16 November 2012

Uganda: How MPs Failed the Umeme Test

In the end, Parliament's investigation of Uganda's troubled energy sector, which kicked off more than a year ago but whose findings have never been tabled before the House, was never about finding the perfect solutions to correct the wrongs.

From the moment it was launched, the investigation was simply a critical pawn in a stiff power struggle within the industry that some shrewd legislators turned into a cash cow, milking those energy players seeking their favour, highly-placed sources have told The Observer.

Our sources say that mid last year, investors eyeing Uganda's electricity distribution business - backed by political heavyweights - first approached cabinet and made recommendations as to how both the government and the public could save money. The timing was perfect. Around that time, there was widespread public uproar over the biting electricity blackouts. The anger was directed, rightly or wrongly, at Umeme Limited, the main energy distribution firm.

The government, fresh from a gruelling political campaign that saw the ruling party spend more money than in the last three previous elections, was choking under the weight of the billions of shillings in subsidies to the power industry. Meanwhile, Electricity Regulatory Authority (ERA), the industry regulator, was preparing to review Umeme's licence, with the possibility of instituting new measures and targets that would make the distributor's life harder.

With some government officials showing a willingness to listen to any other option available, the investors moved to another critical industry to help them build up their case - the media. Stories started making the rounds about Umeme's purportedly shady licence, and just what a terrible deal Uganda had signed.

The investors, who we cannot name because of the legal implications, then moved and infiltrated Parliament, swaying some legislators. Eventually, a special probe team was assigned to investigate the power sector.

The parliamentary investigation took a broad spectrum; it was to investigate matters related to power losses, tariffs, subsidies and power generation; scrutinize agreements; establish the extent to which General Salim Saleh's report was implemented; and investigate whether the management of the open tender system (OTS) on purchase of oil products in Kenya had a bearing on production costs of thermal generation.

The parliamentary probe overlooked such sensitive issues as the competence of the regulator, ERA; government's decision to offer subsidies, which was informed more by political rather than economic interests; and power generation at Jinja, especially the controversy over the second dam.

For the investors eying the power distribution industry, everything was playing in their favour, especially if you consider that the Gen Salim Saleh report had also recommended punitive action against Umeme. (The Salim Saleh report ended up on the shelf after Fred Kabagambe-Kaliisa, the Permanent Secretary in the ministry of Energy and Mineral Development fell short of labeling it a work of high-level mediocrity).

But executing the plan was never going to be easy. For starters, while it is easy for Members of Parliament to investigate matters of corruption in different ministries, the electricity industry is a highly technical one. Led by Jacob Oboth, the committee faced the tall order of digging through the daunting numbers of kilowatts and kilovolts, the complex terminologies dotted all over electricity studies, and simply making sense of terms such as the difference between a power leakage and a line drop (there is almost none).

According to our sources, electricity industry players started bailing out the legislators by pointing them to the different issues facing the industry. Indeed, Umeme officials led by the company's managing director, Charles Chapman, were invited to the committee, where any sense of modesty was thrown out of the window as the grilling turned into a verbal war.

The media followed the action religiously, with the committee briefly assuming the coveted image of Parliament's most feared watchdog. That was enough for some members of the team to ask for even bigger financial rewards from the investors eyeing the power industry, according to our sources.

The probe team also flew to Ghana and Kenya to compare notes between the energy industries there and Uganda's. Some shrewd legislators started delaying and derailing the committee for ulterior motives. The 60 days from early September, 2011 which Speaker Kadaga had given the probe team, elapsed before the legislators could make any headway.

The MPs asked for more time. They got two extra months, but they still failed to beat that time. All this time, the legislators were being booked into expensive hotels as they embarked on retreats to deliberate on the findings of the report.

And then the members started grumbling amongst themselves. Some vowed to write a minority report. Accusations of bribery started flying around. There were also allegations that some interested parties never wanted the report to see the light of day, especially on Parliament's floor.

Umeme is a powerful company, with some equally powerful godfathers. Patrick Bitature, chairman of Uganda Investment Authority, is also Umeme chairman. James Mulwana, one of the most respected local entrepreneurs, sits on the Umeme board.

Throughout all this drama, unforeseen factors started playing out, which would ultimately make the energy probe team, and whatever findings they had come up with, irrelevant. The workings of the media became the first factor. For an industry that hates to be kept waiting, the media started losing interest in the energy story, sensing that the MPs might never release their findings. Besides, there were other newsy stories competing for attention.

And then the 250MW of power from Bujagali started coming on line. The public uproar over load-shedding died down. Umeme, despite its shortcomings, got a breather. Then Umeme launched its Shs 170bn Initial Public Offering. During the last three days of its IPO, some MPs tried to hijack the tabling of the report on the floor of Parliament. Indeed, on the second last day of the IPO, there was talk within Parliament that the report would be debated. It was not.

With the IPO concluded, and Umeme reporting a 35% oversubscription, and with MPs on the probe team left with little to chew on, some leaked a draft report to the media, which might explain the recent screaming headlines that called for the cancellation of Umeme's contract.

But unlike before, Ugandans are now part owners of Umeme. So what now?

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