Ugandan Students Express Concerns About Bujagali Dam

Thursday, August 17, 2000

Letter from Ugandan students to the IFC explaining their concerns about the Bujagali Dam project, and why they believe this is not the best option for their country.

Respectfully submitted to the World Bank and IFC by:

Asuman Basalirwa

Yudaya Babirye
(The Makerere University Association of Basoga Students)

Francis Kidega

We are concerned about the decision of government to shield the Bujagali Dam Project from informed and genuine participation of civil society. We would like to express our concerns, as the youth of Uganda who will inherit the project’s problems, about this project in particular and more generally a series of proposals to develop more dams in the River Nile Basin.

Bias for HydroPower

A major corporation in the dam–building industry produced the study that reviews Uganda’s electricity options: Acres International Limited of Canada. We are convinced that the study is unreliable because it is biased by the preference for hydropower. Alternative energy sources – such as solar, wind and biogas (including fuel/word) were totally ignored. At meetings held about hydropower development in Uganda, the alternatives were unfairly dismissed outright as expensive. The project ignores the small dams option, preferring to call them uneconomical. In fact, at one workshop, the IFC stated plainly that they were not interested in small dams. Small dams are not only affordable, environmental–friendly and socio–culturally acceptable, but also spread national development.

A study of alternative energy sources, in the context of an overall energy assessment for Uganda, should be mounted as a matter of urgency.

Costs of Project Misrepresented

Lost Tourism Revenue: The opportunity cost in terms of revenue from tourism that will be lost to a dam at Bujagali was essentially ignored in the Bujagali planning documents. The white water rafting industry at Bujagali was expected to grow annually, possibly even matching or exceeding the revenue from whitewater rafting on the Zambezi., and Jinja is considered to be well situated for overland tourism in general. If the opportunity cost in terms of lost tourism income is considered, then Bujagali becomes the highest cost site. Bujagali is a world class tourist attraction to rafters and local elites. How will the IFC and World Bank evaluate the lost revenue from a thriving tourism industry in the Jinja area?

Cost of Project: In its "Investment Opportunities, Energy Sector Profile" of March 1998 (see chart below), the Uganda Investment Authority (UIA) statistics indicated that Bujagali is not the least cost dam in terms of capital investment, with a per–unit cost of 1.22 (versus Bujagali’s at 1.44). This evaluation was based on Bujagali costing US$460 and producing 320 megawatts. Now, it seems, Bujagali will cost $530 and produce just 200 MW of power, meaning by this standard of "per unit costs," it ranks at 2.65, putting it at the bottom of the UIA list. How does the World Bank and IFC justify choosing Bujagali over these other options?

Hydropower Site Capacity (mw) Estimated Cost Unit Cost Kalagala 450 550 1.22 Murchison 642 817 1.27 Bujagali 320 460 1.44 Ayago South 234 426 1.82 Ayago North 304 581 1.91 Kamdini/Karuma 180 432 2.40

Source: Uganda Investment Authority, 1998

Spreading the Development Wealth: The Bujagali Dam will not help balance economic development in Uganda. Karuma, Ayago South and Ayago North have more potential to erase the cloud of darkness that has hang over Northern Uganda for decades, as would certain microhydro projects. Why has the World Bank/IFC dismissed the Karuma dam proposal by NORPAK, a project that would leave the environment virtually undisturbed? How has the fact that Karuma will help balance regional development within the country been factored into decisions about Bujagali?

Social Plan Lacking: The AES’ EIA lacks a social plan. In particular, it ignores the need to resettle the displaced community. The displaced community is a recipe for social and political upheaval in the near future once the money promised in compensation is all spent. However, the EIA is silent on whose responsibility it is to resettle the people. The matter of compensation is also still unclear since neither government nor AES has committed itself to this. Furthermore, it remains unclear where the displaced people will be resettled since in Busoga land belongs to clans; not to government. Which clans of the Basoga have agreed to absorb the displaced people onto their land? We request that a list of these clans be published. How does the World Bank Group justify the destruction of a piece of Busoga cultural heritage that has been with us since before the Bank was created and should stay with us as long as the Busoga exist?

We are convinced that the future costs of building a dam at Bujagali Falls have been greatly undervalued socially, economically and culturally while the future benefits of infrastructure development have been overvalued, and that viable alternatives exist. Good economics requires that real costs and real benefits be considered in all decision–making on public projects such as Bujagali Dam. Such accounting must reflect the truth that spiritual, social, cultural, ecological, recreational and environmental capital at Bujagali is, in the long–term, economic. Given that this is absent in the energy plan for Uganda, one is safe calling for fresh evaluations –– not by just corporate interests or entities selected by corporate interests; but by an interdisciplinary consortium of stakeholders, including NGOs.

Electricity Demand

Uganda has an effective purchasing power of just about a million people. The rest are peasants who will continue to cut wood for fuel because they cannot afford to pay for the overpriced hydroelectricity. Therefore, power produced at Bujagali will have to be exported if the project is to be viable. In this regard, the country is exposed because it has no forward sale agreement with any country––no guarantees. The sale of power will depend on the regional politics of the day.

None of the three energy projects currently being negotiated between Uganda and the World Bank Group, integrate the most important energy issue of all: fuelwood. These projects come to almost one billion dollars, more than 15% of Uganda’s GDP, yet they will spend no money on maximizes the efficiency of fuelwood, our most important source of energy. The predominantly poor majority can neither access nor afford to pay for hydroelectricity from the central grid. It is said that with the completion of Bujagali project, 10 – 15 % of Ugandans will have access to electricity. We question these numbers as unrealistic, and wonder what kind of analysis has been done to support these claims? Also, what is not known is what intervention is in place for the 85% citizens who would still remain without access to electricity under this inflated scenario.

Most of the electricity to be generated by AES Nile Power will not be consumed locally since there is not enough current market for hydropower. In fact, the parliamentary Committee on the Economy estimated, in 1999, that 265mw would have to be exported in order for the Bujagali project to be viable.

However, according to the hydropower development plan, the export market will not reach the highest level of 130mw by the year 2020 from the current 38mw. This means that power production at Owen Falls Dam is sufficient for internal consumption and for export for now and the immediate future. For whom, then, is the excess power from Bujagali being produced?

Lack of Transparency

A Project of the size of the proposed Bujagali Falls dam would call for international competitive bidding in order to ensure the best value for money and to minimize corruption of energy development . To this day, how AES was allocated Bujagali is unknown. It remains unknown although the World Bank and IFC appear committed to ensuring that the dam process proceeds unimpeded by protestations.

Power Distribution and Management

On power distribution and management, it is well documented by, among others, the several IDA/World Bank missions, that UEB’s poor performance is the most pressing issue confronting the power sector in Uganda. UEB is characterized by high power losses in transmission estimated at 40%; low collection rate with Accounts Receivable standing at well over Shs 60 billion; and poor quality service. It has even been sometimes stated that 60% of all the electricity consumed is not paid for by the consumers, including government institutions.

The current observed power shortage of about 40MW is more a result of high energy losses than inadequate power production. Therefore, unquestioning commitment of government, developers and funders to construction of more and more huge dams will not solve but exacerbate crises in the energy sector and the socio–economy in Uganda.

We strongly advise against glossing over the critical issue of gross inefficiency in Uganda’s energy sector by simply rushing for the easy but costly option of a huge dam. First things must come first.

Power Purchase Agreement

Press reports (e.g. the Monitor of 16th January 1999) indicate that the Bujagali Dam power would be sold to the Uganda Electricity Board (UEB) which would guarantee the purchase of 250MW. The agreement further provides that, in case UEB does not get the price from the market, then the utility will have to fall back on the Treasury – Consolidated Fund. In effect, government will subsidize UEB – an antithesis of privatisation.

We think that this deal is unfair, and few benefits will accrue to the majority. We do not think that business confidentiality between Uganda Government and AES regarding the PPA renders the Bujagali dam process transparent. Ugandans must finally pay the high price, but we can only know what we are paying for if the entire PPA is laid bare in the public domain for free and fair debate.

What We Are Asking For

  • That a comprehensive and independent reviews of the Bujagali dam be undertaken. Pending the results of such reviews, no further consideration of the dam project should go on.
  • In particular the rights of the indigenous Basoga and their clans to self–determination and decision–making regarding the future of their culture and spirituality should be given due regard. It should be acknowledged that for centuries the Basoga Clans have preserved their Bujagali Falls and the cultural and spiritual resources thereof and, by so doing, preserved themselves. They have the right to continue preserving themselves through their culture and spirituality.
  • The Bujagali dam should not be rushed ahead of results of the work the World Commission on Dams (WCD). We think the debate in the energy sector in Uganda will gain immensely from WCD work since this has the potential to move Uganda towards a new paradigm of energy and water management.
  • Acceptable reviews should in the end mandate that Bujagali dam and any other huge dam in the River Nile Basin cannot be justified before all local options are explored, including small dams, alternative energy sources etc.
  • We demand that the World Bank do more to encourage competition in our energy sector, rather than promote a large dam that has not undergone a competitive process and will further concentrate our power sector in the hands of the few.
  • We demand that there should be full application of the World Bank’s concept of participation as "a process through which stakeholders influence and share control over development initiatives and the decisions and resources which affect them" in the Bujagali dam process or any other such process in the river Nile Basin.

We demand that the energy plan for Uganda does not emphasize huge hydro dams but makes small dams the basis of hydropower development if this is what is desired. We also demand that decommissioning of huge dams, once they run out of useful life, is integral to energy planning in Uganda since hiding the fact that a dam has become useless by simply lending more money ostensibly to repair the dam will only add to the misery of Ugandans.