Uganda needs a rethink of its oil and gas aspirations

16th September 2022 – On Wednesday, the European Parliament passed an important resolution thatofficially recognizes the catastrophic climate and environmental risks posed by the construction of the EastAfrican Crude Oil Pipeline (EACOP).

The resolution urged TotalEnergies to postpone the project, to enable feasibility studies to explore an alternative route to safeguard protected and sensitive ecosystems and the water resources of Uganda and Tanzania. This would reduce the potential vulnerability of watersheds in the African Green Lakes Region.

“We welcome the position taken by the European parliament on safeguarding critical ecosystems and local livelihoods in both Uganda and Tanzania. In addition to that, the envisaged costs of EACOP are prohibitive,and will not be a good return on investments to transform the livelihoods of the most vulnerable people in the region”.- said Dr. Mao Amis , the Executive Director of the African Centre for a Green Economy

EACOP which will be the longest heated crude oil pipeline in the world, will lead to approximately 12,000 families being displaced from their ancestral lands. There is ongoing massive destruction of farmlands whichare a source of income and food to most people living in these communities. Worse off, locals still report thatno fair and adequate compensation has been paid to them as they continue living an uncertain future.

Dr. Mao Amis , adds that “with existing challenges of poor governance and lack of capacity, Uganda’s oil will not extensively contribute to solving the country’s socio-economic challenges as envisioned. Besides that,Uganda’s oil risks being a stranded asset in the future which will lead to significant losses for the government.

‘’Failure to acknowledge this risk is not only detrimental to Uganda’s development aspirations, but will reverse the gains that have been achieved thus far”.

Fintech is key to building resilient food systems

The way natural resources have been extracted in most African countries has led to a lot of injustices, be it social, economic, political, gender, environmental, etc. Amid the climate change crisis, instead of bringing development the exploitation of fossils, land, and forest resources, for example, has often led to the displacement of local communities, loss of access to land/ water, loss of food security, etc. among African livelihoods. This has recently been exacerbated by the recent global energy crisis, which has led to a hike in the prices of food, oil, and other basic commodities. The long-term solution to these challenges lies in focusing investments on massive transformations in Africa’s food and energy production systems. Decision-makers in the public and private sector financial institutions need to ensure that financial flows from their institutions do not undermine the need for a just energy and/ or agrarian transition.

Scaling up agrarian-related solutions to global crises like climate change not only requires knowledge about their costs but also knowledge about their financing options. While traditional funding mechanisms may help, more inclusive options to accelerate Africa’s agrarian transition lie in financial technologies- FinTech. FinTech is an industry that makes use of digital technology innovations to facilitate the provision of financial services to clients through mobile phones/ computers using the internet or cards linked to secure digital payment systems. Examples of these technologies include the internet, cloud services, smartphones, machine learning, digital ID, and Application Programming Interfaces (APIs). FinTech has disrupted many business processes almost in every sector, and this has been accelerated by the Covid-19 pandemic. Its importance comes not only from the fact that it enables traditional financial institutions to function more efficiently but also from its ability to modify traditional financial services/ products and create new ones.

Under traditional business mechanisms, some groups of the economy e.g. farmers, especially in developing countries, suffer funding deficiencies, capital issues, and limited access to financial institutions, resulting in their exclusion from formal financial markets and services. Farmers have generally been considered to be un-bankable by the traditional financial institutions, due to market failures such as poorly defined property rights, information asymmetry, and the transaction costs of reaching out to them, among other factors. FinTech has the potential to meet the demands of farmers thus, addressing financial inclusion, which goes beyond just owning a bank account to (i) having access to credit/ a loan to finance a business; (ii) being able to conveniently make payments and send/ receive money; and (iii) being able to insure assets/ belongings. This post discusses the role of FinTech in driving new services/ products in credit, payments, and risk markets, for a sustainable agrarian transition. FinTech companies are characterized by the use of modern technologies to develop and provide financial services to customers. They focus on the underserved markets of the economy e.g. low-income individuals in highly concentrated markets, areas with few banks per capita, areas where the local economy is not performing well, and rural areas.

Credit

Access to credit for small-scale farmers and other agribusiness practitioners can be enhanced through crowdfunding- an entrepreneurial finance mechanism that permits the raising of funds from a crowd of investors through online platforms. Through crowdfunding, investors use their smartphones to select agricultural products to invest in from a wide range of agricultural commodities. In Congo, an android-app-powered crowdfunding platform called AgriZoom is promoting entrepreneurship and helping farmers, the fishing communities, and agro-processors to raise funds and access markets.Crowdfunding has also delivered notable results in countries like Nigeria, South Africa, Kenya, and Mali as evidence shows that agribusiness SMEs and small-scale farmers managed to finance their ventures from it. The model is not peculiar or entirely new to Africa as it has been (and is still being) used to raise funds for artists, charity, and other social causes from the public. It is becoming a more popular method of financing agriculture and it provides African countries a great opportunity to develop their agricultural sectors, especially in cases where farmers have limited access to services from the banking sector.

Digital Payments/ Transfers  

Most of the transactions across the agricultural value chains in rural areas occur through informal channels which are typically slow, costly, risky, and unreliable. By providing services to the otherwise marginalized populations and making the payments and money transfer processes quicker, cheaper, and simpler, FinTech is revolutionizing agricultural value chains in African countries. Telecommunications companies are leading in providing clients with digital platforms for transferring money/ making payments using smartphone applications. For example, there is MPESA- Africa’s largest and most successful FinTech platform which has active agents operating in Kenya, Tanzania, DRC, Ghana, Lesotho, Egypt, and Mozambique. In other cases, commercial banks are digitalizing/ partnering with start-up firms that provide FinTech packages to expand their financial services to the banked and unbanked parts of the population by offering branchlessbanking services. Evidence from the adoption and utilization of these innovations indicates that FinTech has the potential to stimulate growth and transform agribusiness in SSA.

Mobile phones also provide farmers with access to information about input/ output markets, prices, business opportunities, etc. through digital marketplaces, thus improving spatial arbitrage. A digital marketplace is a platform that connects stakeholders in agribusiness such as input/ equipment suppliers, investors, landowners, farmers, distributors, consumers, etc., directly in a single platform of the mobile market, with fewer intermediaries. An example of a successful digital marketplace in Africa is Hello Tractor, also known as the ‘Uber of tractors’ which operates in Kenya, Nigeria, and Mozambique. Hello Tractor allows farm equipment owners and farmers (in need of services/ equipment) to interact and transact through a digital interface. African agriculture is the least mechanized globally, and farmers under-cultivate their land and continue to be trapped in the cycle of poverty. By providing mechanization services through digital marketplaces, Hello Tractor has managed to increase the productivity and food security of many farmers in Africa, thus breaking the poverty cycle.

Micro-Insurance

Agricultural incomes are subject to substantial shocks, particularly when farming is rain-fed; making issues of risks and insurance very important. Assessing losses is an expensive process for insurers and historically, conventional/ traditional insurance models have suffered from issues of adverse selection and moral hazard. As a result, they offer premiums that are generally high and expensive to low-income individuals and those in rural communities, e.g. farmers. Digital insurance services like index-based insurance systems allow farmers to access affordable insurance packages to de-risk their enterprises and build their resilience to climate-related shocks. Technological innovations used in this case include remote satellite sensing and picture-based monitoring of crop/ livestock health. Index insurance models find a cheaply collectible proxy for the covariate shock that is inherent in agriculture e.g. rainfall/ area yields and insure only the component of variation correlated with this index. Therefore, it becomes easier for the insurer to provide micro-insurance contracts profitably, without challenges from adverse selection or moral hazard. When an index exceeds a certain threshold, the farmers receive fast and efficient insurance pay-outs through digital payment features on their smartphones. Several pilot studies have been done across Africa to increase awareness of index-based insurance services as a promising innovation that provides protection for small-scale farmers and agribusiness practitioners and helps increase their productivity and food security. Uptake of the product has increased in recent years but it is still insufficient to make the product commercially viable.   

Conclusion

Like in many other industries, digital technology is a game-changer in the agricultural sector. By providing basic financial services to the unbanked, and making payments/ money transfer processes simpler, quicker, and cheaper, FinTech has managed to address the challenge of financial inclusion, especially in developing countries where the playing field for those in urban and rural areas is unlevelled. And through its financial services like crowdfunding, digital marketplaces, digital insurance, and many others, FinTech has the opportunity to become the much-needed ‘support system’ for a sustainable agrarian transition in Africa, and it can help the agricultural sector of African countries to compete in global markets.

Author : Olga Mapanje

Research Fellow , African Centre for a Green Economy

How should Africa respond to the global food & fuel crisis?

What the current global oil crisis means for Africa.

The current global crisis occasioned by the war in Ukraine has led to a sharp increase in food and oil prices. This is partly because Russia and Ukraine produce a large percentage of the world’s exported wheat and corn. The ongoing situation is of great concern since it has led to increased inflation for some countries, posing a major economic crisis. There is no doubt that the war will shape global geopolitics and its impact on the global economy will be felt for a long time, even as the world emerges from the Covid-19 pandemic.

For Africa, this is a major concern as many countries do not have the adaptative capacity to cushion their populations. According to the African Development Bank (AfDB), this crisis could push a further 1.8 million Africans into extreme poverty in 2022 and exacerbate other inequalities. For example, in Nigeria, high global gas and oil prices have caused the domestic prices of cooking gas to increase by more than 100% , making it hard for local households to continue cooking using gas and therefore resorting to other “cheaper” cooking alternatives like firewood. Moreover, the use of firewood for cooking poses a threat to one’s health and contributes to increased deforestation, further perpetuating climate change.

At a time when a number of developed countries have achieved energy security and are now gradually shifting to renewable energy, Africa continuous to struggle with both amidst the oil crisis. Energy experts argue that the current global oil crisis should be a wake-up call, for African countries to  become less dependent on foreign oil supplies.

But what does this mean? For a country like South Africa, which is currently burdened by a major power shortage, leading to significant loadshedding, it’s a wakeup call to urgently accelerate the transition away from coal.

Investing in Africa’s energy transition holds the new dividend for the continent’s socio-economic development. Not only that, but it also re-echoes a popular question on climate action accountability. For example, even though Africa is the most vulnerable region to climate change, it contributes negligibly to global emissions, with just about 3% – 4%. This suggests a need for the transition to be tailored according to the socioeconomic and political contexts of specific geographic regions, with the implementation process also being cognisant of the regions’ differing contributions to climate change.

In the short to medium term, African countries will need to take very proactive steps to accelerate the energy transition. According to the African Economic Outlook report, recently published by the African Development Bank, here are some of the key measures African countries would need to take:-

  • Countries should consider blended finance to provide fiscal incentives for issuers of green finance instruments.
  • Strengthen public financial management, including of climate finance resources; reform fossil fuel subsidies; promote transparency and accountability in debt contraction; improve public service delivery; develop well-tailored domestic resource mobilization instruments; improve tax administration; and create an environment to mitigate private investment risks for sustained long-term growth and employment creation.
  • Implement an urgent countercyclical policy response such as subsidies to mitigate the impact of higher food and energy costs.
  • African countries should develop well-tailored domestic resource mobilization instruments for financing climate resilience and the energy transition, helping lighten overdependency on external climate finance resources.
  • Governments need to adopt and enforce strong policies that incentivize use of local or at the least, in-country—goods, services, and labour in climate actions. They should also pursue franchising as a source of technology transfer, helping drive market efficiencies, achieve scale at speed, and create jobs, so as to share the benefits from value addition from manufacturing, at least partly, and not remain importers of energy technologies.

Author : Damalie Tebajjukira

Communications & Marketing Associate -African Centre for a Green Economy

Liberia: Climate smart food system innovation to drive prosperity

Liberia is still battling with a wide range of socio-economic challenges partly steming from the war between 1989- 2003 and most recently, Ebola. Today, the country is termed as one of the world’s poorest countries, fragile to conflict and susceptible to more disease outbreaks. It is characterized with high levels of poverty, lack of access to social services like health care and poor infrastructure. Worse-off, its high population growth rate of 2.56% each year has positioned it as of the countries with a high population  of approximately 5,267,926 according to the latest United Nations data projections.

At the same time, the country is endowed with natural resources such as iron ore, diamonds, gold, forest cover, lakes , rivers and fertile soils for agriculture. It has over time, recorded growth especially in the mining industry through increased exports in rubber , cocoa and palm oil which has contributed to more employment opportunities to the growing population and revenue to the government.

Despite the abundance of fertile soils for farming and with agriculture being central to Liberia’s vision for economic transformation, the country continues to face food insecurity. On average, 1 in 5 households in Liberia is food insecure and 2 in 5 households are marginally food insecure. Even though the country has recorded success in reducing chronic malnutrition rates from ‘critical’ to ‘serious’ levels according to the World Health Organization classifications, food insecurity is still evident. This has been due to lack of adequate support especially to small holder famers who play a key role in sustaining food value chains. They lack fertilizers to increase crop yields, poor financial policies that frustrate their bank loans application , lack of  farming technology for irrigation and  effective post-harvest storage, poor seeds and breeding stock among others. Worse-off, the impact of climate change has exacerbated food price volatility in the country.

Fully addressing food insecurity in Liberia, will require the government to enact policies geared towards accelerating Climate Smart Agriculture(CSA). CSA sustainably increases productivity, enhances resilience (adaptation), reduces greenhouse emissions (mitigation) where possible and enables achievement of national food security and development goals. This will be achieved by scaling up CSA practices across the country, strengthening CSA research, and supporting climate , agrometeorological, food value chains and advisory services.

We are in  Liberia on a stakeholder engagement exercise to map key priorities for the country’s food system. We hope this exercise will set centre stage and offer national guidance on fully transforming the country’s food systems as a strategy for strengthening food security.

Interview: Our Founder Dr Mao Amis reflects on the 10th Anniversary of the African Centre

What inspired you to start the African centre for a Green Economy?

Even though the African Centre has been around for 10 years, the idea goes back some 6 years prior during a random meeting with my co-founder Dr Sepo Hachigonta, at a student conference in Beijing. We were both pursuing post-graduate studies in global change at the University of Cape Town, but in different departments and hadn’t met until that conference.  

We were both dismayed that it took an international organisation to bring us together, as professionals from Africa and moreover in a key sector that lacked the critical skills that we possessed. From that day, we agreed that we would not only collaborate in our studies, but would set up a platform, whose primary goal would be to foster leadership among emerging young Africans, to drive the continent’s development agenda.

We also believed strongly in the potential that a transition to a green economy could provide for Africa. However, we also agreed that if the opportunities provided by the green economy were to be effectively harnessed, requires Africans to be at the forefront of driving the agenda. But more importantly, young people should provide the required leadership. It is for this reason that since our founding, our workforce has exclusively been ambitious African youth. 

When you started the African Centre for a Green Economy , did you think you would be here 10 years later?

To be honest, we were very exploratory when we set up the Centre, but what was very clear from the onset is that we were in this for the long haul. This is partly because the nature of the problems we set out to solve such as climate change, food and energy security, require a long term view. So 10 years may appear to be long from a career perspective, but in terms of creating lasting impact, it’s not a long time. So we see ourselves being around for a much longer, but our tactics might change, depending on the needs and resources at our disposal.

 How has the journey been so far ?

To say that it’s been extremely challenging is an understatement. Building a non-profit, non-partisan entity from scratch is no child play. Aside from the challenges of institutional building, the discourse on sustainability has been changing extremely fast, so convincing key actors such as governments to take the green agenda seriously in the face of competing issues such as poverty alleviation has been difficult. However, over the last couple of years there has been increasing appreciation, that pursuing a green agenda is not a luxury by governments, but a necessity. So it’s good to watch how attitudes have been shifting, which has made our work a bit ‘easier’.

After 10 years in services, are there any major highlights you can share with us?

I think the mere fact that we are still around after 10 years, in itself is a highlight. Many people did not believe in our vision when we set out, but we have been steadfast in our efforts and over the years have demonstrated the value we bring in advancing the discourse on driving the green economy.

There have been numerous highlights, for example many of the green enterprises that we have incubated over the years are still thriving, creating hundreds of jobs for vulnerable communities on the continents. Many young people who have mentored have gone on to play a leading role in driving the green agenda, including taking up key positions in government, international NGOs etc.

Perhaps our biggest impact is in providing technical support to various stakeholders across the continent, which helped to advance the green economy discourse, and helped to embed their principles with practitioners and policymakers.

 What challenges have you faced so far?

Many of the challenges we have faced over the years are reminiscent of those faced by small organisations, such as lack of access to long term core funding, hiring and retaining a skilled workforce. We have overcome these challenges by ensuring that we remain nimble by  focusing on our key strengthens, and leveraging our strategic networks to sustain our operations.

Where do you envision the centre in the next 10 years to come?

Our goal over the next 10 years is to position ourselves as one of the best think-tanks in Africa on all aspects of the advancing the green economy. But more importantly, we want to be an active conduit for channelling climate finance to the vulnerable communities where we are working. To this end, we would like to raise a minimum of $100 million to invest in cutting edge innovations, which empower communities and build resilience of vulnerable communities. So our work over the next 10 years is cut-out for us, and the work starts now.

If you could go back in time, what’s one piece of advice you would give yourself 10 years ago? 

I don’t think there is anything we could have done differently, but perhaps we should have been more aggressive in cultivating relationships with our strategic partners from the onset, especially with governments, who are the custodians of the public goods.

If you could instantly fly all the AfriCGE employees to any destination for a 20th-anniversary celebration, where would it be?

If we are have resources, we wouldn’t wait for a 20th anniversary to appreciate and celebrate the awesome team we have at AfriCGE. I always say Africa is our play ground, I would like our team to explore every corner of our beautiful continent. However for our 20th anniversary, a retreat in Madagascar would be so befitting. Madagascar is a magical place, and epitome of how well our beauty continent is endowed by nature.

 

Energy transition: Importance of community participation

An overview

The concept of just energy transition has been in the centre of grassroot organizations for decades. It has been used in various spheres like labour movements and environmental justice campaigns as it addresses the externalities of climate actions. However, it only gained momentum over the past few years when it was used to solidify the interaction of three pillars of sustainable development namely: the economy, the environment, and members of society. South Africa is highly recognised as one of the few countries in the world to have an advanced national dialogue around the topic of just transition. This is because in 2015, it was the first country to mention a just transition in its Nationally Determined Contribution (NDC) which stimulated many dialogues, assessments, and reviews of existing policies towards decarbonization of the economy. Currently, a draft of the just transition framework is out for comments, and it highlights actions that the South African government and its social partners will take so as to achieve a just transition.

The narrative of energy transition is always centred around industrial and technological context, yet there is a need for community-based perspectives which discuss an array of social values and approaches that can be adopted as the world is transitioning.  This is because any shift in the energy landscape will have impacts being felt mostly at the local community level. To be considered as ‘just’ and ‘inclusive’, energy transition processes need to ensure fairness in terms of equal participation in decision-making processes for all members of society. Therefore, it is crucial to consider energy transition as a fixed rule rather than a vision and it should be based on openness and round table dialogues. Moreover, the outcomes and development agenda of the just transition should not be centred on top-down development approach, instead it should have strong element of community participation and inclusion to ensure that the transition does not leave anyone behind, especially the vulnerable members of the local communities. In order to achieve a ‘just’ and fair low-carbon transition, there is a need to identify opportunities of how local communities can become empowered to drive energy transition and meaningfully benefit in the low-carbon energy future. As the African continent is transitioning towards a low carbon future in line with the Paris Agreement targets to achieve Net Zero, social transformation should be a priority. To realise socio-economic benefit for renewable energy development, it is essential to involve local communities from the early stages of any just transition energy project. The involvement of these local communities will make targets more realistic as citizens play a crucial role in proposing solutions.

The key question should now be, ‘how do we get these communities involved?’

  1. Youth participation

A transition to a more environmentally sustainable future requires the government, stakeholders, enterprises, investors, organizations, and citizens to work together in ensuring resilience for today’s challenges. Any member of society whose livelihood is connected to the fossil fuel industry must be given the platform to participate in decision-making processes. Youth participation is key for any transition.  This allows young people to be architects of their own future and gives them a platform to engage in dialogues where they can address their opinions, hopes and fear as the world is transitioning. For effective participation, young people must have access to information and education that will equip them will skills and knowledge necessary for the new world. In a country like South Africa, where the rate of unemployment of young people is at its peak, the involvement of young people in just transition would offer sufficient opportunities and good alternative jobs while strengthening their decision-making skills.  Young people can offer any programmes and policies a longer perspective during its creation and innovative phases, allowing them to make more informed decisions in the future. The transition would also potentially create employment opportunities for young people as many jobs have been lost, resulting to the unemployment rate crossing the 35% threshold.

  1. An enabling environment

Another important aspect of just transition is the formation of a good working relationship between all levels of the government and the people on the ground. This allows for openness and creates platforms for addressing inequality gaps that exist between societies thus creating an enabling environment for just energy transition. Fundamental aspects that can help in creating such environments include capacity development, where members of society are equipped with relevant skills for the renewable energy sector. There is also a need for funds to be mobilize towards pilot projects in rural communities to channel investments for transformative renewable energy. It is not just the duty of the government to create these enabling environment. Various entities and actors like regional organizations, private sectors and businesses should come together and ensure that even the marginalized members of society are included in the transformation.

  1. Application of modern labour

The role of just transition has always been to protect workers whose jobs are at risk from climate change interventions as the world is moving towards a more sustainable pathway. Various studies have shown that jobs are most likely to be lost in sectors that are predominantly dependent on fossil fuel resources. This is why the transition needs to be smooth, with careful planning so that workers and the broad community relying on fossil fuel is not left stranded. Certain jobs will either be substituted or phased out without direct replacement as the world moves from higher to low carbon and less polluting technologies. Therefore, companies need to redefine their scope and train their workers so that they can be equipped with relevant skills for their specific industries. Taking for example companies that will shift from manufacturing combustion engines to producing electric vehicles. Their workers will now need to be more technologically inclined as less labour will be required.

Take home message

Climate change is a reality. The sooner the world adapts and find sustainable and inclusive solutions for all, the better. Research studies and frameworks that have been developed in then recent years have increased the urgency of generating tools, policies and strategies that can help the world to transition smoothly. What is mostly required is a joined partnership of all individuals, from different economic background to work together is bringing the low carbon future into reality.  For a smooth transition, there should be a balance of social equity and sustainable development.

Author- Xoliswa Ndeleni

Research fellow- African Centre for a Green Economy

Disclaimer: Some of the views expressed here are those of the author and are not in any way meant to represent the views of African Centre for Green Economy.

Sector Analysis: Energy governance reforms in Uganda

A government proposal to amend the current Electricity Act Cap. 145 has been tabled before Uganda’s parliamentary committee on natural resources. It follows a report published by the Ministry of Energy and Mineral Resources which recommended that the three electricity agencies such as Uganda Electricity Generation Company Limited (UEGCL), Uganda Electricity Transmission Company Limited (UETCL) and Uganda Electricity Distribution Company Limited (UEDCL) be merged into one state owned company while the Rural Electrification Agency (REA) responsible for extending the grid to rural areas should be directly placed under the ministry. The government’s view is that this decision will aid in eliminating replication, irregularities, inefficiencies and redundancies of some programmes shared by these agencies in the same sector, set the stage for compliance of different actors and most importantly, redirect unnecessary government expenditures to other pertinent economic challenges.

In addition, the amendment bill seeks to enable a  transition from a single bulk supplier model to include Independent Power Providers as direct suppliers of electricity to consumers and increase funding for the Electricity Regulatory Authority from 0.3% to 0.7% of the revenue received from electricity sales as a means of supporting it in regulating electricity sector. It is projected that this will enable better monitoring, evaluation and address existing gaps and deficiencies in service delivery.

The proposed electricity amendments are ambitious in scope and I believe they are necessary but should go beyond the desire to see the reduction in electricity prices and rather focus more on ensuring universal access to clean energy.

Uganda’s electricity sector was unbundled two decades ago as part of the electricity sector reform and privatisation policy. The state-owned Uganda Electricity Board (UEB) was split into three electricity agencies which are; Uganda Electricity Generation Company Limited (UEGCL), responsible for generation of electricity, Uganda Electricity Transmission Company Limited (UETCL) responsible for the building of transmission lines and Uganda Electricity Distribution Company Limited (UEDCL) responsible retail end.

Before liberalisation, only 1%  of the population was connected to the grid. 22 years later, one can say that the liberalisation of the energy sector has to some extent bore fruit; 24% of the population has been connected to the grid and revenues of the different electricity agencies have increased. For example, UMEME- an electricity distributing company in Uganda continues to record revenue increases over the years. As of 2021, its gross profit rose to Shs642.2bn, up from Shs478.9bn in 2020 and other agencies like UETCL have also recoded profits and met targets. Over 30 independent power producers of different scales operate in the country.

Contrary to what one would view as successes, certain distortions and contradictions project Uganda’s electricity sector as an impediment to the country’s expected growth. Forexample, despite massive cash investments in the sector, effectful policies like the free electricity connections policy and an abundant electricity generation capacity, electricity prices are still high with a constrained supply. As a result,  88% of the population still relies on biomass such as wood and charcoal for their energy needs. Moreover, the dominance of biomass in the country’s’ energy mix has led to enormous loss of forest cover that has contributed to increased silting in water bodies due to high levels of soil erosion among other environment impacts.

These challenges have spurred the government into action with the proposed amendments as a tool to accelerate widespread energy access especially amongst rural communities, reducing electricity prices and achieving rapid industrialization.

While these proposed amendments if passed will certainly contribute to reduced electricity prices thus accelerating widespread energy access for all,  the most important question should be ; How long will it take for Uganda to achieve this ? Through REA, the government in partnership with multilateral partners such as the World Bank embarked on extending the gird to rural areas. However, the results have been dismal since access rates increased from 1 % in 2001 to only 10 % in 2021.

It is evident that extending the grid to remote communities is still a challenge thus, the government should instead use the proposed amendments to ramp up off-grid energy solutions such as solar micro and mini grids to these underserved communities and create an enabling environment to attract more private sector investments for increased clean energy access.  It should also continue to develop mini hydro power stations in instances where rural communities are in proximity with rivers that allow for it. Through this, an increase in energy access will be recorded while also advancing community development, alleviating pollution and therefore mitigating climate change.

Author : Daniel Ogwang

Researcher : African Centre for a Green Economy

The impact of Uganda’s final investment decision on its low carbon future

The signing of the Final Investment Decision (FID) between Total Energies, CNOOC and the Ugandan government on 1st February positioned Uganda as a potential league member of oil exporting countries in Africa. The agreement will see investments close to $10 billion in developing Uganda’s oil resources and construction of a 1,444-kilometer pipeline  from Uganda to the ports of Tanga in Tanzania. This FID  generated considerable excitement amongst government officials and various segments of the public after a long period of inertia characterised by tax and investment disputes between the government and the oil companies. At the same time, there has been backlash from environmental groups, including a campaign to stop South Africa’s commercial banks from investing in the project, due to its impact on Uganda’s low carbon future.

Like all mineral discoveries, the justification behind their commercial exploitation is rationalised through a prism of revenues and royalties to be collected and earned which provide an avenue for the government to uplift citizens out of poverty through interventions in healthcare, infrastructure, job creation among others. According to the president, collected revenue from the oil and gas sector will enable Uganda’s next development phase in fulfillment of vision 2040. Vision 2040 is centered on strengthening the fundamentals of the economy to harness the abundant opportunities in which oil and gas are listed. While this has to an extent been true for the Western world, given how they used coal and oil to drive their economies, it has mostly been the contrast for Africa; limited economic development with massive destruction of the environment, pollution and displacement of communities with little improvement of their socio-economic positions have been the order of the day.

Uganda, just like most developing countries is no exception. Weak state institutions have limited the ability of the government to exhibit efficient leadership and tackle challenges such as poverty.  Unemployment continues to rise while people’s living standards are worsening with corruption at the brim. Nonetheless, the country still holds high hopes on its fossil fuel “treasures” as a solution to most socio-economic challenges. Offcourse this is a failed attempt.

The development of Uganda’s oil and gas sector will significantly increase carbon emissions and therefore sabotage the current global campaigns geared towards accelerating a low carbon future. Uganda is a signatory to the Paris Climate Agreement whose goal is to limit global warming to 1.5 degrees Celsius by 2030. At a time when member countries are transitioning to low carbon development pathways in fulfilment of the set goals and guidelines, it is unfortunate that Uganda is rather pursuing fossil fuels which contribute highly to green gas emissions.

Last year in November at COP26,  Uganda submitted its Nationally Determined Contributions (NDCs) which highlighted the country’s measures for a lower carbon footprint and renewed commitment to climate action especially when it enacted its climate change act. Months later, we are met with an FID also guaranteeing commitment to the development of oil and gas as a tool for economic growth. This rather depicts the dishonesty of our leaders , how COP has turned out to be a meet and greet event for politicians with no environmental interests at heart and most importantly, it further makes us question Uganda’s readiness to commit to climate action.

Not only that, but the country is already reeling from the loss of forest cover due to human activity such as charcoal burning for energy needs. Recent figures indicate a decrease from 4.9 million  in 1990 to 1.8 hectares in 2015. As a result, many animal species which are dependent on these natural habitats have over the years decreased. Therefore, hydrocarbon exploration involving  gas flaring, drilling of oil wells and construction of the  pipeline to crude oil transportation will exacerbate environmental destruction and encroachment on wildlife and biodiversity in Murchison Falls National Park, Bugoma Forest Reserve , Taala Forest Reserve and the surrounding areas. According to statistics, approximately 2,000 square kilometres of wildlife habitats are at the verge of being destructed by the pipeline. Worse off, river Nile has tributaries that flow near the pipeline route hence there is fear amongst communities about the possibilities of oil spills leading to environmental pollution and loss of  livelihoods.

Furthermore, Uganda’s oil risks being stranded asset in the future which will lead to detrimental losses for the government. Stranded assets are sources of fossil fuel which are prone to losing value due to the transition to low-carbon development pathways. In a period when the world is moving away from dirty energy sources due to climate change, the long-term future of a fossil fuel driven economies are uncertain. More so, if the world is to limit global warming to 1.5 degrees Celsius as required by the Paris Agreement, more than half of oil and gas world reserves need to stay in the ground. This would mean fossil fuels like oil will be unprofitable and worthless as the call for net-zero emissions deepens.

In addition, there is a wide  concern amongst local communities, because many of them have not been adequately compensated for their land and other properties.  Approximately 12,000 families are  at the verge of being displaced from their ancestral land as the construction of the pipeline takes shape. The pipeline will also result into massive loss of farmlands which are a source of income and food to most people living in these communities hence with no substantial timely compensation, locals are at the risk of living an uncertain future coupled with livelihood disruption and increased food insecurity.

Therefore, further growing Uganda’s oil and gas sector will pose a serious threat to the environment, livelihoods and ecosystems which are  key aspects of the economy. Oil cannot be the solution to the current socio-economic challenges the country is faced with.  Instead, there is a need to adopt low carbon development pathways which not only provide sustainable employment opportunities to the growing youthful population but also directly respond to the worrying climate crisis.

 

Damalie Tebajjukira

Marketing & Communications Associate

African Centre for a Green Economy

 

 

 

Lack of energy access as a barrier to doing business

One of the biggest challenges Africa faces, is undoubtedly lack of access to reliable and cost effective energy. Less than 50% of the African population is connected to a national grid, and in some countries such as Uganda only 20% have access. The benefits of  energy access to human wellbeing are well documented, including access to clean drinking water, heating, cooking and other economic activities.

Over the years, there has been a growing recognition that if the material wellbeing of vulnerable people is to be improved, universal access to energy must be achieved, as outlined in the Sustainable Development Goal 7 (SDG 7), which aims to “ensure access to affordable, reliable, sustainable and modern energy for all.”

It’s also well recognised that, its practically impossible to connect everyone into the national grid, where in some cases such infrastructure is even none-existent. And in some cases the cost of connecting to the grid is so exorbitant, it does not make business sense. As a result, there has been a strong push for distributing off-grid energy solutions, such as solar to vulnerable communities that require electricity. It’s estimated that over the last 10 years, millions of Africans have managed to access off-grid lighting solutions, resulting in their improved wellbeing, and catalysing other opportunities for economic development.

Unfortunately, most of the progress has been limited to accessing electricity for lighting, with very limited opportunities for productive use. Little progress has been achieved in unlocking energy for productive use, such as the powering of machines for small scale manufacturing and irrigation. This is partly because even though solar technology has become ubiquitous, it’s still extremely costly for productive use. Other systemic challenges such as access to finance has also impacted on the wide uptake of solar technology for productive use.

Over the last couple of months researchers from the African Centre for a Green Economy, have been documenting some of the key challenges small enterprises face in accessing affordable energy for their business. For example between November and February, our researchers interviewed more than 450 small to medium enterprises in the West Nile Region of Uganda. Here are some of the top five barriers to accessing energy for productive use that were mapped:

  • The cost of solar is still prohibitively high for powering small businesses, which require power beyond lighting
  • Lack of dedicated solar providers in rural areas, which are most impacted by lack of access to the grid
  • Poor understanding of the potential solar power provides to improve their productivity and profitability
  • Lack of effective regulatory requirements to adhere to high quality solar technology, often means that small business invest substantial amounts, which are lost due to technology failure
  • Lack of after-sales services from solar providers, often means that users are unable to optimally utilise the solar systems, and cant’t fix minor problems which could have been solved as a result of an effective after-sales service.

 

Just transition: A critique of South Africa’s 2022/23 budget speech!

On Wednesday 23rd February, South Africa’s Minister of Finance, Mr Enoch Godongwana delivered the 2022 budget speech to outline government’s plans aimed at improving public service delivery and the economy. A further breakdown of how the government will finance commitments made by the president in the State of National Address was given. In general the budget was well received, as there no major tax increases, and the government’s fiscal position improved significantly due to effective tax collection.

However, we note with concern the inadequate allocation towards addressing South Africa’s transition to an inclusive and green economy. At the State of National Address, President Cyril Ramaphosa reemphasized South Africa’s commitment in addressing climate change including  its recent climate targets  submitted at COP26 geared towards limiting warming to 1.5°C as required by the Paris Climate Agreement. We believe it’s time to match these verbal commitments with real action against climate change.

While the 2022 budget has rolled out the use of carbon tax as a means of combating carbon emissions especially from high carbon polluting businesses, the increased new carbon tax is still low compared to the global urgency required to avert the climate crisis.  According to the minister,  the carbon tax rate will increase from R134 to R144 and the carbon fuel levy will increase by 1c to 9c per litre for petrol, and 10c per litre for diesel. Despite the fact that South Africa’s commitment at COP26 indicated a yearly increase of carbon tax , the current increase is not fit enough to completely restrain high carbon producing entities from operating especially in a country which is more vulnerable to climate change. With more cases of extreme weather conditions that disproportionately affect marginalized communities, it is disappointing that South Africa’s big carbon emitters will only have to pay an increase of just R10 per tonne of carbon in the face of climate change that continues to bite.

We welcome the government’s intention in addressing Eskom’s debt as this would ensure efficient service delivery to businesses hence positively impacting on the economy. We also welcome the proposal to restructure Eskom energy mix to include the use of renewable energy is a sustainable solution that will reduce the strain on electricity generation. As the president emphasized in the State of Nation Address, renewable energy will make electricity affordable to the masses, more dependable, will enable industries to compete globally and also support the country’s efforts in meeting the global clean energy future.

Therefore, putting specific emphasis on the carbon tax mechanism as a strategy in aiding  South Africa’s fight against climate change  and limiting greenhouse emissions will be an efficient strategy if only it is coupled with more and aggressive decarbonization pathways like the just transition.