Uganda power cuts provoke riots, threaten economy

Fri Dec 2, 2011 1:09pm GMT

* Chronic electricity shortages common

* Govt in dispute with thermal providers

* Unrest worries investors and donors

By Elias Biryabarema

KAMPALA, Dec 2 (Reuters) - A growing power supply crisis in Uganda has provoked riots among a population already angered by soaring prices and is threatening growth in one of Africa's most promising economies.

The latest of a series of riots over 24-hour power outages that began almost two months ago exploded on Thursday in Ndeeba, outside the centre of the capital Kampala. Shopkeepers built barricades on a busy road, set tyres ablaze and blocked traffic.

Police fired teargas and live bullets, according to television footage, and the protesters quickly disappeared, but analysts say the unrest could further unnerve investors already spooked by the highest inflation in nearly 20 years.

Soon to be a top-50 crude oil producer, east Africa's third largest economy has long suffered power shortages after years of underinvestment and, some analysts say, mismanagement in the sector.

Recent shortages have been more severe after two independent thermal power producers shut their plants in protest at the government's failure to pay them promised subsidies.

Businesses are struggling to cope, leaving a question mark over Uganda's growth prospects.

The African Development Bank reduced its projected growth figure for Uganda for this year in October from around 6.3 percent to 6.1 percent, after 6.4 percent last year.

Foreign investors and the country's Western allies are concerned an African success story may sour.

"Foreign investors are worried because the outages are undermining their businesses and threatening the growth potential," said Dickens Kamugisha, director of African Center for Energy Governance(AFIEGO)."But more importantly the crisis is also fueling the resentment caused by high consumer prices."

It is also undermining President Yoweri Museveni's reputation as an astute economic and political tactician, analysts say, though the president, elected to a fourth-term earlier this year, is unlikely to find his 25-year rule threatened by the protests, which often face a tough response.

Opposition leader Kizza Besigye, who led several demonstrations earlier this year against the high cost of fuel, is now put under effective house arrest every time he tries to get protests off the ground.

The thermal power plant closures were a huge blow to an already stretched supply. Then, on Nov. 13, a fire crippled a key substation at Mutundwe, just outside the capital, cutting off power to about 22 percent of the grid.

The government is pleading patience.

"It's a grave problem but we have been working hard and we have managed to release the money to thermal generators," Peter Lokeris, junior energy minister, told Reuters.

For business people like Peter Mwebembezi who operates a printing company along a street where violent protests erupted recently, a solution is needed urgently. Revenues have plummeted and he's struggling to pay his nine full-time staff.

"I also have 40 contract workers and those now rarely turn up because, even if we have work, we can't do it since the power is rarely on," he said.

HOW TO SURVIVE?

On a recent afternoon in a Kampala industrial sprawl filled with hundreds of metal workers, the deafening clanks that usually drown out nearby traffic were silent. The electricity had been off since morning.

"I have not worked and I don't have any money in my pocket. I am hungry and I'm not taking anything to my family today. It makes me mad," said Asaf Kulumbano, 25, a sheet metal fabricator who says he makes about 270,000 shillings ($100) a month.

It's not just the money. Local media have reported that sick people have died because doctors had no electricity to operate.

Much of the flak from consumers has been directed at the power distribution company, Umeme Ltd, which critics accuse of under-investing in its distribution infrastructure.

"The issue of low generation capacity is at the core of Uganda's energy problems," said Angelo Izama, director of Fanaka Kwawote, an energy think-tank in Kampala.

"Government is busy subsidising consumers when it should be using that money to finance core things like increasing generation and revamping the rotten distribution infrastructure."

According to the Electricity Regulatory Authority the government spends about 600 billion Ugandan shillings ($231 million) to subsidise power tariffs annually.

Losses in the distribution system stand at 27 percent, down from 38 percent when Umeme took over the concession in 2005.

The firm, owned by British-based private equity firm Actis, has dismissed the accusations, pointing to the $130 million it has invested in erecting new poles and lines, installing new transformers and revamping substations.

An Umeme spokeswoman declined a request for comment, citing an ongoing parliamentary inquiry into power generation.

In Katwe, workers like those who set up burning barricades there recently are wondering what to do next. "When people demonstrate the police beat them up," one man named Edward said. "What do they want us to do to survive? Some might start stealing and maybe then the people responsible will listen." ($1 = 2593.000 Ugandan Shillings) (Editing by Barry Malone and Philippa Fletcher)

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