GOVERNMENT SHOULD SIGN OFF ON UMEME

One of the best things this government did for this country as to privatise public enterprises and liberalise the economy.

"As a result the private sector has unlocked national assets and individual initiative which has ensured that we the economy has grown every year since 1985. In 1985 the last year the economy contracted it did so by 3.3 percent...

The majority of Ugandans were too young or not yet born when these two initiatives kicked in but just to illustrate it took me two years to get a telephone line, it could take you the same amount of time if not more to get an electricity line and at this time of the years we would suffer shortages of everything from sugar to soda.

All these are totally inconceivable for the majority of Ugandans, eight in every ten are 35 or younger, and for the rest of us we have forgotten.

One of the outcomes of this process is the Umeme concession, which was the privatisation of the management of the electricity distribution process.

The owners of Umeme, led by UK Private Equity firm Actis, took over the 20 year concession in 2005. The concession basically meant that government remains the owner of the assets and Umeme runs the distribution function for them.

Since the concession begun Umeme has signed on an additional one million users from the 290,000 they found online and have invested more than $500m to rehabilitate a dilapidated network and expand it to keep with not only the growing demand but also the increased generation capacity.

At the beginning of the concession Uganda had a generation capacity of 380MW, which has more than doubled since to 850MW and is set to double again in the next 12 months when electricity from the 600 MW Karuma dam and the 183 MW Isimba dam are switched on.

There have been intense negotiations to have government give an early indication that the Umeme concession will continue, when it comes up for renewal in 2025. This is important for Umeme and the economy as a whole because the distribution needs to contract financing to continue with its investment plans.

Umeme estimates that it will need to invest at least $1.2b (sh4.5trillion) over the next eight years to maintain and expand the existing grid.

"Recent outages may suggest that new investment into the network is struggling to keep pace with increasing demand. Last year new signings onto the grid increased by about 15,000 a month, a rate set to increase for this year...

Uncertainty would mean financiers would cost their funds much more expensively or even worse, withhold the badly needed funds until they can be more confident about the way forward. The higher cost of money will invariably feed into the price we pay for our power.

Over the last 15 or so years Umeme has got itself to a good place, raising the confidence in itself to the point that it can go to the open market to source funds. This is confidence is not easily won.

Government understandably has concerns about the cost of power in the economy. Umeme accounts for a third of the tarriff and anything to reduce this or at worst k keep it stable would be great.

And the icing on the cake on the Umeme deal is that the National Social Security Fund (NSSF), which boasts at least two million contributors, and the other Ugandans through listed shares, own about half the company as we speak. This allows a bigger pool of people benefit from the good fortunes of the distribution company, and by extension have a real interest in the dealings around the concession.

This is good because it takes the sting out of the naysayers argument that Ugandans are not benefitting from the investment --- apart from improved electricity distribution, that is.