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Museveni’s hostility towards Umeme

 

How the president’s criticism of the electricity distributor is likely to undermine investor confidence in Uganda

THE LAST WORD | ANDREW M. MWENDA | President Yoweri Museveni recently repeated his claim that officials of the government of Uganda who negotiated the Umeme concession sold the country. It is a belief common among a large section of the Ugandan elite including many inside government. It is also a belief that is grossly mistaken.

Many Ugandans behave like a man who fell in a deep pit and called on the neighbour for help. The neighbor got a rope and threw it to him for rescue. During the tangle to pull him out, the rope injured the man’s hands, his legs got bruises etc. After the rescue the man keeps complaining against the neighbour because of the wounds inflicted on him during the rescue.

In 2001, Uganda’s electricity distribution network was dilapidated and needed a massive investment. But government did not have money. So it advertised internationally for a company to come take a concession. Six companies replied – two from Spain, one from France, another from UK, another from USA and a sixth from South Africa. All were invited to come and do a due diligence. They found the network and policy environment so bad that all of them just walked away even without the courtesy of informing government of Uganda about their findings – except one.

CDC, a British government parastatal wrote to government of Uganda its findings. They argued the network had gone for 30 years without much investment and was therefore moribund. Technical and commercial losses in the distribution system were 38% and growing. The biggest source of commercial losses were illegal connections and government not paying its bills. It needed a massive investment, but that would require to increase the cost of electricity to recover the investment. Yet the price of electricity had not changed in a decade in spite of inflation and foreign exchange depreciation. Ugandans were accustomed to cheap electricity that had no relationship to the cost of production, transmission and distribution – and believed the price is cheap and does not change.

As part of the reforms, government had put in place a regulator who was supposed to be independent. But when the regulator increased the cost of electricity, Ugandans had demonstrated on the streets. Government had responded by suspending the increase and thereby demonstrating the impotence (as opposed to the independence) of the regulator. Reducing commercial losses would require the company to police illegal connections but that would ruin its relations with the communities in which it operated. And it would require government to pay its bills, yet there was no way to force government to pay if it defaulted.

Government was stunned. Our distribution network was not viable as a business. It sent a delegation to London to literally beg CDC to come to its rescue. CDC was skeptical and insisted it would come and invest only $5m (non-refundable) for three years and begin reforming the management of the system.

11 comments

  1. So, the government of Uganda no longer subsidises on electricity?

  2. You still haven’t explained Museveni’s hostility towards Umeme.

  3. Godfrey kambere

    If you have lived here long enough it is easy to notice that Uganda’s economic mismanagement is built on well crafted economic lies. This article has reminded me of the early days of our economic reform. A one Doctor. Frank Maine was heading the largest banking network in the region. I still recall his shrill voice on the radio and the whispers from eminent cadres of that time. The utility sector in Uganda is water and electricity are anti economic growth. For a country where water treatment is minimal, the price of water is outrageous. The taxes and service fees on both utilities is unthinkable . I have stated it before if the president had any patriotism left in him , waiving the taxes is not beyond his executive powers.
    Thanks

  4. Andrew, be reminded that the presidents point of contention is the price of electricity. With all these dams being build and some complete why is price of electricity still so high. This is one way of stifling investment especially industrial investment. Why are we still experience load shedding in this age and time. I leave in an area where we are loadshedded at least once a week n yet we more of less in the middle of town. Why? Its really baffling. N then u have this charge of 3900 of every unit purchase every month…..why do we incurr this monthly charge? And then you hv this huge compensation claim awaiting umeme if the concession is terminated. There alot of issues that the president raises for which u have not tried to explained giving the impression that this was a paid for article by umeme.
    Lastly, are u are there alot of areas in this country that still don’t access to power, despite the so-called massive investment by umeme. Try looking at the North of Uganda, you’ll be surprised. This gives the impression that $130m umeme investment is inflated.

  5. Godfrey kambere

    Typo error. The guy was Dr Frank Mwine and that magic of financial deepening in Uganda commercial bank. Attractive bank loans at 33 percent because of our risk profile!

  6. Tunku Abdul Rahman

    If a private citizen called Andrew Mwenda knows all this about UMEME, how come the President with the Government machinery and over 100 Presidential Advisors at his disposal doesn’t?!

  7. I do appreciate Mwendwa’s voice for the voiceless, notwithstanding his article being informative for us all concerned & uninformed.
    What’s the way forward? I personally applied & paid the standard rates for new connection year ago, nearer to a pole. As a senior citizen, retired, l have been depressed for living in total darkness for more than a year at such a time of Covidveffects. No news, no communication since l can’t charge to listen to at least newsbon my wireless radio.
    I take this opportunity to ask the concerned persons to come to my rescue. I have an UMEME new account & need my house connected. I will be grateful if they come to my rescue, along kasangati-matugga rd

  8. Immy J Nakyeyune

    Article has part 2? Looks incomplete

  9. 1.The President knows a thing or two about being embarrassed before the big boys.Now that the country has made tremendous Economic achievements;he now has the guts of talking back at them which is natural.
    2.With Capitalism its all about making profits at all costs.
    3.With the disorganized infrastructure and the unclear Land ownership; the cost of installing power lines is definitely not cheap.If anything the citizens should donate part of their land for construction of power lines;If in the past Kabaka could donate land for social services what is difficult with donating just a few metres of your land for power lines to pass?
    4. Honestly when you compare the amount of fuel Ugandans happily put in their cars and the YAKA they pay which one is more costly?
    5.Why do Ugandans feel that power should be cheap?(i)The turbines have to be maintained;(ii)There is wear and tear of equipment,(iii)Whether there is one person on the grind;the cost of maintenance remains the same.
    6.It is costly to terminate contacts that are long term and were guaranteed.
    7.What will happen to the big share holders in UMEME like Newvison,NSSF?

  10. Mwenda is missing a point of his headline.
    On the other we all agree Uganda wanted an expert to revamp the board but not meme caliber.
    The president this time is right.
    The population is poor small scale production is not favoured.
    Investment in production also.
    Domestic consumption is running away from power consumption.
    Let us have an element of improving standards of living.
    Through cheap production as a results of cheaper power.
    Thank you.

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