On Umeme, Government officials Should Account

By Ofwono Opondo

March, 29, 18

The renewed controversy over of the contract, performance and tariff collected by electricity distributor, Umeme, brings back the question of competence and due diligence by government officials and institutions who oversee public trust. It also suggests there are issues of technical and financial competences, and business ethical behaviour by service providers who often take advantage to cheat as they make colossal profits.
Therefore, the displeasure expressed this week by President Museveni and other officials against Umeme contract is understandable when electricity, a key driver in economic growth and transformation remains inaccessible, insufficient, unreliable, not fully connected and expensive. These factors make Uganda’s economy unattractive to high end investors especially in manufacturing, agro-processing, service industries and small-scale artisans that ought to provide the bulk of employment.

These sectors would increase Uganda’s export volumes and revenue, while lowering import bills, utilize local raw materials, and generate sufficient internal revenue through taxes and consumption, and creating massive employment along the chain. Unfortunately, many of the government officials both technical and political, who lead the country into these unfavorable business deals often warm their way into the NRM as loyal cadres, allies and supporters, and we find ourselves shy to name, shame and perhaps prosecute them for the losses caused.  
Simply seeking to ‘hang’ Umeme, by not renewing its contract, without removing and prosecuting the ‘weevils’ is to miss the point. On the losses, Electricity Regulatory Authority (ERA) should provide credible figures so that government doesn’t just depend on what Umeme says. Public officials are the ones entrusted with safe-guarding Uganda’s interests, although private businesses too must diligently execute contracts as agreed.
Umeme wasn’t there when government disbanded its dysfunctional and loss-making Uganda Electricity Board (UEB), and created multiple entities to generate, transmit, distribute power and collect revenue, and another, to regulate the sector. Today, Eskom, Uganda Electricity Transmission Company, Uganda Electricity Development Company Limited (UEDCL), Umeme, ERA, and Rural Electrification Agency (REA) are ‘middlemen’ are all ‘eating’ from the final consumer! For the record, electricity tariff is fixed by ERA, and not Umeme. Yes, we can blame Umeme, but again, Umeme wasn’t there when Uganda Airlines Corporation, Uganda Railway Corporation, Uganda Transport Company, Coffee, Lint and Produce Marketing Boards were stripped off their assets, thereby partially subverting the intended goals of privatization, which was to enhance productivity, efficiency, and eliminate wastage in these sectors.
On 13th March 2017, President Museveni wrote to Energy Minister, Eng. Irene Muloni, asking her to explain the unending high power tariff, despite claim by Umeme that it had invested up to $500 million in distribution infrastructure that would otherwise reduce the end-user cost. The President said that as a result, renewing Umeme’s concession should not be an option, directing that a cheaper alternative be sought.
The president attributed the current high power tariffs and related costs to collusion between some corrupt elements within the ministry and Umeme. This implies that, it would not be sensible to renew Umeme’s contract, aware that the same officials involved in the bad deal could still be in charge of the negotiations. Hopefully, we can get new team to negotiate a better deal.
Since 2005 when Umeme took over power distribution from the dysfunctional UEB, a lot of hullabaloo has remained in the public domain, attracting numerous investigations some of which could be of dubious intentions. It should be recalled that in the first bidding, actually no firm turned up. Although much of the blame and animosity is being directed at Umeme, at least the treasury no longer gives subvention as it to UEB, and government entities no longer consume power free of charge. Also, sporadic power outages, and the nuisance of UEB extortionists is gradually being eliminated.
According to President Museveni the variations in figures of operational losses on which Umeme based its argument to keep tariffs high leave no doubt that something fishy was going on. In the run up to the concession signing in 2005, the Auditor General had calculated both technical and commercial losses at 28%. However, this figure shot-up to 38% following a meeting between the Umeme delegation and ministry officials in the United States. Then, following the findings of Gen. Salim Saleh’s committee, Umeme’s estimated losses dropped from 38% to 28%. Currently, reportedly due to various measures like the prepaid metering system, Umeme’s commercial losses have reduced from 13% to 1%.
Whereas Umeme, as a private company promoting business interest has its share of the blame on account of mismanagement and gaps in  distribution which may be leading to failure to lower or eliminate losses, government officials both at the negotiations and implementation should be held more culpable because they signed the agreement knowing Uganda’s national interest. It is unlikely therefore, that, those who represented Uganda were technically incompetent, or had no terms of reference based on research to guide them. It was, therefore, their duty to protect Uganda’s interest, but if Umeme, realized that some of them had corruptible minds, it might have taken some advantage.