“President John Pombe Magufuli has advised President Museveni to sacrifice part of the 185m USD tax bill charged by the URA to conclude plans for the construction of the crude oil pipeline and begin the project forthwith in order to create jobs” (NTV Uganda, 07.09.2019).
Today, is yet another day of hypocrisy. It is not new, but just another story like that. As the Tanzanian President Magufuli is right that Uganda Revenue Authority and their winning of a Court Case, which entails a tax-dispute between Tullow Oil has suspended the development of the pipeline and the drilling in parts of the Lake Albert Basin. As the farm-down agreement between three parties, Tullow, Total and CNOOC is on-hold.
That is where the Tanzanian President is right. Period. However, he is wrong in a whole other sense. Should President Yoweri Kaguta Museveni tell his counter-part, that he should mind his own business? Yes, actually. Because, in this manner. The Tanzanian one is doing the same battle with anther extraction industry. The mining industry, the Acacia Mining tax scandal. Where the the company has to back-pay the government.
This the Tanzanian counterparts slapped on the company by in 2017. The same sort of settlement the Ugandan did with Tullow in 2015, as the Republic wanted back-taxes for the investments done in the territory. That is why Magufuli shouldn’t whine about this.
Surely, we know Magufuli wanted the man-power, the taxing rate of the movement of goods through his United Republic and secure the usage of Tanga Port. Museveni knows this, but he wants the tax for the operations done by both Heritage and Tullow. That is trying to ditch the back-pay on other companies whose buying their stake in the Lake Albert Basin.
Therefore, with the knowledge of the Acacia scandal, that is still going on to this day. Magufuli wanted back-pay for lack of taxes from the mining industry. Which is righteous, just like Museveni does at his place. The Tullow has now used years from 2015 to 2019. Acacia has now used 2017 to 2019. In 2018, the ownership of Acacia said it looked forward to negotiations with the government. This year in February, the company still have no resolution to the back-pay of taxes. That means the government of Magufuli have not fixed the same issue.
Just like the Ugandans haven’t fixed the farm-down and back-pay of operational taxes. Because, the company trying to configure itself out of taxes. Surely, Tanzania see the same acts by their mining industry. But in this regard, Magufuli wants to earn a dime on the oil exploitation in the Lake Albert Basin.
So, before the Tanzanian get it fixed with Acacia or Barrick in their own dominion. They should give time for Ugandans to fix their own tax dispute. They have even won it in an International Court. Therefore, the Ugandan case is stronger, than the one of Acacia. Whose only internally disputed.
That is why, this isn’t the faults of Uganda Revenue Authority, but of Tullow, whose trying to deflect the payment of taxes in the Republic. Something, Magufuli wouldn’t allow anyone operating in his territory. If so, why this hustle against Acacia and still not stopping it?
Because, Magufuli want the taxes and the proper payment for doing business in the United Republic. Just like Museveni want the proper payment for doing business in the Republic.
So, please Joseph, get your own domain straight, before throwing other people under the bus. Maybe, once in the while accept criticism. That might given your argument a more flair and less selfish reasons for addressing a neighbour and an ally. Peace.
In the Republic now its official that the companies that was supposed to buy the stake and the licences to drill for oil from Tullow Oil have backed out. This means, that Total and CNOOC is not operating or willing to foot-the-bill that Tullow left behind.
This is all a play for guards, they all want the slice of the price, but don’t want to be taxed for it. They want tax-holidays for operating and extracting the oil, even as the incentives to build the oil pipeline to Tanga, Tanzania is put on hold. Since a big part of the Lake Albert Basin is still in question. Since, the Tullow Oil doesn’t want to deal with the taxes in question.
Tullow Oil have to back-pay taxes, which it lost in court. They are obliged to pay these, but want the other companies to foot-the-bill, since they will drill and exploit situation. The others gather that this has occurred before they did and that Tullow should pay it. That is why it’s a dead-lock. Because, none of the companies want to pay the taxes.
This is the infamous taxes, which led to the Presidential Handshake drama and wobbling defence of it. That made all the people and civil servants dance for a hot minute. Now, we are seeing the deadlock because of this one.
The state is allowed and should tax the ones whose operating in their territory. Without a question or without any hesitation. Because, they should be able to pay for your rights to be able to do business somewhere. However, here it’s a mismatch of the amounts gained in courts and the planned surrender of Tullow.
Tullow considered that their Farm-Down deal with Total and CNOOC would clear their old debts with the Republic. Instead, the other companies want its shares, but not its past invoices. Which is natural. Because, your paying for other peoples misfortune and cost of operating. That is simple math.
It is Tullow that has done business, who has been operating and whose been in charge of certain parts of Lake Albert Basin. They got to stay responsible. Now, they just looking like a shell-company wanting to be a tax-evasion corporation, who puts their costs on their trading partners.
Within that reason, its understandable that Total and CNOOC wants to have other options and other obligations, also pay their taxes and returns, if they start to drill on the licences previously kept by Tullow. But at this moment, the company think it can get the hook and crook.
Because the victory of the President Handshake isn’t a bargain, but a huge toll for the company. That is why it wish to push the envelope to someone else. This is not natural, but not without a consequence. That they are backing out and giving way. Instead of going into business on these sectors of Lake Albert.
The loss, is also the proposed earnings, the supposed development of the oil sector and the pipeline to Tanzania. As everything stops and shuts its operations. As the CNOOC is sacking employees and who knows what Total does too. Tullow might even do it too, until they find someone who wants to pay their bills. Because, from history they showing that they don’t want too.
The state one, what was theirs, but the companies doesn’t want to pay to play. They want tax-holidays and a free ride to the promised land. That doesn’t happen and therefore, the stalemate and yet another set-back for the oil development there. Peace.
Today, the agreement published between Tullow, Total and CNOOC made a Sale and Purchase Agreement (SPA) on Area 1 and Area 2 in the Lake Albert Basin in the Republic of Uganda. That deal was issued on the 30th August 2016.
Now, nearly three years later. Tullow Oil has now back-tracked and said the deal didn’t go through. Surely the SPA and the Joint Venture Agreement wasn’t settled properly. If not, then the press release of Tullow wouldn’t say this:
“Tullow Oil plc (“Tullow”) announces it has been informed that its farm-down to Total and CNOOC will terminate at the end of today, 29 August 2019, following the expiry of the Sale and Purchase Agreements (SPAs)” (…) “The termination of this transaction is a result of being unable to agree all aspects of the tax treatment of the transaction with the Government of Uganda which was a condition to completing the SPAs. While Tullow’s capital gains tax position had been agreed as per the Group’s disclosure in its 2018 Full Year Results, the Ugandan Revenue Authority and the Joint Venture Partners could not agree on the availability of tax relief for the consideration to be paid by Total and CNOOC as buyers” (…) “Tullow will now initiate a new sales process to reduce its 33.33% Operated stake in the Lake Albert project which has over 1.5 billion barrels of discovered recoverable resources and is expected to produce over 230,000 bopd at peak production” (Tullow Oil plc – ‘Termination of farm-down agreement with Total and CNOOC in Uganda’ 29.08.2019).
This deal fell through because the companies didn’t want to compensate each other for back-taxes or the taxation of the possible profits to the Government of Uganda. Something that was approved upon the Joint Venture Agreement in August 2016 with Total and CNOOC.
This shows how hard it is start-up and the issues by operating in Uganda. Even Tullow Oil plc is trying to figure this one out. It was only in January 2017, when the Total was supposed to buy the biggest part of operated stake of 21,5% from Tullow. Surely, with the announcement in 2018 and now in 2019. This has all backfired and stopped, because URA and the companies couldn’t agree on their fees.
That dispute is the one that was interconnected with the “Presidential Handshake” of 2017. As the 6 billions shillings was doled around to civil servants and high ranking officials, who secure the capital tax gain from Heritage/Tullow Oil, which was awarded in February 2015.
Therefore, Tullow has to now find new buyers for their USD $167m stake in the Lake Albert Basin. This would be the payment of the Capital Gain Taxes (Awarded $157 Million) to the Uganda Revenue Authority. Apparently, Total and CNOOC didn’t want to do that apparently.
So from August 2016 to August 2019, the three companies and URA couldn’t come to an agreement on Capital Tax Gain, which Tullow owe URA after losing their case in February 2015. This shows, that the big victory of the state in this matter. Is actually making it harder to find someone who can afford or see it feasible to drill for oil in Area 1 and Area 2.
This is how it seems and the two other companies didn’t want to pay for what Tullow did before them. Peace.
Today, there was an interesting thing coming through my feed that captured my eye. It was a headline from the Philippines News Agency. It was claiming that the Chinese was not making developing countries in debt slaves or putting them into debt traps by taking up huge loans for extensive spending on infrastructure projects. Now in March 2019, the Chinese are claiming that they are just giving viable loans and not to much.
However, I will beg to differ, but before I do so. Let see what the Chines spokesperson said. Which I have to say is not true.
“Guo Weimin, spokesperson of the second session of the 13th National Committee of the Chinese People’s Political Consultative Conference (CPPCC), said extending Chinese loans to developing countries aims to facilitate infrastructure projects that are expected to bring development and boost the economic growth of these nations. “Chinese investments only account for a very small share to their total debt. And our projects are mostly infrastructure, which can support the long-term development of those countries,” Guo said. “Yet some say, this is a great debt trap. But this doesn’t make sense,” he added” (Kris Chrismundo – ‘No debt trap for developing countries: CN political advisory body’ 02.03.2019, link: http://www.pna.gov.ph/articles/1063438).
Let’s me just take the first victim of the debt trap made by the Chinese is in Sri Lanka where the Chinese has taken over and lease the Hambantota Port for 99 years in 2018. While in Zambia, the Chinese has taken over ZESCO, the state electricity company, majority ownership of the Zambian National Broadcasting Company, and if the Republic fails more on their debt. The Zambian state might loose the ownership of Kenneth Kaunda International Airport as well.
In Kenya, the government have loaned massive funds for the Standard Gauge Railway Part 1 and 2. Now, they are on the limb and its speculated that the Port of Mombasa can be taken as collateral for the possible failing loans.
There are warning signs of the total loans given to Tonga, Fiji, Samoa, Papua New Guinea, Maldives, Ghana, Liberia Philippines and so on. They are clearly strategic about it. There should also be worrying about the loans given to the Democratic Republic of Congo, Uganda, Tanzania and so on. The Chinese has loaned for massive projects and not small-pocketed money. Which the Chinese would like to have back paid.
This is just small examples of what that is coming. Because the states are taking up gigantic loans, which they can possibly default with. That is why the Chinese has been smart enough to sign for collateral, which usually is important parts of infrastructure or mobility. So, that the Chinese can trade and also control vital parts of the economy. They are not joking around and seemingly taken a soft approach to neo-colonize the developing countries. Because they can and have the ability to do so.
We can wonder if there will be more like this. There are also the battle happening in Djibouti over the Doraleh Port, who went from DP World Port Company to a Chinese Company. That was because of the debt that the Republic of Djibouti had. Just like the port in Sri Lanka went to them as well. Both very strategic and important ports in their regions. Therefore, the Chinese has gotten good infrastructure and possible revenue streams in these Republic for their defaulting loans.
There will be more to come out of this. That is why I don’t believe the Chinese, saying the developing countries can manage the amount of loans, as the Chinese are planning to takeover something to get repaid for their services. Peace.