Uganda: Umeme Deal Up for Review, Now Lobbyists Are Digging in


It's season two in the sub-plot that is the fight over Umeme Limited's concession. Two scanned pages of a letter purportedly written by President Yoweri Museveni, which have been widely circulated on social media, talk of how the power utility firm's concession, signed in 2004, was "messed up."

The letter goes further into the grey technical area of power losses, and questions why these losses have not been eliminated entirely. The purpose of this letter comes towards the end, where Museveni appears to block the renewal of Umeme's contract, writes JEFF MBANGA.

So, how can we make sense of what's going on? It is important to step back for a bit and take everything into perspective. For starters, the leaking of these letters onto social media is deliberate. Creating a firestorm on social media by stirring up emotions places the subject at the centre of public debate. Here, the tone of the debate then gradually shifts to the kind where it is the people versus greedy capitalists (read Umeme).

However, before offering your two cents on the topic at hand, it is better to understand the contents of the leaked letter. In this era of fake news and the unethical companies in the likes of Cambridge Analytica, there is need for caution on what kind of information we consume.

After all that, then comes the grand questions: why now; what is the purpose; and what next?

The Umeme concession is a million dollar financial package. Over the next nine years, Umeme says it has planned to invest more than a billion dollars in the infrastructure starting next week.

The company, where the National Social Security Fund is the biggest single shareholder, enjoys a cool 20 per cent return on investment over and above its recovered capital investments.

The company has the advantage of recovering its investment through a tariff it applies for to the Electricity Regulatory Authority. And because of the critical space it occupies, it has managed to gain the confidence of global financial institutions such as the World Bank's International Finance Corporation, from where it has borrowed cheaply. Who wouldn't want to grab this kind of concession?

And yet, this is not the first time we are seeing this sub-plot. In 2011, a major onslaught on Umeme's concession was set in motion. Some short background. Signed in 2005, Umeme's 20-year concession is to be reviewed three times - 2012, 2019 and 2025.

In 2011, a group of shrewd Ugandan businessmen embarked on a do-or-die mission to kick Umeme out. They used a common strategy of getting things done: they splashed money. Floods of dirty cash spread to the media and members of parliament in order to swing opinion. The plan failed.

Seven years later, we seem to be back at it. At the moment, Umeme's concession is being reviewed, and a plan to stop the renewal appears to be on. Paying attention to this debate is important in understanding why we pay the amount of money that we do to light up our houses and offices.

First, let's look at Umeme. The power utility firm has thrown around that narrative where it says it found us, Ugandans, in an appalling situation with our run-down electricity assets, and redeemed us from a future of darkness.

Umeme argues that if it weren't for its investments, Uganda would have struggled to get a foreign company to make the kind of investments it has made. This is an old tired account that needs to be binned. Umeme knows that it did not do us any favours to invest in Uganda. The commercial terms were sweet enough for it to commit money to this market.

And for the first seven years of its license, Umeme was accused of making some good money by overestimating its costs, which it usually reflected in the power tariff it applied for with the regulator.

Also, Umeme's former key shareholder, Actis, made even more money through its creative schemes such as hiring management service from related companies located in low-tax jurisdictions, and lending money to the company at a higher rate.

The company denies all of these accusations. Whether Umeme deserves its concession to be renewed for the last six years is a matter for the technocrats. What I am more interested in is the option in case Umeme left and how the company ought to be treated.

I have no doubt that some Ugandans have built the capacity and expertise to do what Umeme does. Fighting crimes like theft and vandalism, which contribute significantly to the power losses, and therefore a higher tariff, is something a Ugandan company can do.

These Ugandans need to be listened to, and where possible given a chance to manage some of the country's power infrastructure. However, Uganda's electricity industry needs to ensure every process is carried out legally. The sector cannot afford to be hijacked by well-connected brokers pushing ulterior interests as that could scare other foreign investors.

If we are to get rid of Umeme, it is best we do it in a legal and orderly manner. All the parties concerned need to be furnished with the right information so that those who have the responsibility of either cutting Umeme loose or keep it around can make an informed decision.

If we think Umeme are wolves devouring poor Ugandans, then letting rent seekers with selfish interests, who like to work in the shadows, get their way would be falling in the snare of hyenas.

Twitter: @jeff_mbanga


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Publish date : 2018-04-05 07:48:11
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