Uganda’s tariff for industrial users is the most competitive in comparison to those charged by three of its regional peers, according to the Energy Regulators Association of East Africa (EREA) June 2022 data.
Uganda’s rate for a large industrial user is 9.77 USA cents (Shs 355.6) per unit compared with 10.2 cents (Shs 371.2) in Rwanda, 12.4 USA cents (Shs 451.3) in Burundi and 13.78 USA cents (Shs 501.5) in Kenya.
A medium industrial consumer in Uganda pays 12.09 cents (Shs 469.5) while their peer in Burundi shells out 18.2 USA cents (Shs 662.4), one in Kenya parts with 14.96 USA cents (Shs 544.5) and that in Rwanda pays 11.02 USA cents (Shs 401.1).
To improve Uganda’s industrial sector’s competitiveness, the government years back set out to reduce power tariffs by, among other measures, publically funding the construction of renewable power projects such as Isimba and Karuma hydropower plants to generate cheaper electricity.
Indeed, even with rises of the prices of imported oil, a spike in inflation, USA producer price index and the weakening of the shilling against the USA dollar, a review of Uganda Electricity Regulatory Authority’s tariff schedules for the years 2019 to 2022 shows the charges are dropping.
For instance, in the third quarter (July to September) of 2019, the average tariff for a large industrial consumer was Shs 365.7 per unit. As of quarter three 2020, the rate had dropped to Shs 361 per unit, Shs 355 in Q3 2021 where it has remained to date.
In the case of a medium industrial user, the tariff decreased from Shs 599.2 per unit in Q3 2019, to Shs 570.9 per kilowatt hour (kWh) in Q3 2020, Shs 526.9 in Q3 2021 and Shs 439.1/ kWh in Q3 2022.
Commercial consumers paid an average of Shs 669.5 per unit in Q3 2019, which reduced to Shs 645.6 in the Q3 2020, Shs 616.6 in Q3 2021 and Shs 580.6 per unit in Q3 2022.
At the tail end of 2021, the minister of Energy and Mineral Development, Ruth Nankabirwa, said the government would in 2022 pilot a five USA cents (Shs 182) per unit tariff in two industrial parks – Lao Shen in Kapeeka and MMP in Buikwe – before it could consider rolling it out to other industrial parks where manufacturers are concentrated.
“During the piloting period,” Nankabirwa said through a press statement, “Consumption of electricity in the two industrial parks is expected to increase to offset the revenue shortfall that would result from the supply of electricity at five USA cents per kilo watt-hour.”
She added that if the consumption did not cover the shortfall, the government would consider subsidies. The government reasons that once power tariffs – one of the key factors for production in the manufacturing sector - reduce substantially, some companies currently based in countries where power charges are comparatively higher would relocate to Uganda.
And when investors establish factories here, it will create job opportunities for many of the youths currently searching for employment, and that will reduce the likelihood of them turning to crime to make ends meet.
The government has also capitalised the Uganda Development Bank with Shs 636 billion to lend to medium and large-scale businesses at 12 per cent per annum interest, which is six percentage points lower than what many commercial banks charge for loans dominated in Uganda shillings.
Still on reducing the cost of doing business, the government is revamping the old metre gauge railway from the Malaba border in eastern Uganda to Gulu in northern Uganda and Kasese district in southwestern Uganda to lower the cost of hauling either raw materials or finished products across Uganda.