Privatisation process was mishandled

Jul 12, 2009

EDITOR—I wish to contribute to the debate on the state of the energy sector in the country and the possible solution to the problem. I have followed the initiatives of the energy minister, Hillary Onek, and I appreciate that Umeme is rightly being inves

EDITOR—I wish to contribute to the debate on the state of the energy sector in the country and the possible solution to the problem. I have followed the initiatives of the energy minister, Hillary Onek, and I appreciate that Umeme is rightly being investigated for a number of issues including inflated electricity tariffs, use of untested meters and failure to account for billions of shillings, among others.

However, before we convict Umeme, let us first analyse the problems of the entire power sector reform, which has been going on since 1999. what is the performance of the various institutions that have been created over time to implement the reforms?

These reforms include the Power Sector and Privatisation Strategy, the Electricity Act, the Electricity Regulatory Authority, the unbundling of Uganda Electricity Board (UEB), the creation of power companies of generation, transmission and distribution and the Rural Electrification Board.

They also include the National Energy policy and Rural Electrification Strategy and Plan, and the concession for power generation to Umeme. The above reforms were to eliminate UEB’s corruption and energy shortage in Uganda but nine years down the road, we are still in darkness and paying for what we don’t consume in form of power losses. So, where is the problem?

The minister needs to tell Ugandans that the power crisis in Uganda lies in the privatisation process of the power sector that has been messed up by the incompetence, dishonesty and corruption of some government electricity regulatory bodies and other leaders.

It is corruption and incompetence that has allowed corrupt private companies to continue profiting from the sweat and blood of Ugandans without value for money. How did Umeme get a licence in Uganda and how much profit does it make from its electricity distribution services? How much do its directors earn and who determines their salaries?

Who procures and tests Umeme’s meters before they are given to consumers? Did the minister read on February 6 where Ms. Doreen Katusiime of AFIEGO warned the government that Umeme was guilty of high tariffs, misuse of subsidies from government, use of untested and outdated meters, failure to reduce electricity losses and the general power crisis in Uganda? I am surprised that the Government did not find it necessary to follow up on these critical warnings.

Mr Minister, don’t you think Ugandans should blame the Government that allows companies to continue exploiting consumers even amidst public outcry? Many investors have profited from the weaknesses or corruption of some leaders in the Government.

The current power crisis in Uganda is bigger than Umeme and even if Umeme left today but we don’t deal with corruption and incompetence in some government institutions, particularly ERA, there is no guarantee that the next investor will not be worse than Umeme. In any case, Ugandans must know that investigating Paul Mare and even convicting him will not solve our power problem.

We privatised a public good at a time when the country was not prepared to handle the challenges of managing private investors. This is a mistake that we may not overcome before we own up and take bold measures to solve it. As a lawyer, I wish to remind you Mr. Minister, that we are in a fix and Uganda may pay heavily if it continues with the ongoing investigations into Mare’s actions or if it terminates Umeme’s licence without careful considerations.

Legally, Uganda contracted with Umeme and not Mare, so why all this talk about Mare? I am not defending Mare or Umeme, but I am trying to put things into practical legal perspective.

If you read the concession between the Government and Umeme, you will find that Umeme is legally allowed to terminate or discontinue its activities in Uganda any time without giving any notice, and cannot suffer any liability for such termination, but the government cannot terminate Umeme’s contract without suffering liability. This is a dilemma! Imagine, God forbid, if today Umeme decided to terminate its contract! what would be the fate of our power distribution industry?

Yes, we all want investors; but let us always enter into contracts with common sense and logic. Up to now, Umeme hasn’t invested any of her own capital in Uganda but we have evidence of what it has earned in the last four years.

Dickens Kamugisha
Chief Executive Officer/ Advocate
Africa Institute for Energy Governance
Kampala

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