On Umeme: let’s get back to the basics

It is the last day of November – 30th to be exact – in 2012. The sun is finding its way through the clouds. We are at the Sheraton Kampala Hotel. The same Hotel where everything was “Kwisha” in 1981. Fast forward to 2013, I once got served milk that had gone bad. I abandoned the cornflakes. Well, on this November day, Umeme had treated us to breakfast and a host of speeches. It was on this day Umeme got listed on the Stock Exchange. And yes, the trading floor was temporarily moved to the Sheraton. “They have been bought off,” they said. “Why are they not telling us the issues? Umeme is cheating us?” they added. Oh well, I wonder how breakfast could be a form of buying us off? But the company got listed, the first since 2009. The price has since appreciated by 36percent and now a share is worth Shs365. Good for the company and good for the USE. Such days are rare for the USE. 

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The generators blare on. Downtown Kampala, traders along Nasser Road are listening to their Radios. Later in the evening they will watch NTV and on Newsnight, Andrew Mwenda will be talking about “daft MPs” trying to get the “Umeme contract cancelled.” We suffer from “lack of intellectuals” to analyse issues, he will say. The Umeme concession is in its 8th year – of 21years. When MPs made recommendations after an adhoc committee report on the electricity sector, one of them: terminate the Umeme contract as they claimed it was signed in bad faith. We got a bad deal. Additionally, Umeme lied. In defense of Umeme – and partly, I agree – Mwenda notes that Umeme has not breached any of the concession terms and in fact continues to invest in Uganda, achieving the targets set for it. They recently added a Shs485bn loan deal from IFC, Stanbic and Standard Chartered for further investment between 2015 and 2018. 

Yes the concession agreement is complex. You’d have to breakdown the key issues, one by one, including taxation. So let’s deal with the basics. Umeme is inefficient – sometimes. Bills are still estimated and the generators are dominant. In Kampala, we lack a smart grid. Sometimes the slightest of winds – even before the rains – we are plunged into darkness. They’re “trying to fix” the grid. It is not that easy – they say. Western Uganda is now expected to experience more than four months of load-shedding as the grid is upgraded. But what do we want? Electricity! Efficient supply of electricity. Where did all this start? Uganda Electricity Board (UEB) used to be the power distributor and generator. We had daytime and nighttime load-shedding. It was inefficient. It had suffered from elite capture. The same “elite” still running some of electricity bodies like UETCL, UEDCL and UEGCL – all replaced UEB. All these companies have a role to play in the energy sector. It is complex. UETCL undertakes most of the high level projects on behalf of government. If the transmission lines are inefficient, we have the right to blame them. 

We delayed power projects yet more people were added on the grid. Bujagali delayed. We blamed butterfly activists and Ken Lukyamuzi. Then desperately to keep our lights on, we brought in thermal generators – at a premium. Government decided to subsidise the tariff. Bujagali “went live” in 2012. We had excess electricity, an “un-smart” grid and an ad-hoc committee report. The company went public, the investor, Actis got back about Shs92bn returns on loans for “upgrading” the systems since 2007. 

With Bujagali and ESKOM – running Kira and Nalubaale – they want a power distributor that can make collections for them to get paid. The lending arm of the World Bank, IFC, and Germany’s KFW etc… are all investors in Bujagali. IFC is also a lender to Umeme and holds a 3percent stake in the company. IFC wants a return on the money invested in Umeme, they also want to make money from Bujagali. One Bujagali official notes that they prefer Umeme as a distributor, that way they get paid on-time to avoid creditors knocking on their doors. The pressure is on Umeme and Ugandans. If we generate more power, where does it go if we lose 24percent of it? Well, the tariff. We are going to have another huge Dam, Karuma. The Chinese will build and finance most of it. If you think the tariff will drop, well, unless UEB makes it back. To pay for all this energy, the tariff is likely to edge higher. If we get more industries, then, maybe then we won’t pay that much. So even with the tariff, Umeme has to collect the money. They have improved that to 94percent -2012. Then comes in bill estimation!! There is a planned roll-out of prepaid meters – already for some people in Kampala these meters can be seen. They are mandatory, you either get one or get abused by a sub-contractor. The roll-out for the whole country is expected to cost USD300m. Who will pay for it? You. While we pay our bills, some government agencies default. Remember what became of Uganda Airlines? The government racked up a bill that they didn’t pay, sometimes. This cost the airline and it is partly why it went under.  

Point here is, yes we need the FDI, but Umeme’s is not doing charity work, neither for themselves nor for us. We have to keep asking the questions, no matter how “stupid” they sound. If we stop asking, then who will, yet we are the ones who pay the price. If the elite can’t explain the basics, then who will? If they assume, “yeah, Ugandans suffer from lack-of-intellectualism-so-let-us-ignore-them” then how do “they” expect the apathy to go away? The more we discuss Umeme, the more open they become. A Ugandan SME needs efficient supply of electricity. 

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The first thing any business reporter who wants to write about the stock market is told is: “buy shares.” That way you’ll understand how our small stock exchange works. So that way, you become an investor, sometimes, you forget you’re a journalist. So yes, despite the “machinations” about Umeme, the demand for the shares of the company has been on a rise.The reason: Institutional investors. Institutional investors, mostly offshore [Mauritius] seem confident. Umeme Limited, Uganda, is 60percent owned by Umeme Holdings – managed and owned by Actis. For one,it has most sophisticated tax arrangements. The holding company that owns Umeme is domiciled in Mauritius [tax haven]. Prof. Guttorm Schjelderup calls this [tax havens] a facilitator of “sophisticated tax planning.” It is a listed company. Disclosure is not problem. Olympus is a listed company in Japan. Enron was listed on the NYSE. Listed banks have rigged Libor, been fined and the world moved on. 

Categories: concession, uganda, Umeme

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