Thursday, June 28, 2007


Samuel Kizito gives his business a month before it goes belly up. Uganda, once one of the fastest-growing economies in Africa, is suffering through a power crisis that makes doing business here difficult, expensive and — for Mr. Kizito, at least — not worth the trouble.

Mr. Kizito said his blanket-manufacturing company, which employs 300 people in the Ugandan capital, Kampala, is losing $30,000 a month.

“We have less than 50 percent of the power that we had a couple of years ago, and yet our bills are four times what they used to be,” he said.

Uganda was once heralded as East Africa’s power station, generating surplus electricity to export to neighboring countries. But domestic demand has now outgrown supply, forcing a rationing schedule that leaves Kampala in the dark for up to 30 hours at a time.

Electricity prices have doubled in the past year to an average of 26 cents per unit — an astronomical amount in a country of 28 million where per-capita income is around $280.

Uganda, like many of its sub-Saharan counterparts, relies on hydroelectric power from Lake Victoria, the vast lake shared by Uganda, Kenya and Tanzania. Since 2000, Uganda has sopped up all the electricity its dams can produce. Exacerbating the problem, the dams are running below capacity owing to falling water levels on Lake Victoria.

“Inevitably the shortage has affected the growth rate,” said Uganda Energy Minister Simon D’Ujanga. “Factories are laying off staff because when there is no power the machines are idle. … Productivity has been scaled back in a very big way.”

According to the World Bank, annual economic growth in Uganda has dropped to 5.6 percent since 2000. Previously, the economy had been growing at around 6.8 percent, a shining example of progress in a region marked by corruption and poverty. Neighboring Kenya, by comparison, was experiencing negative growth rates in the early 1990s.

“The situation now is worse than I’ve ever seen,” Mr. D’Ujanga said. “We can’t even think of exporting power. Now Kenya supplies us whenever it has a surplus.”

The energy crisis has been caused in part by Uganda’s rapid growth. The economy has doubled in the past decade, according to Uganda investment officials. And the population has exploded at a rate of about 3.6 percent a year — the highest rate in Africa, according to the United Nations.

To help close the energy gap, the government last year installed two diesel generators producing 50 megawatts each. But fuel is costly, with each unit consuming about 42,000 gallons each day — the equivalent of four tankers. Consumers and the government, which subsidizes the fuel to the tune of $150 million each year, have carried the cost burden.

“Even to bring in the diesel stations was a very painful decision for us,” Mr. D’Ujanga said. “We thought, ‘How will our people pay for this?’ But the other alternative is to have darkness. So we thought maybe it is better to have expensive power than to have darkness.”

The biggest potential boost in energy is from the planned Bujagali hydroelectric dam, situated across the picturesque Bujagali Falls, some 60 miles east of Kampala and slated to produce 250 megawatts by 2011. Construction could begin in June, but environmental concerns and charges of corruption have delayed the project since it was conceived in 2004.

Herbert Zake, head of corporate affairs at Standard Chartered Bank in Uganda, said investors in Uganda are struggling.

“We can only assume that it would be even harder for potential new entrants, who we believe may have had to reassess their view on investing in the country with regard to location and scale of operation,” he said.

Mr. D’Ujanga, the state energy minister, said that besides more hydroelectric projects and an additional diesel generator, Uganda’s future energy supply will come from renewable energy sources, such as solar and wind power. He hopes that in 15 years, 20 percent of Uganda’s energy will be derived from such renewable sources.

But for businessmen like Mr. Kizito, the blanket manufacturer, even six months is simply too far off.

“If we had known that the situation was going to be so prolonged, we would have closed 18 months ago,” he said. “But we kept believing the government that things would get better.”

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