Uganda Energy crisis bites: Is it time again to Invest the Uganda Electricity Sector?
Following the third rejection in a week by Ugandan MPs of a request by Government for sh61.3b to settle debts in the energy sector, domestic and commercial consumers will continue paying the ulimate price.
Government’s failure to pay off all its dues for thermal power generation in the past financial year is partly to blame for the current crisis in the energy sector. Until last week when thermal power generators unwaveringly shut down their operations, power shortages seemed to have been a thing for the past.
At a time when the country’s economy is staggering, weighed down by high prices of commodities and services partly as a result of a weakened Ugandan shilling against the American dollar, an acute power shortage would from the very beginning continue to rip farther apart the financial capabilities of the stakeholders.
About a fortnight ago, the load-shedding would be a day and night affair. However, a revision of strategy by the Electricity Regulatory Authority (ERA) a week later metamorphosed into a decision to limit the power cuts to only the night time—when more people are expected not to be working or needing power, so to say.
Following that decision, businesses operating during the night hours however have since then felt the pinch. Arguably, Uganda’s night does not end until well past into the next day. Metropolitans like Kampala are a hub of bustle trans-night with several discotheques, hang-out joints, restaurants and shops open at the service of hundreds of people.
Night business hit
A scheduled system of power cuts during the night hours has translated into higher power costs for such nocturnal places. The shortage in power supply has decapitated a few night businesses, leading to their closure while others have had to endure the high costs of using generators as an only power alternative. Even still, the price of fuel to run the generators is also high.
At the moment, the fix in which the economy is cornered makes it even harder to predict how long the energy crisis will last. Skepticism hovers in the minds of energy investors.
The dollar factor
According to ERA acting Chief Executive Officer Benon Mutambi, all contracts signed with thermal power generators are denominated in dollars (against which the shilling is weak) as investors fear to lose their money from the depreciating shilling.
The ever-depreciating shilling has affected the need for more revenue in the energy sector over the past five years. The 420 billion shillings required by the sector in 2006 has since then almost tripled to 1.076 trillion shillings in this year’s budget.