Traders losing money in inflated power tariffs in arcades

PIC: Traders are paying as much as sh2,000 per unit, which is way above Umeme's sh815.9

BUSINESS | TENANCY

By Faridah Kulabako & Sarah Akware

Tenants in down town Kampala arcades are each losing about sh100,000 monthly in inflated electricity tariffs by landlords. An investigation by our team reveals that landlords charge their tenants as high as sh2,000 per unit of electricity, which is over and above the actual cost of electricity charged by electricity distributor Umeme.

Betty Nakacwa (not real), a tenant on Nana Centre on Nabugabo Street, says their landlord installed smart power sub-metres in the different shops on the arcade, which he uses to charge an exorbitant tarrif of sh2,000 per unit.

The alleged sub metres are different from Umeme yaka metres. This means Nakacwa spends sh240,000 for the 120 units of electricity she consumes per month. Power distributor Umeme sells a unit of electricity for commercial purposes — under which most arcades fall — at sh815.9, which comes to sh962.762 when you add the 18% VAT, during peak hours, according to the Electricity Regulatory Authority current tariffs guide.

The price for the unit reduces to sh741.158, inclusive of VAT during shoulder hours and further to sh461.97 during off peak hours. Peak hours are from 6:oopm to 12:00am, while off peak hours is from 12:00am to 6:00am. Shoulder hours are from 6:00am to 6:00pm. Most traders open shops at 7:00am and close at 7:30pm.

At sh2,000 per unit, Nakacwa pays sh124,468.56 more for the electricity per month, compared to sh115,531.44 that she would have paid if her landlord was transparent. Nana Centre has over 100 shops, which means that the Nana Centre landlord gets about sh12.4m untaxed money from the tenants through inflating tariffs, assuming all the shops on the building are fully occupied.

The Uganda Retailers and Wholesalers Association public relations officer Ceaser Lukanga, also alludes to the installed smart power sub-metres, saying that the development is eating into the profitability of businesses because it increases operational costs.

Lukanga said that Crane Management Services, one of the Ruparelia Group of Companies, which manages several buildings in Kampala also recently installed smart power meters in City House building, charging exorbitant power tariffs of sh1,200 per unit.

"Retailers and tenants have been ambushed with this new purely capitalistic private smart power meter program which gives incorrect smart meter readings. Some of these metres charge rates which are 200% more than the Umeme rates and this has forced tenants to resort to alternative power means like noisy generators," Lukanga said.

He added: "Tenants used to manage their own power directly with Umeme but property managers have taken over, charging exorbitant power tariffs, plundering tenants and profiteering from the Umeme energy supply," Lukanga said.

Tenants are also supposed to buy the smart metres to install in their shops from the landlords at sh300,000. Jemba Plaza tenants, on the other hand, pay sh1,200 per unit of power, while those in Jumbo Plaza pay sh150,000 per month per tenant, irrespective of usage.

Tenants on Park Enkadde Mall pay sh1,201.8 per unit, while at Cooper Complex and Zaina Textile, the landlords charge sh50,000 per month. On average, shops have at least six bulbs for proper lighting. This comes to about sh300,000 per month per shop.

Some shops have even up to 10 bulbs.

Landlords respond

Abdul Kasai, the manager of Park Enkadde Mall's Kanaaba Arcade, denied knowledge of the said charges. "I do not know what they are talking about because I do not sell electricity," he said.

Richard Jingo, the Jemba Plaza manager, said the high charges are inclusive of generator services, whenever grid electricity is off. However, a visit around city arcades showed that tenants have individual small generators, while those who do not have, stay in darkness whenever power goes off.

"Landlords are using several tricks to cheat us. They even make us pay for toilets, yet this would be an added service for tenants," a source at Zaina Textile, who asked for anonymity, said.

 Umeme responds Umeme managing director, Selestino Babungi, however, said the power vendor cannot get involved in the affairs, saying Umeme does not know details of the contracts signed between the two parties — the building owner and the tenants.

"The challenge we have is that we cannot install independent metres in arcades because tenants keep on shifting. That is why we deal with the building owners. Whatever fee they pay is probably agreed on between them and their landlords and we cannot interfere," Babungi said.

However, the Kampala City Traders Association (Kacita) spokesperson, Issa Sekito, said they intend to sue Umeme and arcade owners for ‘conniving to rob traders'.

"We have made a resolution to take the landlords and Umeme to court. It is Umeme which allowed them the autonomous power to charge the high rates. Why don't they give us independent meters per shop," he asked.

"Our lawyer is working on the plaint to take to court. They will explain to us why they are inflating the tariff in court," Sekito added.

Tenants say because of greed, landlords even charge for toilets, yet they (toilets) would have been a bonus service. Tenants allege that toilets make more money than some shops because of the high traffic. Toilet managers charge between sh200 and sh300 to use the facilities.

This means if a building has 50 tenants, each using the toilet facilities twice a day at sh300, management will collect sh30,000 daily, which comes to sh900,000 per month. The Temuseo Mpoza plaza manager, who only identified himself as Teje, defended the toilet fee, saying the money is meant to facilitate management in cleaning and maintaining the toilet facilities.

"You cannot put a person to clean the toilets and you do not pay them. We charge a fee to enable us maintain the toilets," he said. A tenant in Jumbo plaza said some shops have been closed before over delayed clearance of electricity charges.

She added that the landlord does not accept rent fees, minus electricity dues. It was reported by this newspaper recently that landlords are also under-declaring their incomes on property lettings to evade taxes. Although tenants pay as high as sh3m for space per month, the issued receipts quote very little amounts, as low as sh200,000.

Others just indicate that a tenant has cleared rent for a particular month, without indicating the amount paid. Although the Uganda Revenue Authority requires landlords who derive rental income from the property to declare the revenue and pay tax on that income and also VAT, this practice helps them to evade taxes by declaring less profits.

Rental income attracts a tax rate of 20% of the chargeable income in excess of sh2.82m for individual landlords and a 30% of net income if the landlord is a company.

Patrick Opolot, who is in charge tax education and stakeholders' management at URA, said in July last year that of the 5,255 registered landlords in Uganda, only 1,562 (29.7%) were paying taxes, while 3,693 (70.3%) were evading. He further stated that of the 227 taxpayers that declare turnover above sh150m, 64 were not registered for Value Added Tax (VAT).

The habit has seen commercial buildings owners enjoy record high profits, which they are using to develop more properties within the central business district and the periphery.

(Adopted from the New Vision of April 6, 2017)