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Row over Umeme transition, compensation cash

Peter 20th Mar, 2025 Energy Pedson Mumbere
Row over Umeme transition, compensation cash

Umeme engineers inspect a power transformer. The looming transition from the private company to a public entity is sending jitters among key stakeholders. FILE PHOTO


Uganda is facing a critical moment in its electricity sector, with uncertainty looming over the government’s readiness to take over electricity distribution from Umeme.

The transition, which has been marred by funding gaps, contractual restrictions, and staffing concerns, is now in sharper focus as key players wrangle to ensure a smooth handover.

The Electricity Regulatory Authority (ERA) has sounded the alarm over the government’s preparedness, with Ziria Tibalwa, the CEO of ERA, telling Parliament’s Committee on National Economy that Uganda was “not yet ready.”

  • “On our side, we aren’t even ready with the UGX 190 billion for UEDCL to start,” she said, pointing to a critical financing shortfall for the Uganda Electricity Distribution Company Limited (UEDCL). This delay in funding raises concerns about potential disruptions in power supply and service quality.

Tibalwa also highlighted restrictive clauses in the Umeme concession agreement, which prevent government intervention until the contract expires. This, she suggested, has left the nation vulnerable to increased power outages. “I don’t know whether it is a coincidence, but in the last one month, we have had serious outages,” she said, questioning whether Umeme’s service quality has declined as the contract nears its end.

However, in a statement released on March 19, the Ministry of Finance, Planning, and Economic Development confirmed that the government is in advanced stages of securing UGX 190 billion through internal borrowing.

  • “By the end of next week, these funds will be available to ensure that UEDCL is financially equipped to improve the quality of service,” the ministry said.

Additionally, the government is finalizing the approval of the buyout amount to compensate Umeme for its unrecovered capital investments, in a bid to ensure a seamless transition in electricity distribution.

While securing UGX 190 billion for UEDCL is a step forward, the larger issue of the Umeme buyout remains contentious. The government plans to borrow UGX 722 billion from Stanbic Bank Uganda to pay off Umeme. However, the Auditor General has called for an immediate halt to the loan’s approval, citing discrepancies in the figures.

Preliminary findings by the Auditor General suggest that the buyout should cost only UGX482 billion, significantly lower than the government’s proposed UGX722 billion loan amount. This discrepancy has raised concerns over potential overvaluation and misallocation of public funds.

Beyond financial concerns, the transition from Umeme to UEDCL is expected to lead to job losses, which Energy Minister Ruth Nankabirwa acknowledged, saying the restructuring aims to eliminate duplication between Umeme and UEDCL employees.

  • “Where we find out your job is already taken and we already have it with UEDCL, your contract has ended with Umeme,” she stated. “If we interview both of them, the Umeme one and the UEDCL one, one of them is bound to lose. So, this is inevitable.”
  • While officials stress that the recruitment process is fair and merit-based, uncertainty remains for hundreds of workers whose futures hang in the balance.

As the April transition date approaches, the government has instructed Umeme to continue fulfilling its contractual obligations until the end of March 2025. UEDCL is expected to take immediate corrective measures starting April 1, 2025, to address power reliability challenges and enhance service delivery.

Despite these assurances, industry experts warn that any gaps in readiness could lead to prolonged service disruptions.

As the country moves closer to the takeover deadline, all eyes will be on the government’s ability to finalize funding, resolve financial discrepancies, and manage the workforce transition effectively.

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