COP28: Uganda secures energy deals

Uganda continues to take part in discussions at the ongoing COP28 climate change summit in the United Arab Emirates (UAE) determined to transform its energy systems to renewables without exorbitant capital expenditures.
The country has more than 600 delegates at the summit where some, whose number is yet to be disclosed, are facilitated by government coffers and others sponsored by non-government organisations.

“I think so far, especially with the launch of the Energy Transition Plan by [Energy minister] Ruth Nankabirwa, what you have is the protection of the investments in the Oil and Gas sector which had been threatened with the direction of the last two COPs,” Mr Angelo Izama, the board member of Uganda Investment Authority (UIA) who is part of the country’s negotiators in Dubai, said. This, he added, means that there is guaranteed protection of a potential income north of $40b.

Besides, Uganda’s negotiators have secured energy deals at least worth $1.5b as of Thursday as they sprawl hungry for more. “The green investment commitments, current and future, are for the next four years in the areas of renewable energy, water filtration and forestry,” UIA noted in a statement on Wednesday. 

Negotiations for states of such calibre like in investment of energy systems take long to be struck and can last anywhere between 10 to 15 years, but Uganda’s Ministry of Water and Environment claims that the ease with which the country’s high level delegates are negotiating is allowing the country to secure more.

Commitments made
Some of the commitments were made by Mandulis Energy, Spouts International, 1MTN, Nexus Green and Masdar at UIA’s green investment session in the Green Investment Room at the Uganda Pavilion. UIA has already licensed those aforementioned projects and have commenced operations at different stages of green project development and execution.
Mr Peter Nyeko, the co-founder of Mandulis Energy, said their company develops renewable energy infrastructure using innovative technology that converts agricultural waste into low carbon electricity and biogas for households and small businesses.
Mandulis Energy is developing 24 off-grid power systems across rural Uganda, each 0.5 megawatt, and to be scaled to two megawatts. They will power agricultural processing facilities and serve more than 120,000 farmers in low-income communities.
The chief executive of Spouts International, Mr Daniel Yin, said they have invested about $10m and, in the next four years, will invest an additional $80m to $100m.
Spouts International is the largest manufacturer of ceramic water filters in Africa. It produces Purifaaya, a ceramic water filter made from clay and other locally sourced materials. Currently, it has reached 200,000 households, aiming to reach six million households by 2030.
“We make sure that all people have access to safe clean drinking water for the lowest price possible, and this empowers communities and also saves trees from being burnt to boil water for drinking,” said Yin.
In addition, the co-founder and chief executive of 1MTN, Christian Raude, said they have so far invested $1.5m and plan to invest another $100m in the next four years.
The 1MTN is a high-quality nature-based carbon removal project developer in Africa. Its mission is to restore one million hectares of degraded land by 2030 through the planting of polyculture native bamboo with an emphasis on biodiversity management.
“There is a lot of bamboo in Uganda and East Africa and not only does it make good investment sense but is also good for the environment and does not need too much water,” said Mr Raude.

Nexus Green, a solar energy company that manufactures and supplies affordable solar-powered solutions designed for hundreds of millions of people (estimated at 458 million) in east and central Africa without access to reliable energy, has also secured financing from the United Kingdom Export Fund and has invested $100m in the Ugandan factory, employing 200 people directly and more than 1,000 people indirectly, according to its founder and chief executive, Rikki Verma.

Uganda has also secured a deal worth $650m with Masdar, which is aimed to develop and install one gigawatt of solar power in the country.
“The first phase worth $150m will commence after the agreement was signed this week,” said Mr Izama.

Three-pronged approach
Uganda is lobbying for these deals on three fronts: the low development countries group; the African countries’ group; and also ‘G77 and China.’
Here the government is lobbying for adaptation, loss and damage, mitigation projects, capacity building, technology development and transfer and food systems to curb hunger, especially in drought-stricken areas.
Ms Margaret Athieno Mwebesa, the commissioner for water resources in the Water ministry, admitted on Wednesday in an online discussion on X (formerly Twitter) that the global stake on the way forward on climate change is still lacking. 
She also noted that it is paramount to enable Uganda to develop its next climate action plan and Nationally Determined Contribution (NDC).
An NDC is a climate action plan to cut emissions and adapt to climate impacts. Each party to the Paris Agreement is required to establish an NDC and update it every five years, according to the United Nations.
“We have secured the loss and damage fund, which is aimed to smoothen our transition and livelihoods of the affected people. However, we have not yet been successful securing deals in the food systems. That is where we need agriculture specialists who can negotiate on behalf of the country,” Ms Mwebesa said.

On the gravy train?
Ugandan officials have come under scrutiny from the public about the gravy train of 600 delegates that went to Dubai.  Concerns have been raised about the austerity measures that the national treasury promised to implement, including reducing government expenditure on workshops while optimising more revenue collection.
The country is short on cash. It just passed a Shs5.5 trillion supplementary budget.

Bank of Uganda (BoU) data shows that the government now spends at least $1b on public debt servicing. This negatively impacts the central bank’s efforts to build foreign exchange reserves, which have reduced from $5b in June 2022 to $3.9b.
Yet the bank has already warned that the volatility in the global financial markets could increase, triggering increased outflow of capital and exacerbating depreciation of the shilling. 

This is relevant if anything because international travel is dominated in foreign currency and it somewhat depletes the shilling when the country fails to collect substantial dollar receipts. The Brettonwoods institutions, like the International Monetary Fund, are pushing for Uganda’s fiscal consolidation, tight monetary policy, and continued exchange rate flexibility to keep debt on a sustainable path. 
They are also desirous of reducing the current account deficit and protecting foreign exchange buffers.

Govt responds
Uganda tabled a Shs52.7 trillion budget that it says was dedicated to poor Ugandans. Finance Minister Matia Kasaija proposed austerity measures, including a freeze on new administrative units, domestic borrowing and rationalisation of agencies to save the government Shs1 trillion annually.

Officials in the Water ministry say whoever went on government permit to the climate summit was on merit because there was a lot of scrutiny before anyone was allowed to go to the summit on government facilitation. 
Mr Jim Mugunga, the spokesperson of the national treasury, told Sunday Monitor that it’s difficult to track the money the government has spent on its delegates in the Dubai summit because it’s an integral part of so many agencies under which COP28 falls.

“Every institution has its own budget and, since this summit was known before, it could have been planned for. We do not micromanage funds for institutions,” he said. 
He added that climate change is a broad subject that falls under agriculture, health, infrastructure and so many more sectors. So each agency could have its own budget “and they are supposed to receive authorisation from their accounting officers.”

The Ministry of Water and Environment acknowledges that the country needs negotiators on at least three fronts on the summit—the low developing countries’ group, the continental fronts and  the G77 front—all of which need high level delegates vital for bilateral agreements.

Championing hydropower 
Uganda is fronting its ability to produce abundant hydropower and its secure business environment to attract offshore investors. The country projects to reach 5000MW from the current 1000MW of its hydropower.

Currently, the country banks on its Karuma, Bujagali, Kiira, Oriang, Ayago, and Isima hydroelectric power stations. In addition, President Museveni assented to the Electricity (Amendment) Act, 2022, on May 26, 2022. The assent paves way for the enactment of an enhanced regulatory regime in the electricity sub-sector of Uganda.

The new amended Electricity Act after a 23-year stretch opens access to and competition in transmission and bulk supply of energy, establishing an Infrastructure Fund to finance the much needed electricity access in Uganda; increased penalties for vandalism; and enhance energy planning, among others. 

But the country’s negotiators could face a hit since the majority of the projects that requested the Electricity Regulatory Authority (ERA) to do feasibility studies as of June 2023 were rejected mainly due to failure to meet environmental obligations, failure to qualify under the Notice of Intended Application framework, and failure to demonstrate financial capacity and requirements for licensing of grid connected projects. There is an increment in demand of domestic power of seven percent in a year-on-year review from 651MW to 699MW in 2021/22 financial year, according to ERA data. This increase in demand was attributed to the post-pandemic recovery and full opening up of the economy. 

“However, it should be noted that there was a decrease in demand during the last quarter of the 2021/22 financial year, mainly due to the general increase in the cost of production,” ERA noted in a report. 

“Maximum demand is projected to grow to 953MW in 2023, from the current 800 MW observed in FY 2021/22. The drivers for growth in demand include promoting electric cooking in institutions and households, enhancing industrial electrical usage, promoting electric mobility, and increasing access to electricity,” it added.