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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 –
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)
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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
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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
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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).
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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)
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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
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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
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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).
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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
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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.
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(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
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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
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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,
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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,
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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
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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)
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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
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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
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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.
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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.
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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
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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
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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
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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
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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:
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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
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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
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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.
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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
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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
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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.
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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
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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.
References:
Alabi, O.F. & Ntukekpo, S.S. (2012). Oil Companies and Corporate Social Responsibility in
Nigeria: An Empirical Assessment of Chevron’s Community Development Projects in the
Niger Delta. British Journal of Arts and Social Sciences 4(2)
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Alba, E. (2009). Extractive Industries Value-Chain: A Comprehensive Integrated Approach to
Developing Extractive Industries. World Bank: Extractive Industries for Development
Series #3/Africa Region Working Paper Series #125
Amaniga-Ruhanga, I., Manyindo, J. & Jordahl, M. (2009). Maintaining the Conservation
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Albertine Rift: Ensuring Win-Win Policy Approaches. Ugandan Wildlife Society (#2)
Bainomugisha, A., Kivengyere, H. & Tusasirwe, B. (2006). Escaping the Oil Curse and Making
Poverty History: A Review of the Oil and Gas Policy and Legal Framework for Uganda.
ACODE Policy Series No. 20
Bategeka, L. & Matovu, J. (2011). Oil Wealth and Potential Dutch Disease Effects. Economic
Policy Research Center: University of Makerere
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Biryabarema, E. (2013, June 28). Exploration Pits Ecology Against the Petro Dollar in Uganda.
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Blowfield, M. & Frynas, J. (2006). Setting New Agendas: critical perspectives on corporate
social responsibility in the developing world. International Affairs 81(3), 499-513
Boden, G. (February, 2012). Uganda’s petroleum legislation: safeguarding the sector. Global
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Boele, R., Fabig, H., & Wheeler, D. (2001). Shell, Nigeria and the Ogoni. A Study in
Unsustainable Development: I. The Story of Shell, Nigeria and the Ogoni People –
Environment, Economy, Relationships: Conflict and Prospects for Resolution.
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Carroll, A. (1991). The Pyramid of Corporate Social Responsibility: Toward the Moral
Management of Organizational Stakeholders. Business Horizons 34(4): 39-49.
Briggs, J. (2007). Guide to Armed Groups Operating in the Niger Delta: Part 2. Jamestown
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