Export manufacturers lobby to pay for electricity in dollars

Power. A worker operates a machine at a factory in Mukono. Some manufacturers who export goods outside Uganda want to pay for electricity in dollars. PHOTO BY RACHEL MABALA

What you need to know:

  • Volatile. The power tariff is determined and reviewed based on many factors including the foreign exchange rate which is volatile.

Kampala. Manufacturers who export goods outside Uganda want to pay for electricity in dollars.
Mr Daniel Birungi, executive director, Uganda Manufacturers Association (UMA) revealed that some members have proposed to pay electricity in dollars.

“Manufacturers mainly those exporting and earning in dollars have suggested to have an option to pay the power bill in dollars,” he said.

Burden of conversions
In their argument, exporting manufacturers claim that payment of power in dollars would rid them of the burden associated with conversions in the foreign exchange rate.
For instance, the power tariff is determined and reviewed based on many factors including the foreign exchange rate – which in Uganda’s case is very volatile.

Last year, the shilling highly depreciated against the dollar, nearly hitting the Shs3,900 mark.
According to the manufacturers especially exporters, since they earn their revenues in dollars, payment of electricity in dollars would eliminate the need to review the tariff in relation to changes in the foreign exchange rate.

“We would like to hedge against foreign exchange loss, which occurs since manufacturers need to convert to shillings from dollars to pay electricity,” he said adding that the move would culminate into a strengthening the shilling against the dollar.

However, he clarified that not all manufacturers would like to pay in dollars, rather only those that can.
Without revealing the number of manufacturers behind the proposal, Mr Birungi explained that many manufacturers currently earn in dollars.
“As of last year, we hit $1b mark in manufactured exports,” he explained adding that the move would also create stability in the tariff.

Responding to the proposal, Ms Ziria Tibalwa Waako, chief executive officer, Electricity Regulatory Authority (ERA) confirmed that talks were ongoing with manufacturers concerning payment in dollars.
“We have also got an interest from manufacturers to charge electricity in dollars. We do not want to dollarise the economy. But we are still in engagements,” she explained.
The regulator also has concerns with the practicability of making allowances for different consumers in the power sector.

In essence, the proposal would mean the regulator would have additional work in differentiating the extra-large industrialists between those paying in dollars and those paying in shillings.
According to Mr Birungi, the pending matter is a policy reform that would decide whether extra-large industrialists paying electricity in shillings would pay more than those paying in dollars.

If so, the reform would create a variation in competitiveness of different manufacturers.
The discussion comes at the heels of another argument by government to scrap paying rent in dollars in a bid to strengthen the shilling.

Amalgamated meters

Issue. According to Mr Birungi, amalgamation of meters is also an issue that manufacturers would like the power regulator to address.
Amalgamation of meters simply means combining the billing system of different meters held by an individual.
He, however, noted that some industries currently have amalgamated meters.