Local content: Hoima businessman defies the odds
As locals in the oil-rich Albertine region lament about failing to access business opportunities in the oil and gas industry, one of them seems to have penetrated the notorious local content ‘wall of steel.’
HOIMA: Local businessman Fred Musigunzi has never regretted his decision to quit his government job and go into private business.
Through his Muka Investments Ltd, he has won several multi-million contracts from oil companies in Hoima district, defying the locally-held belief that achieving the standards required to supply services to the oil and gas industry is almost impossible for home-grown businesses.
His company constructed an Out Patient Department (OPD) at Kyehoro Health Centre III in Hoima, which was funded by Tullow Oil under its Corporate Social Responsibility (CSR) programme.
“We were contracted at $ 148,671 (400 million shillings) to construct the OPD,” he said. Upon completion in 2011, Tullow Oil handed the centre over to the Hoima District Local Government.
Just last year, Musinguzi partnered with Samuka Construction Company, a Kampala-based firm, to undertake civil works near the Kingfisher-1 oil well to prevent a seasonal stream that flows near the well from flooding and surging towards the oil well.
“The sub-contract was worth $ 30,000 (80 million shillings),” revealed Musingizi.
The company is also a sub-contractor in a construction project of four houses for the families that were displaced by the new road to the Kingfisher oil fields that are being prepared for commercial production anticipated to start around 2018.
Musinguzi, who was born in Buhimba sub-county, Hoima district, narrated to Oil in Uganda that he registered his company in 2001, but did not really transact any business until 2007 when he left the Ministry of Education and Sports where he worked as an Engineering Assistant.
Raising initial capital was his immediate challenge at the time.
“I had two houses,” he said. “I decided to sale off one at $ 15,000 (40 million shillings). I invested the money in contracts. The company won its first contract to supply desks to some schools in Kibaale District,” Musinguzi narrated. “Then we kept expanding up to now when we can bid for contracts worth billions of shillings.”
Musinguzi has since replaced the house he sold and bought over 70 acres of land within Hoima municipality with his proceeds.
He currently employs 639 workers but projects his workforce could hit the 1,000 mark in the next two years.
Don’t be scared
Musinguzi observes that many local firms are losing out on lucrative deals because they are fearful of the stringent standards in the oil and gas industry.
He blames some of them for failing to establish offices and continuing to operate in a ‘briefcase’ manner, which disqualifies them from bidding for work from the oil companies. He advises them to employ professionals, brand their companies, prioritize environment, health and safety and where possible, seek business partnerships with bigger firms.
Local business people have continuously accused oil companies of hiding behind the ‘standards’ veil to deny them work.
Ben Mugasha, Director of Bemuga Forwarders Limited, one of the biggest local logistics service companies in the oil and gas sector, says he has, on several occasions, lost opportunities to international companies, even when his company met all the requirements to do the job.
“I spent $220,000 (580 million shillings) on training crane operators but the deal was instead awarded to an international player by one of the oil companies. All this is done to malign local players,” he argues.
But a survey commissioned by the Joint Venture Partners (Tullow, CNOOC and Total) reported that although Uganda’s oil sector has the potential to generate over 160,000 direct, indirect and induced jobs, locals lack the skills to take up these jobs.
“A major effort of certification will be required in the medium term to comply with the oil and gas projects standards,” recommends the report.
But even for those companies that meet the industry standards, another hurdle stands in their way-finance.
It is for this reason that the government is setting up a fund to provide cheap credit to local players who have been struggling to raise funds to participate in the capital intensive industry.
The 500 billion shillings fund will boost local service providers to compete favourably with their international counterparts who are currently dominating the market.
Although Oil in Uganda could not get an update on this fund from government sources, many local business people will be hoping to be beneficiaries as the industry enters the hectic development and production phase.
Report by our special correspondent