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Power tariff increase to hamper SMEs’ growth - experts

By Wilson Manishimwe

Added 15th August 2018 02:37 PM

Medium industrial consumers will pay sh383.8 per unit from sh372.4.

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Medium industrial consumers will pay sh383.8 per unit from sh372.4.

PIC: The former Executive director ERA, Dr. Frank Sebowa (speaking) during the meeting. (Credit: Wilson Manishimwe)


KAMPALA - The recent increase in the electricity prices by the Electricity Regulatory Authority (ERA) will lead to increased cost of doing business, affecting the growth of small and medium enterprises (SMEs), experts said.

The experts also noted that the increased cost of doing business will also negatively impact on the country’s Gross Domestic Product (GDP).This was revealed during the energy stakeholders meeting at Hotel Africana this morning

Recently, ERA announced an increase in power tariffs, which demanded that the domestic consumers pay sh771.1 from sh718.5 per unit.

The commercial consumers, according to the new rates will pay sh687 up from sh647 per unit, whereas the medium industrial consumers pay sh383.8 from sh372.4.

In the new tariffs applicable from July to September, extra-large industries benefited because their tariffs were reduced due to Bujagali hydropower plant refinancing.

“SMEs and domestic users will be affected but in the long run, the cost will go down especially after the shilling demand rises.

"The demand for a shilling can only increase once we export more goods to other countries,” said Dr. Eng. Frank Sebowa, the former executive director Uganda Investment Authority.

Eng. Norbert Semitala, a consultant and Managing Director NS Engineering Associates Ltd said the tariffs depend on dollar demand.

Semitala added that 56% of revenue requirement for companies during energy generation is dollar denominated.

“The dollar denomination implies that utilities paying this power must look for the equivalent of these dollars.

"In the last couple of months, the shilling depreciated by about sh300 which affects business,” he stated.

Semitala added that the technical and commercial losses of energy affect power tariffs. “There is mechanism of reducing power tariffs especially at Bujagali and this will increase power consumption; and of course their production significantly feed into other sectors."

Samuel Sejjaaka, the chairman Uganda Development Bank questioned why power tariff rates are increasing yet the country has more power generated.

Currently, Uganda has over 1000MW installed power and according to REA, the capacity is likely to double in the next two years, with the forthcoming completion of Karuma and Isimba projects.

Ziria Tibalwa Waako, the ERA Chief Executive Officer explained that the increased power supply is paramount as Uganda looks forward to industrialising the economy.

She said the Government also intends to invest in geothermal, oil and nuclear energies to enhance stable power security.

“The more you diversify, the more the power security. Since the inception of ERA in 2000, we have been able to reduce losses from over 37% to less than 17%.

The manufacturers contribute 67% of the demand energy and soon it will increase,” said Eng. Tibalwa.


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