Power consumption for industry dropped by 3% from 6.5% in 2018/19 due to the lockdown measures instituted against to contain the spread of the novel Corona Virus. On 15th July, 2020, Uganda Manufacturers Association hosted representatives from Electricity Regulatory Authority (ERA) to discuss the quarterly trajectory of power tariffs.
Remarks from UMA;
Power consumption for industry dropped by 3% from 6.5% in 2018/19 due to the lockdown measures instituted against to contain the spread of the novel Corona Virus.
According to UMA, the pandemic has presented some very unique opportunities to the Electricity Supply Industry (ESI) in terms of managing the structure of returns to investment and cost of capital and they requested ERA to consider;
- Renegotiation of the UMEME concessional agreement in light of the disruptions caused by COVID-19 pandemic. Globally, there has been a push for stakeholders in the global economy where revenue requirements of ESI licensees are driven by very high Returns on Investment (R.O.I) to renegotiate and rhyme with reality.
- Since the power cost drivers have largely remained stable, UMA strongly maintains that power tariffs should reduce or at worst maintained at the current levels to support resumption of optimal production in manufacturing.
- The price of oil, inflation and exchange rates have been largely favourable and there is no indication that the trajectory shall change in the medium term given the global economic environment. If power rates are reduced or maintained at worst, manufacturers shall leverage the expansionary monetary policy to drive production and investment.
- The need to meet set obligations by UMEME in regards to rectifying the never-ending power quality shortfalls in some industrial locations such as Seeta – Mukono - Mabalala, Kawempe and elsewhere. In a meeting on 29th January, 2020 at UMA Boardroom, UMEME committed on record to resolve the Mukono sub – station specifically by 15th of February, 2020, however until now the problem has persisted, with no clear communication from UMEME.
- Local sourcing for especially transformers and cables that are locally made sufficiently available as a move for imports replacement which is one in the multi-faceted stimuli for recovery as envisioned by the National Budget and committed by HE the President in the State of the Nation Address. UMEME are a licensee of Government of Uganda, as such ERA should be able to prevail over UMEME to source local as much as it is practical.
- Clarity on the current industrial consumption categorisation given the slump on production. The current categorisation speaks to manufacturing facilities being able to meet a given threshold in terms of power consumptions. However, given the current impact of Covid on production, UMA needs a clear trajectory on the categorisation amidst the current eventuality.
Remarks from ERA;
- According to ERA, the electricity sector was not insulated from the shocks of the Covid-19 pandemic either.
- The reaffirmed that that renegotiation of the UMEME concession agreement was purely, a regulation issue and committed to have more discussion around the same.
- Reliability of power: they noted that complaints with regard to reliability of power would be handled case by case for manufacturers.
- They noted that ERA had committed investment on new connections and pledged to fix the issues with the Mukono substation.
- Local sourcing of transformers; ERA noted that they would engage UMEME to understand the required specifications from the local transformer manufacturers to supply the specialised transformers.
UMA’s Proposals Towards Building a Stronger Recovery
During the Post Budget E-Conference that was held on 23-24 June 2020, Uganda Manufacturers Association, represented by the Chairman, Ms Barbara Mulwana delivered a raft of proposals needed to hasten recovery of the economy after the worst of the health crisis, Covid-19.
In this year’s financial year budget, a stimulus package of 1 trillion was allocated to Uganda Development Bank to cater for manufacturers. Even with the stimulus in production, Ms Barbara Mulwana pointed out the need to stimulate aggregate demand for sustainability through;
Settlement of domestic arrears/VAT & WHT Refunds:
This, she said would be done through settlement of domestic arrears to be made in the first quarter of the financial year 2020. Settlement of these arrears is crucial to ensuring that industrialists have working capital.
Mainstreaming of local content in public procurement:
As the UMA, we have identified the Public Procurement as a vehicle towards full recovery of the economy. As such, having local content mainstreamed in public procurement process will not only create market for locally made products but will also create more jobs for Ugandans.
Cognizant of the delays in payment, Government ought to issue letters of credit to local suppliers to be paid on time.
Facilitate an export guarantee scheme:
In order to lessen the risk of exporting to volatile markets like DRC,
Government of Uganda ought to facilitate an export guarantee scheme for local exporters.
Access to the NSSF savings
With 7 million informal workers out of work and close to 1.5 million formal workers laid off due to the pandemic, early access to their savings should be first tracked by NSSF to improve livelihoods and increase in the level of liquidity to spark demand and supply.
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