By Dickens Kamugisha
Chief executive officer of the Africa Institute for Energy Governance
27 March 2008 – Four years down the road, Umeme is still telling Ugandans that the electricity sector is making losses of over 36% worth sh3.4b per year. Umeme does not appreciate the link between high tariffs and electricity theft; the higher the tariffs, and the more the thieves, the bigger the power burden to innocent Ugandans.
Umeme say they have spent $30m (about sh51b) worth of investment in Uganda’s small electricity sector. That innocent Ugandans have to pay for stolen power indicates that Umeme is incapable of developing the sector.
Shouldn’t Ugandans prepare for more darkness and higher tariffs? If you want to develop as a country and not as individuals, as is the case in Uganda, there is a formula: you must always guard against inefficiency, especially in strategic areas such as the power sector.
In this case, privatisation or no privatisation per se is not the answer. The formula is good planning and focused investors. Does Umeme have the will to modernise the sector or is here to make money? I bet the latter is true, and if they can be allowed to charge high tariffs on the few available mega watts and make more profits, that is what any business needs. Otherwise, how can $30m be invested in a small sector to reduce power losses only from 40% to 36% in four years’ time?
Independent auditing would come in handy here.
Development is not a matter of coincidence, but a matter of good planning and effective execution of such plans. This has helped countries such as Malaysia, Botswana and Philippines to consistently pursue a sustainable development agenda.
These governments have spent all their energies evaluating each and every company/investor that comes to invest in their countries. For instance, Philippines managed to use only $60m (sh102b) which the country borrowed from the World Bank to develop her power sector and now the country has over 90% electricity access and it is among the countries that produce the cheapest power in the world.
The 1960 Philippine Power Reform Initiative motto was "efficiency, quality and zero tolerance to corruption." And there was no privatisation.
Uganda’s Electricity Regulatory Authority (ERA) was established by an Act of Parliament to ensure that Ugandans get value for money. But ERA does not have any independent information or carry out independent evaluation on how much Umeme invests, collects from consumers, the quality of power meters it gives to consumers, how those meters are read, how Umeme employees and customers are treated and how long Ugandans should wait for Umeme to save them from paying for what they do not consume (power losses). ERA cannot regulate what they cannot measure.
Umeme offices are a scene of crying consumers in very long queues with unexplainable bills waiting to see one cashier. And the tired-looking cashiers say they cannot be efficient because they are over-worked. Yet one top executive earns $35,000 (about sh60m) per month as salary. Where is Umeme taking the power sector and where are the national regulators?
Like any other profit-motivated company, Umeme probably has no incentive to invest in solving power losses because the burden rests on the consumer, not the company. Like a hike in Value Added Tax, the burden of power losses is passed on to the consumers through increased tariffs.
It is, therefore, the duty of the Government to ensure that Umeme improves efficiency to stop burdening Ugandans with endless hikes in tariffs. It is not fair for an innocent power consumer to pay exorbitant tariffs because of the service provider has failed to stop theft. If privatisation has failed, let us re-nationalise the sector. There is no more room for experiments.
Originally published in the New Vision newspaper.