BMAU Briefing Paper (16/16) June 2016

THE REPUBLIC OF

What is constraining increased power use/ connections in Uganda?

OVERVIEW KEY POLICY ISSUES Energy is a key strategic infrastructure • There are persistent delays in the in development according to the second implementation of grid extension National Development Plan (NDP II) as it projects due to limited capacity of accelerates the harnessing of opportunities contractors, which is exacerbated by thereby spurring growth in the country. late payment by Rural Electrification Uganda’s Vision 2040 also recognizes that Agency (REA). energy, particularly electricity is a driver of socio-economic transformation of the • Many poor households cannot afford to nation. connect. From Financial Year (FY) 2011/12 to • Knowledge of the existence of the 2015/16, Government has invested Ug subsidised household connections shs 126.022 billion towards grid extension project is still slowed down by limited and increasing household connections to sensitization. the rural poor households. This has been done through funding projects such as grid extension lines, and by subsidizing household connections. Currently, energy access in Uganda is at 1 This briefing paper examines whether 20% . However, this is still very low to achieve these investments will result in increased meaningful development. power use/ connection. Focus of analysis is on development expenditures during The Rural Electrification Program was elevated FYs2011/12-2015/16 majorly using to Vote status in FY2013/14 and funding to this the Integrated Financial Management System (IFMS), Budget Monitoring and vote has cumulatively increased to about Ug Accountability Unit (BMAU) reports, Ministry shs 126 billion. of Finance’s Approved Estimates and the Public Investment Plan. Projects funded under this vote include the Rural Electrification Program and the Output Based Aid (OBA) - Household Connections Introduction Project. The projects aim at contributing to the overall objective of achieving rural In FY2011/12 and 2012/13, a Government of electrification access of 26% by June 2022. Uganda (GoU) contribution of Ug shs 24billion The GoU and development partners jointly was allocated to increase rural electrification support these projects. under the Energy for Rural Transformation (ERTII) and the Rural Electrification projects. 1 UBOS National Population and Housing Census,2014:

Ministry of Finance, Planning and Economic Development 1 BMAU Briefing Paper (16/16)

Grid Extension Projects a) Delayed implementation of projects These are implemented under the Rural There have been delays in all projects that have Electrification Program with an aim of been monitored in the period under review. All increasing grid coverage throughout the contractors have applied for extensions during country. In the period under review, a number project implementation and hardly completing of projects have been completed including; by the revised dates. The major reason Namutamba-Bugobi; Migyera-Nyakitoma line; highlighted by all contractors for the delays was Soroti-Katakwu-Amuria; Ibanda-Kabujwogera; delayed payments from REA. For instance, Muhanga - Kamwezi; Bukwiri - Kyankanzi; the contractor on the Gulu/Kitgum/Pader/ Ibanda - Kazo - Rushere; Gulu - Kamdini - Otuke/Lira/Lamwo; and Wakiso/Butambala Bobi. The grid extension projects supply power lines are yet to be paid fully after completion for lighting, powering electronic equipment to of the lines. Some of the contractors did not various social institutions such as schools; have adequate financial capacity to implement sub-county headquarters; and health centers. projects using own resources until the REA In trading centers, it enables business paid them. Table 1 below shows the project development leading to increased incomes timeframes and revised timeframes. among the users. Table 1: Timeframe of Selected Grid A number of projects are also still under Extension Projects implementation such as; Apac/ Chegere-Kole/ Akalo-baala, Ntungamo/ / / Project Initial Start and Revised completion Completion / Kanungu/ Kisoro/ Nakasongola/ dates date Luwero, Serere/ Soroti/ Palisa/ Kapchorwa/ Apac-Chegere- Aug 2014 to Oct January Kumi; Kapchworwa-Bukwo-Suam. Alemi 2015 2016 (delayed payment) Ntungamo/ July 2014 to July 2016 Rukungiri/ June 2015 Kanungu/Kisoro/ Kabale/Mbarara and Environs Nakasongola/ May 2014 to May 2016 Luwero/ June 2015 Nakaseke/ Hoima/ Zombo/ Arua/Paidha Wakiso/ May 2014 to May 2016 Butambala June 2015

Serere/ June 2014 to April 2016 Ongoing low voltage string in for Soroti/Pallisa/ Sep 2015 Ntungamo/Rukungiri/Kanungu/Kisoro/ Kabale/Mbarara Kapchorwa and Environs Kapchworwa- Dec 2014 to Sep July 2016 Bukwo- Suam 2015 Challenges with Grid extension Projects Bundibugyo- June 2014 to February Kasese-- June 2015 2016 A number of challenges have continuously Kamwenge affected the successful implementation of grid Gulu/Kitgum/ Sep 2014 to Dec March 2016 Pader/ Otuke/ 2015 extension projects. Some of these include; Lira/Lamwo

Source: Field Findings

2 Ministry of Finance, Planning and Economic Development BMAU Briefing Paper (16/16)

Other reasons delaying project implementation power lines. Alternatively, it is poor households include; identified in newly electrified areas where poverty mapping has been undertaken by an b) Change in scope on the lines –like independent consultant. Nakasongola/Luwero/Nakaseke/Hoima/ Zombo/Arua/Paidha and Ntungamo/ The total project funding is US$18.2 million. Rukungiri/Kanungu/Kisoro/ Kabale/ The OBA Project is now targeting 115,700 Mbarara lines connections throughout the rural and peri-urban c) Delays in clearance of materials including areas. Considering an average occupancy of transformers, wires and insulators from five members per household, the estimated Uganda Revenue Authority. project beneficiaries are 578,000. d) Vandalized transformers as reported on The electricity connections under the OBA Wakiso/Butambala line. project are made by licensed distribution companies (LDCs) namely; Umeme Limited, The OBA Grid Extensions program: Free West Nile Rural Electrification Company Household Connections (WENRECO), Ferdsult The Uganda grid-based OBA Project is funded Engineering Services Limited (FESL), Kilembe by the Global Partnership on Output-Based Investments Limited (KIL), Bundibudyo Energy Aid (GPOBA) through the World Bank (IDA), Cooperative Society (BECS), Pader – the Government of the Federal Republic of Abim Community Multi-Purpose Electric Germany, the European Union (EU) through Cooperative Society Limited (PACMECS), the German Financial Cooperation (KfW), and Uganda Electricity Distribution Company GoU The objective of the OBA Project is to Limited (UEDCL), and Kyegegwa Rural provide improved access to electricity to poor Electric Cooperative Society (KRECS). households throughout Uganda. The project subsidizes the full cost of connection to poor The OBA project became effective in households who need no pole service, in a December 2012 and actual connections distance of less or equal to 35 metres from a low commenced in July 2013. A cumulative total of voltage network. These must be able to pay for 102,205 connections were reported by service internal house wiring and the energy consumed providers to have been made by the end of but have not connected their premises for at March 2016, representing 89% of the total least 18 months after commissioning of the target as detailed in table 2.

Table 2: Cumulative Connection made for the OBA Project

SP/Period FY2013 /14 FY2014 /15 July-Sept 2015 Oct-Dec Jan-Mar Total UEDCL - 462 481 1,083 593 2,619 Umeme 58 31,460 33,842 18,172 5,279 88,811 PACMECS 226 219 101 82 35 663 WENRECO 417 516 - - - 933 FESL 464 778 - - - 1,242 BECS 388 1,142 627 848 401 3,406 KIL 1,357 2,274 392 34 394 4,451 KRECS - - - - 80 80 Total 2,910 36,851 35,443 20,219 6,782 102,205

Source: Field Findings; REA

Ministry of Finance, Planning and Economic Development 3 BMAU Briefing Paper (16/16)

Benefits from OBA project Conclusion The customers connected to power under the In conclusion, government has invested heavily OBA project listed various benefits. These in energy through increasing grid extension include; and electricity access. However, powers connections/use continues to be constrained • Ability to operate businesses such as by the delayed completion of grid extension saloons; mobile money kiosks; restaurants projects; and inability of the poor households leading to improved incomes and to connect. development in the area, • Ability to light houses using clean energy, Recommendations • Ability to charge phones, • Government should prioritise required counterpart funding to the grid extensions • The prepaid metering system eased project. payment for power. • REA should effectively appraise the financial capacity of contractors during the evaluation of bids from contactors. • REA should mobilize funds to give free connection to the poor households or further subsidize the connections. • REA should enhance awareness of the OBA programme to rural households.

L-R: OBA beneficiary operating a mobile money shop and phone charging business; Installed power meter in Kasese district References: Persistent Challenges of the OBA • Budget Monitoring Reports FY 2011/12- Connections Q2 FY 2015/16 • GOU (June 2015) Second National In spite of the benefits associated with the Development Plan 2015/16-2019/20 project, in-depth discussions with the service • providers and beneficiaries revealed that the GOU (June 2015) Approved Estimates of Revenue and Expenditure (Recurrent project is not entirely benefiting the intended and Development) 2011/12-2015/16 poor households. For instance; i) majority of the poor households cannot afford the wiring • MEMD Sector performance Report costs of about Ug shs 350,000 ii) the ready 2013-14 boards which could serve the poor who cannot • MFPED Public Investment Plan afford wiring costs are not available; grid power (2012/13-2017/18) is largely linear and concentrated in urban and trading centres for the villages leaving out some rural households; iii) Sensitization efforts Budget Monitoring and Accountability by Real Marketing Limited have not effectively Unit reached all the households as some potential Ministry of Finance Planning and beneficiaries are not aware of the existence of Economic Development, such a program. Plot 2-12 Apollo Kaggwa Road, P.O. Box 8147 Kampala

4 Ministry of Finance, Planning and Economic Development