President Museveni has revealed that government officials who negotiated the Bujjagali power dam deal hid it from him, the reason why electricity has turned out to be too expensive for Ugandans.
“They [negotiators] excluded me. They said my presence was undesirable. I was happy that they [would] do the job. But when I asked them [later] that what is the cost, they told me 11 US cents (about Shs 400) per unit even with a subsidy,” he said.
Museveni was addressing the 19th summit of East African Community Heads of State at Munyonyo yesterday.
The 250-megawatt (MW) Bujagali dam was developed by U.S. Blackstone Group and the Aga Khan Development Network. It was financed by the World Bank, and several European development finance agencies. Industrial Promotion Services, a division of the Aga Khan Fund for Economic Development own the biggest shares in the project.
Government said the dam commissioned in 2012 cost $862 million (Shs 3.1 trillion at today’s exchange rate). However a parliamentary ad-hoc committee on Energy in 2012 found that project had cost the country at least $1.3 billion (Shs 4.7 trillion) – $438 million more than earlier reported. The Bujagali Public-private partnership has to run for a period of 30 years from the completion of construction.
The Aga Khan Development Network through Bujagali Energy Limited (BEL) has a debt of about $700m. The overall cost of the debt, including fees, is at 6.5% p.a repayable over 16 years. The tariff will reduce to about US 6 cents when the debt is repaid.
At the end of the PPP, the plant will be purchased by the government at $1.The government is considering other means to pay debt in a bid to cut the cost of electricity.
MPs, who were in the 9th parliament led by Budaama South MP Jacob Oboth-Oboth, recommended that then permanent secretary in the ministry of Energy and Mineral Development, Fred Kabagambe-Kaliisa, and the director of energy, Paul Mubiru, be interdicted over the “over-priced” project.
Both officials however stayed in their jobs and Kaliisa was only replaced early last year. In October 2009, the then Energy minister, Hillary Onek, had described the Bujagali as “a bad project, over-delayed, and over-priced.”
Yesterday, Museveni appeared to lament like a helpless orphan. He said: “Those people called commissioners and permanent secretaries negotiated for the country. How can you be an expert in doing shoddy work? In the case of Uganda, this game is finished.”
The president said public private partnerships (PPPs) had been responsible for high cost power in the country and also interest rates because the World Bank told the country to sell its bank; Uganda Commercial Bank (UCB) to the private people.
PPPs is a funding model where government and private investor bring together resources to work on a particular project. The private investor is assured of their money and return on investment. Government benefits from having an investor bring in funds.
“The cost of money and structure of ownership should not be allowed to interfere with the strategic areas of the economy,” Museveni said.
Museveni said the electricity final price must not go beyond 5 US cents (Shs 182) per unit, the cost that Bujagali power would be priced at had Ugandan negotiators not been arm-twisted. It now costs 11 US cents (Shs 400) per unit.
Ugandan electricity is most expensive in the region – with the most small and bigger businesses finding it hard to use such exorbitant power and break-even. A case in point is a start-up in Kawempe called Lindemei Investments Limited. They fry maize corns into a decent snack in addition to packaging long horned grasshoppers.
This month, the start-up’s general manager Joseph Kagame told The Observer that they buy firewood for use because electricity was too expensive for their business. There have been efforts to buy out a private investor in the Bujjagali power project but it is also costly to the taxpayer.
“The PPPs is now the new talk. They now make it short and call them PPPs. [They] must be anchored on the strategic plans for the three items of railway, electricity, and ICT”.
“When dealing with the railway, electricity, we must ensure the final price of the utility is competitive because those elements are dangerous cost pushers,” Museveni said.
Low cost internet, he said means Ugandans can do the Business Processing Outsourcing (BPO) where they can work for international companies even from here. The president said Uganda was surrounded by waters that could be used as transport hubs to neighbouring countries but the ‘so-called’ experts could not see these things.
A State House employee told The Observer after president’s take on PPPs that the main problem was the negotiators who had personal interests in signing the over-priced deals so they could get ‘pay’ from private companies.
The companies were happy to pay the Ugandan negotiators, he said, because they knew they would recover the money from over priced charges.
Additional reporting by URN