Recently, Uganda’s Courts of judicature quashed a directive by Inspector General of Government (IGG) that sought review of award of contract to build 600 megawatts of power at Karuma. I was happy with the court decision.

A combination of parliamentary and technocratic oligarchy, lengthy procedures, bureaucratic red tapes and other illicit ‘due diligences’ have before frustrated efforts to deploy investments in energy and continue to threaten strategic investment especially where private individuals are investing and risking their own money. This stand should not be confused with the rule of law debate or fight against corruption and routing for transparency activities in Uganda.

As we continue to debate, businesses are losing money, investors are looking elsewhere, jobs are shedding, blackouts and surging electricity bills are constraining our livelihoods. For example, Ugandan firms continue to incur a high cost composition of Energy as part of the overall productions costs ranging from 15-65% compared to the acceptable global range of 2-5%.

You see, any actions (deliberate or incidental) which will increase further the costs of electricity will undermine the competitiveness of Ugandan producers, slow growth and in particular value addition in the agricultural sector and by implication affect revenue generation and creation of millions of jobs.

In 2012, the Private Sector Foundation (U) reported that consultations with companies operating in Uganda revealed that their payment of domestic taxes dropped by 40% as a result of challenges related to increase in energy costs. In 2011 and early 2012, businesses experienced worsening power shortage and paid dearly in alternative energy as some companies reported 6M UGX per day for use of generators which were purchased when government provided the incentive of tax free diesel for generators of100kv and above.

The demand for electricity by businesses in 2011 through 2012 was 515 MW against only 300MW available. Due to the foregoing situation, the government increased electricity subsidy from 420 Bilion shillings in 2006 cumulating to about 1.3 Trillion in 2011 with thermal costs contributing 670 Billion!  Government could not sustain this subsidy and its withdrawal resulted into increase of up-to 69% and 38% in energy tariffs for larger and medium industries respectively. This on average increased the cost of production by 14% thus lowering production. The taxes paid (especially the internal taxes of excise duty and Value added Tax or VAT) reduced up-to a high of 40%.

As much as the larger and medium industries experienced such drastic hikes through 2012 and 2013 going forward, the mega large producers continue to face more challenges. These mega producers are especially cement and steel sectors. We are yet to know how many jobs we continue to lose or fail to create due to energy /electricity constraints.

We should therefore support private sector calls for Government to quickly manage issues surrounding the delay in commencement of 600 MW Karuma dam and efforts to minimize energy losses to under 10%. Utility companies particularly UMEME must step up efforts to contain power thefts and other losses to help bring down the cost of electricity. Government should also incentivize producers of electricity - especially Sugar factories which are ready to upload over 50 Megawatts to the national grid. Public Private Partnerships approach in development of energy with issuance of energy bonds should also be considered without delay. Increase of energy costs, through Tariff adjustment must be avoided with immediacy. Investment in Rural electrification need to be stepped up further to support agricultural value chains and stimulation of meaningful and rewarding employment in the rural areas.

In early 2010, there were talks of creating a regional energy pool with countries in Eastern Africa mobilizing a basket fund to boost energy investments to a tune of 30,000 megawatts by 2016. What happened to this revolutionary approach? What is the East African Community doing to achieve this ambition?

If we are to transform, there are no options. We have to invest in flagship enablers sectors - especially energy. Sustainable energy/electrification accentuates both soft and hardware aspects of development. Procurement laws like PPDA are good, especially in deepening transparency in our procurement and democratization of businesses by creating a fair regime for assessments and award of contracts. But if the same procedures and rules serve to delay strategic investments in core areas of development like energy, we have to find a way of reconfiguring these rules and procedures to achieve our strategic development objectives.

As we rework our laws and procedures, the President would be right to issue an Executive Order to cure this harmful impasse of administrative and legal delays that stand in way of Uganda’s strategic economic objectives. For the case of Karuma’s 600 megawatts, and other projects of similar bandwidth – we cannot afford delays and sabotage under the guise of legal, parliamentary and administrative ‘due diligence.’

By Morrison Rwakakamba
Chief Executive Officer, Agency for Transformation
[email protected]