France and Germany signed a financing agreement with the government of Uganda to provide €90 million for the construction of the Muzizi hydropower dam.

France through the French Development Agency said it would provide €45 million, a concessional loan. The remaining €45 million will come from the German kfW Bank, a concessional loan of €40 million and a €5 million subsidy. The Ugandan government committed to provide the rest of the funding for the project which is expected to cost about €110 million.

“The Muzizi project will increase the current power generation capacity in Uganda by about 5 percent, enough to power 1 million homes,” the two European institutions said in a joint statement.

The 44.7 MW project will be developed on the lower riches of the Muzizi River and serve the Kibale, Kabarole, Kvendjojo and Ntooroko communities, in the western part of the country.

Uganda plans to bring its power production capacity to 1,500 MW by 2018, from 850 MW now. This increase could however not be as profiting as it seems.

Truly, the report on the country’s electric activity in 2014 and 2015 warns: “The government’s commitment to invest in projects, without any appropriate prior analysis of the challenges in terms of demand, could lead it to becoming unable to pay the debts it took to develop these projects. This would further increase subsidies to the power sector, subsequently drawing on the meager public resources”

The country which was at overcapacity, by 118 MW last January, had a 20% electrification rate, spurred mainly by the small size of its power network. Also, its electricity tariff, $0.11/kwh, is the highest in the region (42% increase since 2012. A situation that the government and its partners, including the World Bank, are working to change. It is mostly due to power being purchased from the Bujagali hydroelectric dam.  

Gwladys Johnson