NGOs Tell OPIC to Reconsider Bujagali Dam

A June 2001 letter to US funder OPIC signed by 20 NGOs urging them to reject Bujagali Dam.

Peter S. Watson
Overseas Private Investment Corporation
1100 New York Avenue, N. W.
Washington, D.C. 20527

Re: Bujagali Dam project, Uganda

Dear President Watson:

We are writing to you to express our concern about the Bujagali Dam project in Uganda, which is currently being considered for funding by OPIC. Since we understand you have pledged to stringently uphold OPIC’s environmental guidelines, this project requires your immediate attention.

We have been following developments related to this project very closely and have carefully evaluated its pros and cons. It is our opinion that the project is too flawed to go forward as planned, as it does not respond directly to the core needs of the vast majority of Ugandans. It is also likely to seriously impact Nile River fisheries, possibly including rare and even endangered species, thereby violating OPIC statutory requirements under the Foreign Assistance Act. The project also does not meet the guidelines and recommendations of the newly released report of the World Commission on Dams (WCD) on many important issues. Perhaps most disturbingly, it is likely to set off a wave of dam building on the White Nile whose cumulative impacts could be catastrophic but have not yet been fully assessed as required by OPIC environmental procedures.

MEETING THE NEEDS OF THE POOR

The WCD calls for a "needs assessment" to ensure that a project will actually meet local needs: "In countries where a large proportion of the population does not have access to basic services, a key parameter should be the extent to which basic human needs will be met." This information is not available on Bujagali. The Bujagali project is not likely to produce positive developmental impacts for the poor, and in fact will make electricity prices rise dramatically. An electricity industry analyst working in Uganda has revealed that the Bujagali Dam will lead to a doubling of electricity rates to Ugandan citizens. This is in addition to a recent rate increase of 170% arising from the restructuring of the electricity utility (the basic use of 30–200 kWh, has just gone from 70Sh/unit to 189.8 Sh/Unit; Bujagali will result in rates double this). Much of the cost increase from the Bujagali project is due to the Power Purchase Agreement being tied to a pay–back in dollars.

These price increases – in a country where only a fraction of the population can afford grid electricity – make the project a true white elephant for Uganda. Problems with projects relying on the sale of overpriced electricity are not new to OPIC. The EIA also reveals that development programs for affected people will amount to less than a fraction of a percent of revenues for AES on the project (i.e., US$9.3m over 30 years – versus a few billion dollars for AES). The fact remains that the number of Ugandans who can afford grid electricity are a small elite.

It is not just the cost of electricity from Bujagali Dam that is prohibitive to local people (and only the project developer AES seems willing to assert will cost $.05 per KwH), but also the capital costs of first extending the grid to remote regions ($10,000 per km) and, more importantly for the consumer, paying for individual extensions. The notion that the majority of Ugandans could afford this capital cost is unrealistic.

IMPACTS ON FISHERIES

Remarkably, the project Environmental Impact Assessment states that the Bujagali dam will actually lead to improved fisheries in the region. In reality, scientists believe that not enough is known about Nile River fisheries to predict the full impacts of Bujagali. Les Kaufman, a biologist with the Boston University Center for Ecology and Conservation Biology, has studied the Nile fisheries in the Bujagali area. He recently stated in a letter to International Rivers, "First, the rapids habitats were not directly and systematically sampled, or at least the report does not indicate so. Second, two sets of samples from the falls clearly indicate the presence of species of haplochromine cichlids that are undescribed, and not yet known from anywhere else, plus one species, Neochromis simotes, that was thought extinct. The species from the rapids and pools areas exhibit adaptations suggestive of dependence upon rapidly flowing water; i.e., falls and rapids habitats that would be inundated by the dam."

Another fisheries expert, Ole Seehausen, who has been working with Ugandan fisheries experts to sample species near the dam site, recently wrote, "The results were astonishing. Most of the species were clearly previously unknown and possibly endemic. Some seemed specially adapted to life in rapids. The biggest surprise was that we re–discovered Neochromis simotes, a species that was believed to be extinct and had not been reported after 1911!"

It appears the dam could destroy the habitat of some very rare species – possibly even pushing some toward extinction. This information is not reflected in the project EIA. Mr. Kaufman recently wrote AES about the potential for species extinction from the dam, but it is unclear how the company intends to respond. More research on fisheries is clearly called for.

OPTIONS ASSESSMENT

The World Commission on Dams report calls for a complete understanding of energy needs and a comprehensive evaluation of the best way to meet those needs before considering specific projects. The WCD also recommends that studies be made to assess the scope for "demand side management (DSM), and for decentralized supply options and community–level initiatives" and that "a priority should be to improve existing systems before building new supply, and DSM options should be given the same significance as supply options."

The analysis done for the Bujagali project does not meet the criteria described above. There is neither a comprehensive needs assessment for Uganda, nor a detailed study of the many approaches to energy supply that could meet those needs. There is no feasibility study for renewables such as solar and wind (although reportedly one is under way by the African Development Bank, it will obviously be too late to compare against this project). The only study on "alternatives" was undertaken by a dam–building company, Acres International, and it merely looked at a number of dam proposals and compared them to Bujagali.

WAVE OF DAMS TO COME

Bujagali is likely to set off a wave of dam–building on the Nile which will take Uganda down a path of hydro–development that is inflexible, uneconomic and damages the environment and communities. Bujagali could be followed by three or more dams that would compound its social and environmental impacts (and up to 12 hydro sites have been identified, according to the "Acres Study" commissioned by the IFC). The World Bank’s Project Information Document for Bujagali acknowledges this, stating that the project is expected to "catalyze" further hydro development along the Nile. For all intents and purposes, there is the very real likelihood that at least two dams will be built if Bujagali is approved, and possibly more. The cumulative impacts of mulitiple projects should be thoroughly examined and are a clear requirement of OPIC environmental procedures.

In addition to future dams, Bujagali would be the third large dam project on this stretch of the Nile, after the Owen Falls Dam and Owen Falls Extension Project. The cumulative impacts of these dams will have a detrimental effect on the Nile ecosystems and local livelihoods. No environmental assessment has been carried out for either Owen Falls or Owen Falls Extension. Without knowing the impacts of these two upstream dams, the Bujagali EIA cannot adequately address the cumulative impacts of all three projects. This clearly contradicts the WCD recommendation that states, "Cumulative impacts of projects should be analyzed and environmental impacts from past projects should be evaluated and incorporated into the needs assessment."

PARTICIPATION

Although project documents paint a picture of widespread public support for the project, there have been serious flaws in the participation process. For example, AES states that they have done "exhaustive" consultation, and that "the result was an independent local NGO survey indicating 96% project support, a national newspaper poll showing 85% support, and unanimous approval from Parliament." This survey is quite simply a tool for public relations. There are a few thousand Ugandan NGOs; the survey polled less than 50. A number of those polled have a strong vested interest in the project (e.g., the Uganda Investment Authority – created for the express purpose of promoting foreign investment in Uganda; the Uganda Manufacturers Association, and the Uganda Chamber of Commerce). But the selection of respondents is not the only problematic aspect of this survey. There were serious methodological flaws in the Steadman survey. Leading questions appear throughout the survey. AES has consistently used the survey to argue that levels of popular support for the project are higher than they are.

Many concerns by Ugandans have been summarily ignored or dismissed by the company and project proponents. NGOs in Uganda have written numerous letters of concern to the Bank and IFC, but have been virtually ignored. Here is just one of many letters sent to the World Bank which questioned the company’s participatory process:

"I am the Director of the Human Rights and Peace Centre, Faculty of Law, Makerere University, Uganda. I am expressing my concern about the proposed construction of a Dam at the Bujagali Falls in the Kingdom of Busoga, Uganda with the support of the IFC/WB. While I recognize the need for development, I also believe that we must bear in mind that development should be sustainable and beneficial to all humanity. The world today is suffering from a development process that has had total disregard for the environment. The consequences are well documented and known to you. Thus it has become part of human conscience that such reckless development process must be avoided. It is however surprising that powerful institutions and private companies do not care a damn. As a representative of a human rights organization, we protest against the decision to build the dam which was top down decision by the executive in Uganda, prompted by useless incentives from the benefiting company. Today we talk about participatory development but this is often an academic and public relations phraseology. While AES claims having consulted, that consultation has largely been with government .... Neither has AES bothered to consult with academic and human rights institutions such as ours." (Samuel B. Tindifa, Aug. 10, 2000)

LOSS OF CULTURALLY IMPORTANT SITE

The project will drown Bujagali Falls, a national treasure and culturally important site. The "Source of the Nile" corridor is one of the most spectacular river stretches in the world, say rafting experts, and is already the biggest draw for foreign tourists in Uganda. Tourism is the second largest source of foreign exchange in Uganda. According to rafting companies in Uganda, over 6,000 people raft the Nile each year near Bujagali, spending nearly $4 million a year in Uganda on activities not related to rafting, much of which goes directly to local communities. Ugandan NGOs have written to the Bank, "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 EIA and other project documents have downplayed the economic impacts the dam will have on the growing whitewater rafting and tourism industries, while indicating there will be increased tourism opportunities in the area and other economic benefits for local people from the dam project. In reality, the reservoir is not likely to draw tourists. The dam itself will employ only 29 people after construction, according to the EIA, and probably most of these will be foreigners. And although the Owen Falls Dam is right next door, the town of Jinja has been in steady decline for years. Civic leaders have expressed the belief that tourism is more likely to benefit their community in the long run than another dam.

PUBLIC RISK

As far as project–related risks are concerned, the World Commission on Dams calls for a fair analysis and public discussion of these: "[Risks] must be identified, articulated and addressed explicitly. Most important, involuntary risk bearers must be provided with the legal rights to engage with risks takers in a transparent process to ensure that risks and benefits are negotiated in a more equitable basis." It also specifies that: "Determining what is an acceptable level of risk should be undertaken through collective political process."

The planning process for Bujagali is troubling in its handling of risk. The key document that lays out economic risks – the power purchase agreement (PPA) – has been kept secret. However, the terms of the PPA reportedly force Uganda to buy all of the project’s projected power output even if there is not enough demand from consumers, and even in case of an energy glut or of a drought–induced reduction in energy production. The people of Uganda would pay the costs of this unfair deal, should the national utility be unable to meet its obligations. This project will potentially increase the public debt of the country.

Another kind of risk is that directly experienced by the project affected people who might not receive the benefits allegedly promised by AES. No grievance mechanism is in place to allow local villagers to hold the private project sponsor accountable in case it does not deliver its promises for jobs, hospitals, schools and land.

There are many other concerns being raised by Ugandan NGOs, such as the lack of competitive bidding for the project and the resulting potential for corruption (in fact, project corruption is being investigated by the World Bank’s anti–fraud unit, and it would be useful to know how OPIC has assessed compliance with the Foreign Corrupt Practices Act for this project); the serious unmitigable cultural loss caused by destroying Bujagali falls; and dam safety issues (should the Owen Falls dam, already in very poor condition, fail, "it would cause an environmental disaster all the way to the Mediterranean," according to former World Bank environmentalist Gus Tillman).

CONCLUSION

We believe the WCD guidelines offer an excellent framework for ensuring this project does not do more harm than good, and in fact AES has stated it wants to meet the guidelines for the project. It is our opinion, however, that the project as planned does not yet met critical WCD guidelines. Given the potential for species extinction, it may not meet OPIC’s own guidelines as well. We therefore ask that no financial support be given to the Bujagali Dam project unless the following conditions are satisfied:

1. the release and public discussion of the Power Purchase Agreement, so that risks to citizens of Uganda are fully understood;
2. a thorough energy needs assessment, and a full and fair consideration of alternative energy approaches to meet those needs, following WCD recommendations;
3. a comprehensive management plan for the Nile done by independent experts;
4. further independent analysis of the impacts of Bujagali Dam on Nile River fisheries;
5. a comprehensive EIA for the Owen Falls Dam and the Owen Falls Extension, and;
6. an assessment of the cumulative impacts of related projects now being considered.

We look forward to a prompt reply to our concerns.

Sincerely,