High power tariffs top manufacturing problems

No reprieve yet. Government is not about to subsidise power rates any time soon as it is still footing bills incurred on the construction of Bujagali Power Dam.

Electricity outages and the cost of power tops the lists of major constrains that small and medium businesses in the manufacturing sector have to deal with frequently, a study by the School of Economics, Makerere University indicates.

The report, titled “Access to Credit and the Effects of Credit Constraints on the performance of Manufacturing Firms in the EA Region” also links challenges related to access to credits by manufacturing firms in Uganda to the aforementioned constraints.

“With power related challenges, the manufacturing sector is no longer attractive to formal institutions that offer credit facilities, this constraints the sector’s ability to grow,” Mr Faisal Buyinza, the author of the report said last week in a policy dialogue in Kampala.

Uganda Manufacturers Association executive director Kigozi Ssebagala told Prosper in an interview that the additional power, following the commissioning of Bujagali power dam, has only relieved the manufacturers problem and not solved it.

“The study is spot on. With power outages we cannot produce to our capacity. And with the high cost of power, we cannot compete with other manufacturers in the region,” Mr Ssebagala said on Friday last week.

He continued: “We are aware that the government is exploring other ways, including fast tracking the Karuma dam project, but the message here is that we need affordable power.”

In an earlier interview with the State Minister for Energy, Mr Simon D’Ujanga, he confirmed the government will not subsidise power rates any time soon due to the fact that it is still footing bills incurred during the construction of Bujagali Power Dam.

The declaration that was first made by the power regulator and confirmed by Mr D’Ujanga, is a u-turn of what the government had earlier promised manufacturers.

Currently, domestic consumers pay over Shs500 per kwh after 15 minutes usage, while medium scale industries pay between Shs380.8 and overShs550.9, depending on the time of usage and large industries pay between Shs266.6 and Shs375.4.

Other constraints according to the Makerere University School of Economics research include; lack of access to finance, high and volatile tax rates, corruption, and macro economics instabilities.

iladu@ug.natrionmedia.com