FACTBOX-Key political risks to watch in Uganda

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Uganda’s opposition has revived protests over the escalating cost of living but even though the public has grown bolder in voicing anger against inflation that has topped 30 percent, the unrest has yet to reach critical mass.

Keeping the protests relatively subdued has been the Ugandan security forces’ decision to keep leading opposition leader Kizza Besigye under house arrest, effectively blocking him from joining in the ‘walk to work’ protests that had gripped the country in April and May.

Although a magistrates court ruled that his home confinement was illegal, police have vowed to arrest him every time he attempts to walk to his workplace, Reuters reports.

In a move that reflects government’s increasing impatience with the protests, police slapped treason charges on seven opposition members who were arrested during protests earlier this month while three have been charged with concealment of treason.

Year-on-year headline inflation leapt to 30.5 percent in October, driven by a surge in non-food prices.

Uganda’s march toward becoming a top-50 oil producer suffered a setback after parliament voted to withhold consent for UK explorer Tullow Oil’s proposed sale of stakes to France’s Total and China’s Cnooc .

PROTESTS AND INFLATION

Economic conditions in Uganda continue to deteriorate with crushing price pressures, but the crisis is unlikely to explode into mass unrest given the opposition’s failure to win international support, analysts say.

The relative silence of the international community means President Yoweri Museveni, who contributes to a peacekeeping force fighting militants in Somalia, can escalate his opposition crackdown with little fear of alienating his Western backers.

Opposition pressure group Activists 4 Change (A4C) says it will press ahead with its anti-government campaign although the jailing of its key leaders and Besigye’s restricted movements is testing the group’s resolve.

A wage strike by teachers who were threatening to boycott the start of the new term in September failed to spur street action and most of them have quietly returned to class after government threatened to sack them.

Strikes in June and July by traders, teachers and taxi drivers also lacked the fervour that marked the protests in April and May which ended when the government clamped down on them across the capital Kampala, killing nine people.

Museveni, elected to a fourth term earlier this year, is keen to avoid a resumption of the April-May violence as he seeks to reassure foreign investors that Uganda is a safe bet and ready to become a top-50 oil producer.

What to watch:
— Besigye. To what extent will he continue to challenge security forces who severely restrict his movement. Will Western powers finally notice Museveni’s clamp-down on opposition?
— Public protests. So far the protests barely even begin before police forcibly disperse them. Will protesters still have the will to keep going — with or without Besigye — and will the government increase the intensity of its crackdown?
— Inflation. Headline CPI hit 30.5 percent in October. If the government is seen as remaining indifferent, people may grow more emboldened in their public demonstrations.

OIL ROWS, CORRUPTION CASES

Uganda’s parliament passed a resolution urging the government to delay consent for Tullow’s longstanding proposed $2.9 billion sale of stakes to Cnooc and Total until necessary laws to regulate the sector are in place.

Although Museveni can endorse the deal, he would not want to be seen as overriding parliament. Instead he could opt to have a ruling party lawmaker present a bill rescinding the resolution before he gives the go-ahead for the deal which would jump-start the deployment of a $10 billion investment and development of the nascent oil sector into production phase.

Parliament has also set up a committee to probe allegations of corruption in the sector after a member of parliament, Gerald Karuhanga, alleged in papers handed to the house, that three ministers had taken bribes from oil firms.

Analysts say these allegations plus protracted tax disputes with Heritage and Tullow are denting Uganda’s potential to attract much needed investment capital.

Uganda’s energy ministry expects to send three petroleum bills to parliament by the end of the year as it expedites efforts to institute an effective legal framework to manage the sector before crude production starts early next year.

Uganda has also demanded that Tullow Oil and Total and CNOOC drop a key protective clause from their agreement before their proposed partnership is endorsed.

The clause shields them from revenue losses resulting from taxation and policy changes.

Three former politicians — Foreign Affairs Minister Sam Kutesa, government Chief Whip John Nasasira and junior Labour Minister Mwesigwa Rukutana — have been charged with abuse of office and causing financial loss to the government, corruption offenses related to the country’s preparations for the 2007 commonwealth heads of government meeting (CHOGM).

What to watch:
— The resolution. Although parliamentary resolutions are non binding to the executive, Museveni might choose to hold off on endorsing Tullow’s deal to show respect for the legislature.
— Petroleum laws. If the government takes long to bring petroleum bills to parliament, it will likely add pressure on Museveni to delay granting consent for the Tullow deal.
— Corruption allegations.

If the probe finds it is true ministers took bribes in some of the country’ oil transactions, Uganda’s risk profile as an investment destination will take a severe blow, making it that much harder to lure investors.

SECURITY THREAT

Somalia’s al Shabaab Islamist rebels have threatened more attacks along the lines of the twin suicide-bomb blasts in Kampala in July last year that killed 79 people.

The insurgents have vowed to target Uganda and nearby Burundi until they withdraw their peacekeeping troops from Somalia’s capital Mogadishu. The troops helped drive the insurgents out of most parts of the capital, but want more reinforcements to seize and hold all of Mogadishu.



What to watch:
— More attacks. Another strike could deter foreign investment inflows, weaken the shilling, disrupt business, hurt tourism and ultimately knock the economy.