Energy Ministry prefers imported transformers

Thursday June 4 2020

Local production. Mr James Kalibala (left), a

Local production. Mr James Kalibala (left), a member of the Uganda Manufacturers Association advisory board also managing director Electrical Controls and Switchgear, inspects a transformer at the UMA show grounds on Tuesday. They are asking government to procure their items. PHOTO/STEPHEN OTAGE. 

By ISMAIL MUSA LADU

The Ministry of Energy, save for the Uganda Electricity Distribution Company Ltd (UEDCL), has defied the Presidential directive to procure locally made transformers in favour of imported ones.
This has left local transformer manufacturers stuck with their products despite President’s Museveni’s directive requiring all Ministries, Departments and Agencies to support the ‘Buy Uganda Build Uganda’ initiative. If only the Energy ministry locally bought transformers, the local manufacturers would bag some $52 million (about Shs195 billion).

This has also cut out at least 4,000 direct jobs for engineers and technicians plus another 3,000 in indirect employment.
According Uganda Manufacturers Association (UMA) executive director, Mr Daniel Birungi, this is just one of the examples of how government is undermining its own efforts to promote consumption of locally manufactured goods.
Members of the Uganda Transformer Manufacturers Sub-Sector are now protesting the Energy Ministry and its agencies’ refusal to buy locally manufactured transformers, saying they have already obtained ISO certificates in addition to Uganda National Bureau of Standards’ quality marks.

Collectively, the local manufacturers have injecting about $28 million (about Shs105 billion) in the sub sector. They are now asking government to procure their items.
Despite the appeals, Rural Electrification Agency (REA) has rolled out multi-million-dollar distribution projects under Engineering Procurement and Construction (EPC) contracts that have not local transformer manufacturers.
Under these EPC contracts, the bidding contractors are supposed to procure equipment which includes transformers. However, REA includes a number specifications in the procurement bids that eliminate local manufacturing companies.
An example is a specifications that requires the manufacturer to have been in production for the last 10 years and with annual turnovers of more than $2 million (about Shs7.5 billion) or more.

In addition, the standard preferential schemes by the Public Procurement and Disposal of Public Assets (PPDA) do not include transformers in the schedule of protected locally produced products, despite the sub sector players’ request to be considered.
Government, through REA, has commissioned TBEA China Ltd to commence implementation of a project that will procure a minimum of 6,000 transformers worth $24 million (about shs90.3 billion) without considering the local transformer manufacturers as key suppliers.
According to Mr Mark Amumpaire representing Orion Transformers Ltd, there is need to protect the market for the local manufacturers considering that regional counterparts like Kenya and Tanzania strictly buy transformers from their respective local producers.
Government through its various electricity distribution projects accounts for more than 80 per cent of the annual new transformers installed and old ones repaired. The rest of the few consumers are from the private sector of which Umeme is the largest.

Minister’s response
When contacted yesterday, Ms Mary Goretti Kitutu, Minister of Energy, said: “I received the petition by the manufactures of locally made transformers and I wrote directing all agencies under the Ministry to consider buying locally made transformers. But they (agencies) told me that some of the projects are funded by foreign grants. For that, the PPDA rules gives them (donors) an upper hand. I think that needs to be changed by way of a law that should favour our local manufacturers.”
She continued: “It also depends on the specification of the transformers. But I have already directed that if the locally made transformers meet the required specifications, then we should procure from them. With the Covid-19 crisis, we must promote more local manufacturing.”

Other demands
Local Content Bill
Manufacturers of transformers with support of UMA also wants the Local Content bill to take effect.
They also want a review the TBEA China LTD Contract to reallocate and award the supply of at least 50 per cent of the project’s transformer requirements to the Uganda Transformer manufacturers.
They want government to expedite and complete updating of the PPDA Preferential Scheme.
Government should reinstate the 25 per cent import duty on Transformers to promote import substitution since the sub sector has demonstrated capacity.

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