World Bank Set for Uganda Dam Refinancing Talks Despite Criticism | Financial Times

David Pilling, Africa Editor, Financial Times
Wednesday, March 7, 2018

Worker rights violations and environmental concerns not addressed, say critics


This article originally appeared in the Financial Times.

The World Bank is poised to decide whether to refinance loans on a $900m hydroelectric power plant in Uganda despite criticism from the bank’s own watchdog that workers’ rights were violated on the project and complaints from campaigners that the Ugandan government has ridden roughshod over environmental safeguards.

Bujagali Falls in March 2007, before dam construction.
Bujagali Falls in March 2007, before dam construction.
Sanjoy Ghosh, via Wikimedia Commons

The 250MW Bujagali dam, which is part-owned by an affiliate of the Blackstone Group, the private equity investor, has been presented as a successful example of the World Bank’s push for public-private partnerships to fund infrastructure in the developing word. But, said one bank official who did not want to be identified, it is “a poster child with some pretty nasty blemishes”.

A bank-affiliated ombudsman, which investigates complaints into projects undertaken by the International Finance Corporation, the World Bank’s private-sector arm, last year found that workers on the project who had been permanently injured “were not provided with appropriate compensation”.

It said “significant numbers of households whose land was acquired ... likely did not receive compensation at full replacement cost”, while others had payments delayed.

As the project moved towards the next phase, the IFC should consult with affected communities and workers and “make specific timebound commitments,” an ombudsman spokesman said.

The IFC, the lead investor in Bujagali, is meeting on Thursday to discuss the refinancing deal. The move has prompted campaigners to press the IFC to address some of the alleged problems.

“This is an unusual opportunity to get a second bite at the apple,” said Josh Klemm, policy director for International Rivers, an NGO that campaigns for river protection. He urged the IFC to put money aside to address outstanding compensation claims.

Critics have accused the bank of failing to enforce an agreement with the Ugandan government to preserve a stretch of the Nile as an “environmental offset” to compensate for damage caused by the hydroelectric plant.

Construction of the dam, completed in 2012, submerged the Bujagali waterfalls and flooded an environmentally sensitive area. To offset this, the Ugandan government agreed to preserve in perpetuity another section of the Nile around Kalagala.

But it has since given the go-ahead for the Chinese-built Isimba dam, which will shortly flood part of that area too, a decision that campaigners say makes a mockery of the original offset deal.

“There was a clear agreement by the government to protect this area,” said Mr Klemm. “The World Bank has been complicit in impacting Kalagala and not ensuring its own legal obligations are being met.”

The IFC should use the opportunity presented by the refinancing to press Uganda to lower the proposed height of the Isimba dam to limit damage to Kalagala, he said.

The bank said that ahead of the refinancing, it had negotiated a new and expanded offset agreement with the Ugandan government that carried the force of law, unlike the original offset deal.

The refinancing will help bring down electricity tariffs that campaigners say are among the highest in east Africa and unaffordable for many Ugandans. Lenders are proposing lengthening loan maturities, most of which have five years to run, to 15 years.

The project is owned and operated by Bujagali Energy Limited (BEL), which is jointly controlled by Sithe Global Power, a subsidiary of the Blackstone Group, and the Aga Khan Fund for Economic Development.

Under the public-private partnership, BEL, which sub-contracted the construction, agreed to build and operate the dam before handing it back to the Ugandan government after 30 years.

BEL said the dam was producing cheap and reliable electricity, though customers might not receive the full benefit because the Ugandan government had removed electricity subsidies. Following completion of Bujagali, it said, 90 per cent of Uganda’s power came from renewable resources.

Geoffrey Kamese, co-founder of Uganda’s National Association of Professional Environmentalists, said he was “surprised and shocked” that several hundred workers had been injured during the dam’s construction.

“In some circumstances, the compensation was non-existent,” he said. “The bank did not ensure that the companies abided by the procedures that they themselves had put in place.”

The bank said it was working with all parties concerned to resolve outstanding compensation claims. BEL said workers’ complaints were being dealt with and only a few were outstanding.

The World Bank has held the project up as an exemplar of public-private partnership, arguing in a 2013 strategy paper that it would double Uganda’s electricity capacity “while ensuring environmental, social and economic due diligence”. Bujagali, it said, “established a model for World Bank Group collaboration in the power sector”, which would be replicated in other countries.

One bank official, who did not want to be identified, said public-private partnerships were not a panacea. “If we start by acknowledging that PPPs are difficult to get right in wealthier and more stable countries,” he said, “getting them right in poor and fragile countries is even more difficult.”