

negatively impact by oil perhaps it will be more effective preventing a repeat of the Niger Delta

catastrophe. The case of the PNI and the Akassa Community Foundation shows, CSR can not

only help protect the environment but also help to transform communities.

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A Very Brief History of Uganda

Turning our attention from Nigeria to Uganda, I begin by briefly reviewing the political

and economic history of Uganda with a focus towards the oil industry. The history provides a

context within which to understand the efforts oil companies are making to minimize the

negative environmental effects of oil and promote social and economic development. Uganda is

a country with a history of civilization and a rich endowment of natural resources. However, the

post-Colonial period has been marred by violence and a lack of economic development,

especially in rural areas.

Uganda has a long history of centralized rule. By the end of the 17th C. Bunyoro was the

largest kingdom of the region. It had a mixed economy, a loose political structure and a central

trade position on account of its exclusive control of the region’s salt mines (Briggs, 2010, pg.

14). Today, the salt mines continue to produce a product with 90+% purity.

When the British colonized Uganda in the late 19th century it was the Kingdom of

Buganda, not the Kingdom of Bunyoro, around which the new protectorate coalesced. Early

European visitors to Uganda were enamored with its natural beauty and the strength of its

indigenous kingdoms. In his book "My African Journey" Winston Churchill describes Uganda

as, "...from end to end a beautiful garden" (Churchill, 1962, pg. 88), "...the exuberance of

vegetation...scarcely describable" (Ibid, pg. 151). Bunyoro only became a part of the colony in

1899 after the defeat of Kabalega, a dynamic ruler who had doubled the size of his territory in a

mere 20 years (Briggs, 2010, pg. 16).

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When Uganda achieved independence in 1962 the first leader, Milton Obote, “inherited a

nation fragmented along religious and ethnic lines to the point of ungovernability” (Briggs,

2010, pg. 21). As if to prove the point in 1971, Kampala was rocked by a military coup which

ushered in an era of instability that would not end until 1986. During that time Idi Amin

trampled the constitution, revoked the privileges of the indigenous kingdoms and forced into

exile all people of Asiatic descent while seizing their property. During his reign, an estimated

300,000 Ugandans lost their lives. His reign finally came to an end in April 1979 after he was

driven into exile (Briggs, 2010, pg. 23).

When General Museveni and the National Revolutionary Movement came to power in

1986 they shied away from retributive actions. “(Museveni) appointed a broad-based government

which swept across party and ethnic lines, re-established the rule of law, appointed a much-

needed Human Rights Commission, increased the freedom of the press, and encouraged the

return of Asians and other exiles” (Briggs, 2010, 25). Reuben Kashembuzi, the man who led

Uganda’s effort to establish an oil industry returned and took back the position he had vacated

when he fled the country under Amin. As the head of Uganda’s Petroleum Exploration and

Production Department, he was to play a major role in the development of the Ugandan oil

industry (Kashambuzi, 2010).

Museveni’s economic policy emphasized foreign investment and tourism. Keys to

Uganda’s growth have been macroeconomic stability and the liberalization of the economy. One

example of the effect of liberalization is visible in the proliferation of independent gas stations.

The market stranglehold of Shell and Total was challenged by those who charged slightly less

per liter. However, liberalization has not resulted in major changes in the structure of the

! 22CSR Uganda

economy. Today, agriculture still accounts for 25% of GDP and 80% of employment (MUNDI,

2013).

Despite considerable gains in security, Museveni has continued to fight Northern

revolutionary movements. Alice Lakwena was a spirit medium who drew most of her followers

from the Acholi tribe. The most important spirit was a god-fearing ninety-five-year-old Italian

army officer who had drowned in the Nile River. Through her the spirits instructed her followers

on “strategy, principals and the causes of conducting war against Museveni” (de Kock, 2012, pg.

16). By the time of her defeat she had amassed seven to ten thousand followers. Beginning in

1987 Joseph Kony and the Lord’s Resistance Army began a “devastating campaign of plunder,

abduction, rape and war” (de Kock, 2012, pg. 17). Officially committed to ten-commandment

orthodoxy, the LRA pillaged villages. The conflict between the LRA and the Ugandan military

devastated the lives of inhabitants of the northern countryside. During this time, almost two

million people were forced to resettle in Internal Displacement Camps (IDCs). While the LRA

was never officially defeated, Museveni did succeed in driving them from Uganda. (de Kock,

2012, pg. 19) While the security situation has improved the group is still active and conducts

operations in the Democratic Republic of the Congo (DRC). The greatest challenge today is

from South Sudan. At the time of this writing Uganda had created a corridor to Juba to get

Ugandans and other foreign citizens out of the country (Sserunjogi, 2013).

Today, Museveni has been in office for 27 years and is the second longest serving head of

state in Sub-Saharan Africa after Robert Mugabe of Zimbabwe. Under his reign Uganda has

transformed itself from a war-torn African country beset by ethnic and religious conflict to a

politically and economically centralized state. In 2004, he supported a controversial

! 23CSR Uganda

constitutional amendment that allowed him to be reelected for more than two-terms. While it is

likely that Museveni will once again win reelection in 2016, there is no question that his time in

office will expire long before oil reserves are exhausted. So the main question going forward is

how long will he stay in power? And who will replace him when he’s gone?

History of Oil in Uganda

The history of oil in Uganda begins in 1927 with the publication of E.J. Wayland

Petroleum in Uganda. Wayland brought attention to the petroleum potential of the region by

traveling around Lake Albert and documenting the numerous oil seepages. This only generated

marginal interest, however, and this interest dissipated when, in 1938, the Waki B1 well drilled

near Butiiba did not encounter oil. Thirty years later, the rise in global fuel prices during the

1970s increased interest in small African oil fields. When General Museveni was approach in

1986 about securing exploration licenses for the Albertine Grabin, he asked his staff if there was

anybody in the government with knowledge of the oil industry. When the only person they could

find was an economist who had worked at the World Bank in the petroleum department he

decided that the country was not ready. A group of young Ugandans were sent to study petroleum

sciences in the US and UK and when the first crop returned in 1987, they became the nucleus

around which Uganda’s Petroleum Exploration and Production Department (PEPD) would form

(Kashembuzi, 2010, pg. 3).

! 24CSR Uganda

The first discovery of oil occurred at the

Mputa-1 well in February of 2006. The

well, which was drilled by Heritage oil, is

located in Kaiso-Tonya, in Hoima District.

Subsequent wells confirmed the presence of

petroleum products at a remarkable success

rate of 88%. In other words, the basin is

literally overflowing with oil. 3.5 billion

barrels have been discovered in the 40% of

the Albertine Graben which has been

explored so far (PEPD, 2010). Considering

the astronomical success rate during the

initial stage of exploration, future

exploration is likely to uncover billions of

future barrels. Importantly some of the biggest reserves are clustered in and around Murchison

Falls National Park, presenting complications for commercial extraction.

Three companies will be responsible for extracting oil in Uganda. After Heritage Oil sold

their stake to Tullow Oil, Tullow turned around and farmed-down their operation - to the tune of

$3.5 billion – to Total and the Chinese National Offshore Oil Company (CNOOC). Each of these

three companies is now responsible for drilling in a different region of Albertine Graben. Tullow

will drill Kaiso-Tonya and Buliisa, Total will drill Paraa and Buliigi and CNOOC is responsible

for the Kingfisher Well in former exploration area 3A. All three of the companies will be

Figure 1: Map of Exploration Areas on the Albertine Grabin (PEPD, 2010)

! 25CSR Uganda

working onshore and in close proximity to local communities. Corporate Social Responsibility is

the primary mechanism by which they engage these stakeholders.

A significant amount of academic research has been conducted on the oil industry in

Uganda mostly focusing on how to avoid (various elements of) the ‘resource curse,’ with a

particular focus on governance (Bainomugisha, 2006; Boden, 2012; Henstride & Page, 2012;

Kathman, 2011; Larsen, Excell and Veit, 2011; Minio-Paluello, 2012; Muramira, 2008; Rodin,

2012; Shepherd, 2013). However, I am much more interested in the impact of CSR programs on

local communities. Do oil companies have explicit commitments to protecting the environment

and supporting development? What kinds of programs do the oil companies execute to benefit

local communities? What conditions underlie the effectiveness of these programs?

CSR in Uganda:

Following Woods I assess the effectiveness of CSR programs in terms of Corporate

Social Responsibility, Corporate Social Responsiveness and Corporate Social Performance

(Woods, 2010 pg. 54). In other words I am concerned with CSR policies, programs and

outcomes. Policies are defined in terms of explicit commitments made by oil companies in CSR

reports or on company websites to protecting the environment and promoting social and

economic development in host communities. There are three common ways that oil companies

execute CSR programs: they make philanthropic donations, they form partnerships with NGOs

and they invest in social entrepreneurship programs. Finally, four key conditions will help

! 26CSR Uganda

determine the overall output of CSR activities. These conditions are legislation and enforcement,

freedom of the press, security and local community participation. The results indicate that the

most effective CSR programs are those which align with core business interests and/or are

incorporated into the supply chain. The least effective programs are those which are peripheral

to core business activities.

Policies

“It started in a small town called Tullow, about 35 miles south of Dublin, Ireland. In the

80s there were loads of companies starting off in the North Sea and Irish Celtic Sea. I was talking

to a friend of mine in the bank one day and he was talking about small oil fields in Africa, which

had been left behind by the majors and had no-one to work them. That is where the idea came

from. I contact another friend of mine in the World Bank who told me about a project in Senegal.

They had some small gas fields that they were trying to get people to develop, so I setup Tullow

Oil to rework those old fields. I knew nothing about the oil and gas industry at the time, which

made it more challenging. No-one thought Tullow would succeed because of my lack of

knowledge of the industry, no major backers and I was starting a company in a country with no

oil industry.”

- Aidan Heavey – Founder and CEO

Tullow is committed to “creating shared prosperity” which means “running our business

in a way that makes a positive and lasting contribution to economic and social

development.” (Tullow, 2013). In 2009, the discovery of the Jubilee Oil Field offshore Ghana

! 27CSR Uganda

established Tullow as the leading independent oil and gas producer in Sub-Saharan Africa. The

Tullow Model of CSR, as employed in Ghana consists of training and employing local people,

expanding their scholarship scheme and getting local industries into the supply-chain. According

to Aiden Heavey, “it can be used as an example of how an oil company should work in new

countries.” (“CEO Interview,” 2014)

“Total’s mission is to responsibly enable as many people as possible to access energy in a

world of constantly growing demand. In practical terms, this means making corporate social

responsibility an integral part of our operational and business excellence goals.” (CSR Report,

2012, pg. 1) Environmental CSR is of paramount importance in Uganda where Total has the

opportunity to prove that environmentally responsible resource extraction is possible when

drilling in Murchison Falls National Park. If, at the same time, they stimulate development

through the construction of infrastructure then they will have created a blue-print for engagement

to be emulated worldwide.

Finally, on CNOOC’s website they write: “we believe that our primary social

responsibility is to supply clean, reliable and stable energy for society . . . we believe that

fulfilling our corporate social responsibility (CSR) goals requires more than acknowledgement,

belief and thought from senior management to individual employees; we believe it is a concept

that should be integrated into our management system and organizational culture. CSR initiatives

have been reflected in the Company’s business goals and development model (“Social

Responsibility,” 2005).

! 28CSR Uganda

In sum, all three multinational oil companies operating in Uganda have explicit policies

supporting CSR which outline their commitment to protecting the environment and supporting

development.

Programs:

Environment

Murchison Falls National Park is one

of the most bio-diverse areas on the planet

and a major tourist attraction. The park is

home to 109 different mammals – including

elephants, zebra, giraffe and lions -and just

under 500 unique bird species - including

the endangered shoebill stork.

Conservationists fear that oil development

threatens the Nile River and surrounding

wetlands (Biryabarema, 2013). Noise pollution and

road construction are two important concerns during

the early stages of exploration.

Soon after oil exploration began in the park, Park Rangers raised the concern that oil

activities were disrupting the natural ecosystem by driving the animals away. USAID sponsored

research on the impact of oil development on the local animals. The research supported the

Figure: 2 - Jackson-Harbeet in MFNP

! 29CSR Uganda

claim that oil production was disturbing local animal populations and pointed to noise pollution

as a major source of this disruption. Around the Giraffe Exploration site in Murchison Falls

National Park, the researchers found that exploration initiated “significant and sudden population

movements.” Affected elephants did not return to the area for five months after drillings

(Aminiga-Ruhanga, 2009, pg. 9). To mitigate the impact researchers recommended, all vehicles

should be moved at the same time and operational exploration wells should be no closer together

than 5km to allow the animals space to cross (Aminiga-Ruhanga, 2009).

When I visited the park, a ranger told me that despite the findings of the USAID

sponsored study, he did not believe that oil was responsible for the disappearance of the lions or

any of the other animals. In fact, lions had migrated to follow animal herds which they prey

upon. He continued, once oil exploration is complete the environment (and tourism activities)

return to normal. Backing up his assertion we saw Jackson Antelope, wildebeests and giraffe

within a few hundred yards of an active oil exploration site although we saw few elephants.

(Figure: 3) More research needs is needed to verify the results of the USAID sponsored-study.

!

! 30CSR Uganda

(Figure 3: Replanted Road in Murchison Falls National Park)

!

(Figure 4: Capped Mputo-5 Oil Well)

!

(Figure 5: Jackson Harbeet near oil well in MFNP)

Another major environmental concern is road construction and the expansion of

infrastructure. In Ecuador, road construction had such devastating effects on the environment that

oil companies have adopted off-shore drilling techniques and are flying oil workers to site

! 31CSR Uganda

instead of driving them in on roads. After pipelines are installed they are disguised in the

rainforest (Steffen & Oneko, 2013). In Uganda, road building can be problematic because the

process can open up previously inaccessible areas of the park to poachers and others who would

do harm to the environment. While in Uganda I found evidence that oil companies are replanting

exploration areas and roads once exploration in a particular area of the park is complete giving

credence to Total’s claims that they are protecting the environment.

It appears that the early stages of discovery and exploration have not caused irreparable

damage to the ecosystem. At the same time we should note that even the noise from oil can alter

the ecosystem in profound ways. While we have evidence that the oil companies are replanting

roads and extraction sites - and this makes sense considering that CSR should be aligned with

core business strategies - the truth is the dire consequences of oil extraction have yet to be felt in

Uganda. As commercial oil production ramps up, incidents such as an oil spill will test the limits

of CSR in a ‘win-lose’ situation where what will be good for the company will be bad for the

environment.

Development:

To promote economic and social development in host communities, oil companies fund a

variety of Corporate Social Responsibility programs. These programs are the way that

companies operationalize the explicit commitments made in CSR reports and on company

websites to development programs. There are three ways that companies give back to

communities: they engage in corporate philanthropy, they build infrastructure and they provide

! 32CSR Uganda

services. Examples discussed below include donations to cultural centers, education and

healthcare and social entrepreneurship programs.

Philanthropy

The first way that oil companies make contributions to local communities is through

philanthropy. In July of 2011 Tullow donated 120,000,000 Nairu ($47,640 US) towards the

construction of a new cultural center for the Kingdom of Bunyoro. According to the Kingdom of

Bunyoro’s website the cultural center is going to be built on a 3.5 acre plot just in front of the

palace to preserve and promote the history and culture of the Bunyoro people. It will include “a

cultural village, craftshop, arts and performances, leisure gardens, clans networking bureau

etc” (Miirima, 2011). When I visited the site two years later the gates were closed and there was

no sign of development. My guide was deeply suspicious that the cultural center would ever be

built. He told me that the king only shows his face to the public once a year on a day to celebrate

Kingdom of Bunyoro. The case of Shell on the Niger Delta shows the need to be wary of bribery

disguised as CSR. These donations may never result in tangible benefits for local communities.

Consequently, the donation is a way of paying off community leaders. The case of the Akassa

also showed effective programs marginalize institutionalized elite and bring local voices into the

fold.

Oil companies also use philanthropy to support education and healthcare. In Buliisa,

Tullow provided solar panels to power a local school and light the dormitories. Farther south,

! 33CSR Uganda

Tullow built two primary schools in Hoima District: one to serve the students of Kaiso and the

other for the students of Kyehorro. The schools have “two classroom blocks, accommodations

for three teachers and a kitchen” (New Vision, 2012). CNOOC supports a vocational school in

Hoima District (Observer, 24/5/13) and CNOOC is building a relationship with residents of

Buhuka fishing village, in Hoima District by donating textbooks and food, and supplementing

the salaries of teachers by 250,000 UGs/month ($100) (Xinhua, 2013). This kind of ad-hoc

investment at best leads to marginal educational benefits and at worse can cause conflict or even

war, as groups compete to get the privileges of being host communities. The case of the Akassa

shows that CSR programs should be designed to include all stakeholders within a federally

defined territory, like a district, to ensure that minorities are not cut out from the decision making

process. Thus, the mechanism for the provision of basic services by oil companies in Uganda is

limited and problematic.

Infrastructure

The second way that oil companies contribute to the local community is by investing in

infrastructure. So far, Tullow has invested $5 million in infrastructure for health and education.

The most costly project is the Buliisa Health Center IV ($2 million) which is designed to serve a

population of 100,000. According to the Observer, a Kampala newspaper, when completed the

building will be “equipped with a maternity ward, operating theatre, outpatient department, X-

ray block, nurses’ and doctor’ residences, attendants, shelter and other standard

infrastructure” (Observer, 2013). The Maternity Health Center in Kyehorro is supposed to

provide various health services including HIV/AIDS prevention and treatment, immunization,

! 34CSR Uganda

malaria treatment, family planning and antenatal services.” (New Vision, 2/2012) When I visited

the healthcare centers in Buliisa and Kyehorro I saw that while they have been constructed there

were no signs of use by the local community. According to my guide, the real problem isn’t

healthcare buildings but the provision of medicines and high quality doctors. This suggests that

investing in healthcare centers is not effective. These examples illustrate the need for

mechanisms to assess effectiveness beyond merely reporting the total amount of money spent of

certain projects.

In addition to road building and the

construction of infrastructure to

support education and health, oil

companies are initiating other large

infrastructure projects. For instance

CNOOC is likely the major player

behind the refinery project. Tullow only finalized plans for a refinery after CNOOC joined the

equation. This evidence might be circumstantial except for the fact that Chinese National Owned

Oil Companies have already been parties to building refineries in Niger and Chad (Daly, 2012;

Felix, 2012). The refinery is important to the government because they want Uganda to become a

major regional oil player by providing refined products to surrounding communities. However,

there are many problems associated with the development of the refinery such as land-grabbing

and poor compensation for those forced to relocate. Major road construction is underway

connecting the Mputo oil wells (which are down the escarpment), with the refinery (above the

! 35CSR Uganda

escarpment) and Hoima. From Hoima, the government has already paved a road to Kampala.

Only time will tell, for instance, whether the development of the oil industry will open up the

lower area of the escarpment for tourism or whether a badly bruised rural landscape will be torn

and broken.

Provision of Services

The third way that oil companies contribute to local communities is by providing

services. In terms of education, Tullow’s Group Scholarship program aims to get local students

into oil and gas jobs. Last year, twenty Ugandan students received these scholarships which

allow them to study petroleum sciences, geology, physics and other critical subjects like

agriculture and tourism at prestigious universities in the US and the UK. (Tullow, 2013, pg. 7) 3

Tullow’s group scholarship program does not appear totally unlike the scholarship program

provided by the Total Foundation which provided 11,000 scholarships to students from 50

countries in 2009 (Total, 2010).

Often CSR programs are run in partnership with non-profit organizations. Tullow’s

partnership with FrontierMEDEX is designed to increase local content in the healthcare supply

chain. Instead of bringing in ex-patriot doctors to treat oil workers, Tullow is training Ugandan

doctors to be able to handle the load. According to Risk and Insurance, over the course of nine

The total pot, which funds “health, education and enterprise development was $11.6 million in 2011 of which $5.1 3

million were invested in Uganda. Today the pot has grown to $19.9 million. (Tullow, 2013, pg. 7)

! 36CSR Uganda

months, five doctors were trained to be able to provide both the primary preventive and

emergency medical care required of a doctor working for the oil industry. The program also

benefits the local community because the doctors conduct rotations at local clinics where they

not only treat patients but also share their experience and knowledge with staff (Risk and

Insuruance, 2013). Hopefully the program will increase local employment and improve

community health. The oil company is likely to continue this program because it has the added

benefit of being cost-effective. Thus, it represents a “win-win” for the oil company and society.

Today, all of the doctors who work in Tullow’s camps are, in fact, Ugandan citizens (although

this does not mean they come from local communities).

While health and education programs receive the bulk of CSR spending, I found that

Tullow’s most successful program promotes agricultural entrepreneurship as a path to social and

economic development. The Agro-Business Program, which was established with funding from

Tullow in 2009, is administered by a Belgian international development organization (TRIAS)

specializing in strengthening members based farmers’ associations. The majority of participants

in the program are subsistence farmers who work family owned farms. At the beginning of the

program the average plot size was 1 acre. The Agro-Business program is an example of a

partnership between an oil company and an NGO.

Initially TRIAS provides participants with business training and later access to

microfinance. Participants are members of HODFA, the largest farmer’s association in Hoima

District. TRIAS begins by providing farmers with training and aid in marketing. The training

program focuses on practical skills and learning through demonstrations. Training is necessary to

get farmers to comply with hygiene standards and other requirements of the oil company. In

! 37CSR Uganda

many cases insights gained from the training program increase the size of yields because farmers

have not had formal training before. The key to aid in marketing is coming together in larger

groups (200 farmers) to sell at a bigger scale.

After receiving training, farmers have the opportunity to apply for microfinance. To

execute this portion of the program TRIAS partners with HOKOFAM, one of the largest

microfinance institutions in rural Uganda. Founded in 2003 by the Catholic Relief Services, they

now serve 20,000 people through over 1000 village banks in Western Uganda (Kiva, 2014).

Farmer’s apply for loans in small groups of 16-20 people. They write a short business proposal

(2 pages) detailing the costs/benefits of the program and indicating which specific commodity

the loan is going to support. The business plan is then reviewed by employees of TRIAS. If the

plan is thought to have merit then they tell the MFI to release the funds. In general the farmers

grow rice and corn (maize) for commercial sale and cassava and beans for household

consumption.

TRIAS uses a number of mechanisms to audit the effectiveness of the program, some of

which involve Tullow and some which do not. A steering committee - composed of a

representative of the oil companies, local government and the two partners (HODFA and

HOFKAM) meets regularly. The most extensive review is conducted at the end of the three year

period. To understand whether the group loans were being used for farming as opposed to burial

costs or some other expense TRIAS asked a local university to send students to complete an in-

depth survey. The students found that there is a high degree of compliance with program goals.

Overall, the program has been effective although there are still some kinks. The program

saw promising results in the first year with “65 farmer groups reporting profitable enterprises in

! 38CSR Uganda

2011, from a baseline of 45” (Tullow, 2013, pg. 77). The size of plots has increased from 1 to 2

acres and using new farming techniques crop yields are substantially greater (somewhere in the

realm of 0.8 to 2 times greater). However, farmers complain that the 20% interest rate is too

high. They consider the 6-month time period “too short” and would prefer a repayment grace

period of 1 year. Weak female participation has been noted by the NGO and reaching out to more

women and youth is a goal of the future. TRIAS is also looking into fishponds for fisherman,

many of whom are also farmers, which are desperately needed because the lake has been

overfished. Outside the immediate effects of the program, but still of concern to the farmers, are

price fluctuations on the open market.

One of the reasons why the agriculture program has been so successful is because it

results in a “win-win” for the company and the community. The community wins because they

get more jobs and money is injected into the local economy. The company wins because they

don’t have to transport food thousands of miles to feed their employees. I also learned that

Tullow is currently going through an organizational restructuring: switching from the CSR model

(Corporate Social Responsibility) to a CSP (Corporate Social Performance) model. An external

review recommended Tullow focus on the most effective CSR programs instead of spreading

their resources thinly between multiple sectors. In Uganda, the review gave a thumbs up to

Tullow’s Agro-Business Program with TRIAS and Tullow’s Enterprise Development Center with

Traidlinks. Meanwhile, the review recommended that Tullow curtail their investments in

healthcare. As oil companies become increasingly specialized in their support of CSR programs

– programs like the Agro-Business program, the partnership with Frontier Medex and the Tullow

Group Scholarship program are likely to grow.

! 39CSR Uganda

So far, the results show that all three companies have established CSR policies and

programs. CSR is used to promote sustainable development for local communities and protect

the environment. In Murchison Falls National Park, Total is replanting roads used to access oil

exploration sites after they are no longer necessary and they are making donations to help protect

sensitive environmental areas. The largest contribution from CNOOC is likely to come from

large infrastructure although they also support primary and vocational education for local

communities. Meanwhile, Tullow has built healthcare clinics, schools and invested in two agro-

development initiatives. Thus we can say that, Tullow is the most active in Uganda. The fact that

they have more CSR than the newcomers is not surprising given their history of engagement in

the host country.

The least effective programs would seem to be those which are either temporary or

outside the core business strategy. Direct donations to local schools are unlikely to catalyze the

transformation of a community. Healthcare centers make for good publicity but they are not a

cost effective way of promoting sustainable development in local communities.

The most effective programs are deeply tied into the business plan. They work because

they result in a “win-win” for the company and society. Replanting roads and exploration sites is

an important responsibility because oil companies are responsible for building the roads and

clearing space for exploration wells in the first place. Partnerships are a prerequisite to designing

effective CSR for community development projects.

! 40CSR Uganda

The final part of the CSP models requires that we look at CSR programs against the

backdrop of the context in which they are being conducted. This is how we assess effectiveness.

The goal in the next section is to broaden the discussion and look at four key conditions

underlying the effectiveness of CSR in Uganda.

Outcomes

The results from the previous section show that the most effective CSR programs – both

in terms of protecting the environment and supporting social and economic development - are

those which result in “win-wins” for the company and society. But what happens in the case of

“win-lose?” Four conditions underlie the effectiveness of CSR in Uganda: the timing of

legislation and enforcement, freedom of the press, security and local community participation.

Timing means getting the policy environment right before the onset of commercial oil

production. Freedom of the press is a key determinant of the effectiveness of oil and gas law.

Security is defined politically and economically. Local community participation means that local

communities are consulted in the development and execution of CSR programs.

Legislation and enforcement

The quality of legislation and the ability of the Ugandan government to enforce it is the

first condition underlying the success of CSR in Uganda. Uganda has had more time to get their

policy house in order than Ghana, which began commercial oil extraction three years after the

discovery of significant reserves at the off-shore Jubilee Field. Numerous authors have detailed

! 41CSR Uganda

the importance of finishing oil bills before the onset of production (Bodin, 2012; Shephard,

2012; Frynas, 2009). So far two of the three bills governing the oil industry in Uganda have

been finalized. However, the most important bill which will detail how oil revenues will be spent

and what mechanisms will be created to ensure that oil revenues are spent transparently has yet

to be finalized. If this bill provides incentives for oil companies to invest in CSR then we will

see oil companies operating more CSR programs. While the two oil bills which have been passed

are a good start, they have some serious holes. For instance neither bill spells out the rules and

responsibilities of the oil companies with respect to the environment and society (Boden, 2012).

A secondary problem is that oil-related legislation, such as an updated Wildlife Bill which

centralizes authority with the central government – has been problematic. This is particularly

dangerous because the Ugandan Wildlife Authority (UWA) is one of the few government

ministries institutionally opposed to oil exploration and development. Their primary goal is to

protect the nearly $1 billion dollar tourism industry (Wass & Musiime, 2013, pg. 24).

Nevertheless, the state of Uganda’s oil laws is generally good. The more important problem is

with enforcement.

The government is already having trouble enforcing legislation with the oil companies.

Oil companies have argued in court that CSR is part of the recoverable costs which they should

not be taxed upon. According to the Production Sharing Agreements (PSAs), oil companies don’t

have to pay taxes on the costs of initial exploration and development. Now that significant

amounts of oil have been discovered in Uganda, the government doesn’t have the capacity to

conduct effective audits to determine how much the oil companies have spent. An external

review by Earnest and Young for the period 2004-2006 found that Heritage Oil over-claimed

! 42CSR Uganda

recoverable cost expenditures by as much as $600,000 including those related to CSR (Radon et.

al, 2012, pg. 42). In addition, in 2005 Heritage Oil paid a local farmer in Pubit Village, Nwoya

(North-East of Murchison Falls) a minute sum to deposit toxic waste on his property.

Fortunately, Total has agreed to clean up the Heritage Oil’s mess (Wass & Musiime, 2013, pg

26).

In overcoming the hurdle of monitoring oil company’s activities, the government of

Uganda ought to work closely with international organizations and NGOs. The Government of

Norway has worked closely with Ugandan authorities for decades – especially the Petroleum

Production and Exploration Department (PEPD) - in the development of the oil industry. Today

they are helping to build capacity within Civil Society Organizations (CSOs). Two current

programs focus on strengthening CSOs. The programs focus on improving capacity, improving

regional voice and improving the cooperative mechanisms for enabling CSOs to form coalitions

(Nordic Consulting Group, 2012, pg. 26). Additionally, enforcement will require cooperation

between different branches of the Ugandan government including the financial ministry, the

forest service and Uganda’s Petroleum and Production Department. The Ugandan Wildlife

Authority will need to work closely with experienced NGOs like the Wildlife Conservation

Society to conduct research that will document the impact of oil on the environment.

Partnerships are likely to remain integral for the short to medium term.

Freedom of the Press:

The quality of the press is the second condition which will determine the effectiveness of

CSR. Freedom of the press is crucial because only a vibrant civil society can draw attention to

! 43CSR Uganda

oil company abuses. Freedom House ranks the press in Uganda as Partly Free. As we have seen,

in Murchison Falls National Park, researchers have drawn attention to the effect of oil production

on the large mammalian population. In Hoima district, local communities have been able to draw

attention to their concerns about oil exploration threatening local livelihoods. In general, two

Ugandan newspapers – New Vision and Daily Monitor - have reported widely on developments

in the oil industry. Additionally, the NGO Oil in Uganda is an important information resource

which consolidates both news and research about oil developments.

While the press is largely free, initial governments reactions to potentially bad publicity

in the oil industry has already been problematic. In Only The Brave Talk About Oil researchers

detail the intimidation tactics that are used on NGOs as they go about trying to inform the local

communities about the effects of oil extraction. Civil society organizations have been persecuted

by the government for awareness-raising activities in the area of Buliisa. Representatives of

Publish What You Pay were arrested for showing a film about the situation on the Niger Delta

(Human Rights Watch, 2012a, pg. 32). Human Rights Watch reports that Ugandan citizens have

been arrested and held for multiple days for engaging in discussions with local communities

about oil (Human Rights Watch, 2012a, pg 31). NGOs have also been threatened with

“degazzetment” for taking part in activities which the government deems political. Early in 2013,

two Parliamentarians lost their jobs, apparently for criticizing the oil industry. They objected to a

clause which would create a super-governmental agency to regulate oil wealth because it would

unnecessarily centralize power within the executive branch of the government (Wass, 2013, pg.

19; Human Rights Watch, 2012a; Holterman & Blazevic, 2012; de Kock, 2012). The evidence

seems to suggest that there is no place for an open discussion of oil which might be construed as

! 44CSR Uganda

oppositional to the institutional elite. The government seems to assume that anybody who talks

about oil is stirring up opposition that will lead to a bloody uprising and revolt, thereby threating

security.

The fear of retaliation is great enough that it discourages local communities from voicing

concerns and it is preventing NGOs from conducting research (Human Rights Watch, 2012a).

There are two major effects of a constricted public space for CSR. First, if NGOs are deterred

from interacting with local communities we can expect that the effectiveness of CSR will

decrease because the programs will not have been developed with community involvement. We

have already shown how civil-society organizations can be prevented from engaging in

discussions with local communities. Second, if CSR is going to have real lasting effects then

civil-society is going to need to be able to praise and criticize environmental protection and

development efforts. One of the biggest drivers of CSR is bad publicity. The local communities

need to be able to draw attention to oil company activities which are harmful to the environment.

The press needs to be free to report on oil related developments. In the negative scenario,

international attention may force the government to make the oil companies correct their

mistakes. At the same time, the press is not all bad for the companies and a free press will also

report on effective CSR programs. Praise is important because CSR is public relations and the

companies want to get into good moral standing with the communities that they serve. Good

CSR also plays well with employees, investors and customers; it helps build the brand.

Security:

! 45CSR Uganda

In the last 25 years, Uganda has made great strides when it comes to security. Under

President Museveni the Ugandan army has expelled rebel groups and successfully regained a

monopoly on the use of force within the confines of the state. President Museveni has also

presided over a period of macro-economic stability which can be seen in positive growth rates

for much of the last two decades. Much of the economic stability has come from neoliberal

economic policies such as liberalization, privatization and deregulation. The combination of

political and economic stability has made Uganda attractive to foreign investors. Unfortunately,

the development of the oil industry has the potential to reignite tensions that could plunge the

country back into violence and warfare. Will Museveni invest revenues in the security forces

rather than in social and economic development programs?

Oil companies have an incentive to keep the people from taking up arms: to prevent

kidnapping and sabotage which are very costly. No matter what the oil companies do, the

chances of a conflict in the Albertine Grabin are heightened because of three risk factors

highlighted by Nelson as instrumental to the onset of conflict. First, there is the potential for an

unequal distribution of natural resources. The Kingdom of Bunyoro, for instance which is an

indigenous kingdom, will not receive a percentage of the oil wealth. They have already

threatened to rally local communities to take up arms once. The second risk is the risk of

religious conflict. Uganda is a pluralistic society with Muslims, Christians and indigenous

religions. The fear is that Muslims (like the Acholi) which live on the Northern edge of the

Albertine Grabin will join the arc of religious violence which stretches from Pakistan in the East

to Mali in the West because they are left out of the proceeds of oil wealth. Poor governance is a

! 46CSR Uganda

third factor which could lead to the onset of violence and will almost certainly exacerbate it if it

begins some other way (Nelson, 2000).

The most important measures that oil companies can take to reduce the risk of conflict

are related to socio-economic development. At the macro-level, the private sector can support

good governance frameworks, an open and vibrant civil society and media, an inclusive strategy

of wealth creation and respect for diversity (Nelson, 2000). Tullow has indicated that it would

disclose EITI information if Uganda became a member. At the micro-level, the oil companies

must make efforts to include oil communities in the proceeds of oil wealth. I have argued that

entrepreneurship programs, which are intended to generate wealth from the bottom-up, have the

greatest potential to encourage economic development. However, I see no indication that at the

macro-level oil companies are encouraging respect for diversity or an open media environment.

We do find that oil companies are promoting industry literacy which is important because only

by knowing about the oil industry will local expectations coincide with reality. As Lawrence

Bategeka pointed out, the greatest threat is not corruption but unrealistic expectations about the

potential contribution of oil wealth (Bategeka, 2009).

Local Communities:

In addition to legislation and enforcement, freedom of the press and security, the way that

local communities respond to CSR programs will also determine whether oil will be a catalyst of

conflict. Oil brings lots of money but it doesn’t bring lots of jobs. Most of the jobs for local

communities in the oil industry continue to be manual labor jobs. In time the oil companies will

! 47CSR Uganda

get local content to 90%, the international standard, but this doesn’t mean that the local

communities which are directly affected by oil production will get the more technical jobs. It is

likely that members of the president’s family and circle of friends who have been studying

petroleum sciences abroad will get these jobs. Economic development of local communities

depends on small and medium sized enterprises, agriculture, tourism and perhaps manufacturing.

If the local communities lack ownership of CSR programs then there is little chance that they

will be effective, let alone achieve transformational effects.

In the short term, the expansion of infrastructure to meet the needs of the oil companies

presents local industries with growth opportunities. Oil roads decrease the costs of transportation

for local manufacturing and agricultural producers to export their products and increase the

accessibility of Uganda’s natural treasures to tourists. The expansion of the electricity grid to

meet the needs of oil companies creates opportunities for rural manufacturing and more

comfortable tourist accommodations. Manufacturing is virtually non-existent and, according to

Lawrence Bategeka of the Economic Policy Research Center, Uganda needs manual labor jobs in

order to develop. As Asian countries continue to grow and wages continue to increase, garment

jobs are likely to find new homes, probably in Africa. In terms of tourism, Uganda has incredible

bio-diversity on par with Costa Rica. Winston Churchill is credited with giving Uganda its

slogan “the pearl of Africa” and in 2012 Uganda was ranked the #1 Tourist destination in the

world by Lonely Planet (Lonely Planet, 2012).

In the long term the hope is that once the oil companies leave the communities, they will

leave behind improved agricultural techniques, better equipped schools, well trained physicians,

a pristine natural environment, good manufacturing jobs and a thriving tourism industry.

! 48CSR Uganda

According to Professor Bategeka, the reason why agriculture is so important is because of the

potential for Uganda to become a major exporter of food products. With three rainy seasons and

fertile land Uganda could become a major exporter to a region plagued by draught.

A final point is that local communities sometimes expect too much from the oil

companies. Ensuring that local community expectations coincide with the reality of what oil

companies can and should provide for local communities is a key component of effective CSR

programs (Eweje, 2007). I asked Professor Bategeka at the Economic Policy Research Center

(EPRC) what the biggest challenge is for Uganda going forward. He told me that it is not

corruption but making sure that all stakeholders have reasonable expectations for what oil will

contribute to the local economy. Stakeholders must understand that 3.5 billion barrels does not

translate into $350 billion in oil wealth (3.5 billion times $100/barrel) but rather $50-60 billion

over the course of 30 years (Kiiza, Bategeka and Ssewanyana, 2011). In order for oil wealth to be

translated into trans-generational benefits, it must be invested in industry (Mawaejje and

Bategeka, 2013). Only through many years of hard work will Uganda be able to realize the

potential benefits. The point about unreasonable expectations applies equally to local

communities and government officials alike.

In terms of legislation and regulation, Uganda has had ample time to get their policy

environment together. The problem is that even with the right policy, the government still

struggles with enforcement. So far the press has been relatively free to report on developments in

the oil industry but we should be concerned that the government has persecuted civil society

! 49CSR Uganda

organizations who engage in discussions with oil communities about the potentially devastating

effects of exploration and production. In terms of security, the most important thing that oil

companies can do to prevent local communities from becoming dissatisfied and taking up arms is

to invest in social and economic development. Finally, CSR initiatives are unlikely to be

effective unless local communities have ownership over the programs. There are also positive

externalities associated with oil extraction not commonly associated with CSR, such as the

development of infrastructure to support local industries.

Conclusion:

Overall, I believe that we should be pessimistic about the future of CSR in Uganda.

Nevertheless, while CSR is unlikely to completely transform communities, it appears that the

development of the oil industry in Uganda will not have the same catastrophic effect on local

communities as it has on the Niger Delta. In terms of the environment, oil companies and NGOs

are working together to find “win-win” situations where what is good for the bottom line is also

what is good for the environment. However, when what is good for the environment doesn’t

align with the profit motive (as in the case of toxic waste and oil spills) then it will be the role

and responsibility of the government to twist the arm of the oil companies. This may be difficult

because developing countries, like Uganda, often lack the regulatory framework to enforce laws.

So, as Frynas writes in Beyond Corporate Social Responsibility: Oil Multinationals and Social

Challenges, "to sum up in a single sentence: CSR can help companies to achieve eco-efficiency,

but it cannot help them to achieve sustainable development" (Frynas, 2009, pg. 101). In terms of

! 50CSR Uganda

society, the majority of the most important development work will need to be completed by the

government. Oil companies can build entrepreneurship centers but they cannot provide all the

health, education and other services needed to develop entire communities (Alba, 2009, pg. 20).

Tullow’s switch to the CSP model means that they will be increasingly focused on

developing metrics to measure the impact of their CSR activities on the environment and

society. Right now Tullow’s CSR report includes specific environmental information but

the metrics for community programs are anecdotal and say little about the overall

effectiveness of those programs (Tullow, 2013). The switch to the CSP model is likely to

mean that Tullow will focus on integrating CSR more deeply into core business strategy.

Rather than supporting a wide range of causes they will focus on those particular situations

where they can have the largest impact. One challenge for Tullow’s CSR programs in

Uganda is that they are not led by a coherent macro-level program. As we have seen from

the case of Akassa, programs that are not designed to impact all the people within a

federally-defined geographic area have a risk of escalating community tensions.

So far oil companies have been able to accomplish oil exploration without causing

irreparable harm to the ecosystem and it appears that local communities are deriving some

benefit from the development of the oil sector. Total has been receptive to criticism and has

adapted new techniques to mitigate the impact on the Nile River ecosystem and animal

populations. One concern is about the plans to build a pipeline which traverses the Nile to

connect the oil wells in Murchison Falls National Park with the refinery in Hoima District. In

terms of social programs, all three company’s education programs are also likely to continue to

receive the largest amount of funding because they need to build the workforce of tomorrow.

! 51CSR Uganda

Uganda would do well to adopt best practices from around the world. In Ghana the

government is experienced with natural resource management, the press is free, and the primary

oil producer is an industry leader in CSR. Another advantage for Ghana is that one of the primary

investors in the Jubilee oil-field is the International Financial Corporation. A number of clauses

in the contract between the IFC and Tullow specify financial, environmental and social indicators

that must be disclosed by the oil company which go beyond industry norms (Wetherill, 2011). In,

Surinam, the state-owned oil company Staatsolie invests in community development projects

through the Staatsolie Foundation for Community Development. (Staatsolie, 2014) Now that

Uganda has decided to create a Nationally Owned Oil Company for itself it is time to consider,

not only the refinery, but also programs to support citizens.

The implications of CSR in Uganda reverberate across the rest of sub-Saharan Africa

where ten countries are in the advanced stage of exploration and will become commercial oil

producers in the next decade (Wetherill, 2011). In East Africa, the development of the oil

industry around Lake Turkana on the border between Northern Kenya and Ethiopia will open up

an area of the countryside which has until now been largely neglected by government.

Organizations like Friends of Lake Turkana campaign to protect the rights of indigenous people

and increase their participation in environmental protection and local development projects.

(Friends of Lake Turkana, 2014) Major regional tests include the construction of a hydroelectric

dam on the Omo River, to support large-scale agriculture in Ethiopia; the development of a major

transit corridor connecting Nairobi and Juba (Manguen, 2013); and the development of the

nascent oil industry. The fear is development could lead to the widespread displacement of

people, famine and/or violence between different tribes (Human Rights Watch, 2012b). Social

! 52CSR Uganda

development programs will be key to prevent a repeat of ongoing violence in South Sudan.

Designing CSR for the areas nomadic tribes will be difficult so partnering with relevant local

organizations will be critical.

I suggest three paths for future research. In terms of Uganda, in ten years’ time it will be

important for researchers to revisit the Albertine Grabin to determine how the impacts of CSR

programs measure up relative to the overall impact of oil extraction. Do entrepreneurship

programs receive the majority of funding or have they faded away into irrelevance? How about

education and health programs? What new infrastructure has been constructed? Has oil enhanced

or detracted from the tourism industry? How did oil companies respond to the first major oil

spill? The second path is to look at Sub-Saharan Africa’s oil companies. More research is

needed on CSR conducted by nationally owned oil companies and privately owned indigenous

oil companies. Finally, it would be interesting to explore CSR by geographic region. For instance

future research could look at how the CSR projects of oil companies in South America

differentiate from those in Sub-Saharan Africa and Asia.

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