Inside the Shs9.5trillion energy loan

The Ministry of Energy and Mineral Development took 17 loans, totalling to more than Shs10 trillion to construct hydroelectricity dams, distribution lines and enable rural electrification. 

However, despite the huge investment, Uganda has 27 percent access to grid connection, with large swaths of country plunged into darkness.

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The current installed electricity capacity in Uganda as of end of last year was 1,346 megawatts with demand at about 800 MW, leaving a surplus of 546 MW.

Data presented to the committee by the Energy ministry officials led by the Minister of State for Energy, Mr Sidronius Okaasai Opolot, indicated that the ministry borrowed up to $2.6 billion (about Shs9.5 trillion) since 2013. 

About half of the loan to the tune of $1.1 billion (about Shs4 trillion) was secured for the construction of 600MW Karuma Dam, another $482.6m (Shs1.8 trillion) for Isimba Dam, both from Exim Bank of China and $212.7 million (Shs776.4 billion) for bridging the demand gap through accelerated rural electrification programme.

Other projects that also consumed huge loans include energy for rural transformation, which got $143 million (Shs522 billion) and rural electrification access had $133 million (Shs485.5b), where $72 million went for extension of 400KV Masaka-Mbarara transmission line, $80 million Opuyo-Moroto transmission line, €15 million Mutundwe-Entebbe transmission, $37 million for Mirama-Kabale transmission line, $32 million for Kampala metropolitan transmission improvement system and $90 million for grid expansion and rural electrification project.

Gulu-Agago transmission line got €40 million, while $45.9m funds obtained through the loans went again to Mirama-Kabale transmission and distribution network. About €40 million was obtained for Muzizi hydro project which was later abandoned sparking angry protests from legislators, and €23 million for airborne geophysical and geological mapping of Karamoja.

Parliament last year approved another loan of $638m (Shs2.3 trillion), taking the total to Shs11.8 trillion.
While presenting the status update of the loans to the committee on national economy yesterday, Ms Irene Pauline Batebe, the Permanent Secretary of Ministry of Energy and Mineral Development, said many of the projects are at various stages of implementation. 

She said while some have already been completed, others are ongoing and that the absorption rate of the loans secured was quite impressive.

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Ms Batebe said the loan, which was approved by Parliament last year to connect a million customers to the grid, is already at an advanced stage, adding that work will soon start.

“The electricity access scale up project whose financing is to the tune of $638 million, was approved by Parliament. The ministry is now finalising the loan effectiveness conditions with the set timelines. This project is expected to add over one million connections to the national grid targeting households, commercial enterprises, public institutions, mining centres and industrial parks, thereby creating demand for up to 500MW. Implementation of the project is expected to commence after April 2023,” she said.

Ms Batebe, however, said a number of projects were affected by the Covid-19 pandemic for two years during the lockdown. 

She said with the end of the Covid-19 lockdown and reopening of the economy, all the projects that had been delayed are proceeding well.

MPs pin team

Legislators, however, pinned the Energy ministry officials over selective connections, losses incurred during liability defect period and cancelled loans that were not utilised.

Ms Batebe in her report had indicated that a loan of €40 million that was secured for construction of 44.7MW hydropower dam had been cancelled because the cost of bidding was much higher and that the contractor had inflated the cost of construction.

However, legislators were enraged to find out that government had paid $3 million agency fee yet no work was done.

Mr Allan Atugonza, the Buliisa County Member of Parliament (MP), wondered how government had incurred a loss on loans that did not materialise and questioned where the money had gone and who got it.

“You have indicated in your report that the loan was cancelled but already when I see, a commission was already paid to the contractor. How did we pay commission and yet we have not implemented this project. I want the ministry to tell us,” he said.

Mr Nathan Byanyima, the Bukanga North County MP, questioned the officials on selective connection wondering whether the ministry has records of where they have connected. 

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He also wondered why particular villages in some regions are all connected while a whole sub-county or even a district is left without connection to the grid.

“Does the ministry have a map of Uganda where they see that there is no power and they can equitably distribute power? How can you explain to us that we have villages where everyone is connected but we have sub-counties without electricity? We need equitable distribution of electricity connection across the country,” he said.

Mr Kajwengye Twinomugisha Wilson (Nyabushozi County MP) said many of the places that were connected under electricity for transformation project only have power for lighting, but not to run businesses.
“I have 24 small trading centres in my constituency [of which] 14 were connected to low voltage which only lights the houses. I also have eight health centre IIIs, but only three have been connected to electricity. What transformation are we talking about if people cannot use the power for commercial purposes? My constituency produces a lot of milk, but when one person switches on power for the milk cooler, all lights go off and other farmers cannot switch on their power. Is that what we call electricity for transformation?” he questioned.

The chairperson of the committee, Mr John Bosco Ikojo (Bukedea County), asked the officials to prepare written responses to a number of issues the members raised and submit them for final report writing.