Umeme, grain and coffee: why Kenya should fear Uganda’s economic gamble

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By Charles Onyango Obbo

Uganda, Africa’s shining poster child for privatization in the 1990s, is in what may be the greatest reverse gear in East Africa’s economic liberalization. Last year, the Ugandan government officially announced that it would not renew electricity utility Umeme’s contract in 2025 when its concession expires and would set up a state entity to take over its business.

The government’s main criticism of Umeme is that its profit margins are too high, which is why it has failed to reduce electricity costs, and the high tariffs have hampered Uganda’s industrialization ambitions. Umeme counters that it is only a distributor and that the high electricity costs are passed on to the electricity producers.

In two years the debate will be settled. Uganda will be in the midst of campaigning ahead of January 2026 elections, when President Yoweri Museveni, weighed down by the attrition of 40 years in office, is likely for a record-breaking ninth term with his son, Gen Muhoozi Kainerugaba, among those trying to wring the crown off his head. It will be the worst possible timing because incumbents rarely make the most informed decisions in heated campaigns. As West Africans say, there will likely be “a lot of shouting”.

distribution concession

Umeme was formed in 2004 when the government of Uganda awarded the distribution concession to a consortium owned by Globeleq, a subsidiary of the UK’s Commonwealth Development Corporation, which owned 56 percent, and South Africa’s now-defunct utility Eskom, which owned 44 percent. In 2006 Eskom left the consortium and Globeleq became the sole owner of Umeme.

The regional impact could be significant as Umeme shares are listed on the Nairobi Securities Exchange, among others. If it unraveled, Kenyan shareholders would weep in their bowls and we could be back at the regional assets feud that followed the dissolution of the first East African community in 1977.


Too messy to swallow

The renationalization of Umeme will not be an isolated case. Kenya has just attempted to renationalize bloody national airline Kenya Airways but found it too messy to swallow. The recently elected new administration of President William Ruto has decided to throw it back on the block.

The difference in Uganda is that Umeme is just the shallow end of the pool. There are further moves to renationalize the very lucrative liberalized coffee sector by granting a near monopoly over the processing and export of Uganda’s coffee to a Vinci Coffee Company owned by controversial and shady Italian “foreign investor” Enrica Pinetti. That would take Uganda back to the early 1990s when the disastrous Coffee Marketing Board was disbanded.

A similar move is being taken to give the Grain Council of Uganda, on paper a non-profit membership organization, the kind of influence over the country’s grain last seen in the colonial era.

The driving force behind the grain council is the otherwise amiable president’s younger brother, retired Lt. Gen. Salim Saleh (Caleb Akandwanaho), a wily entrepreneur who is the second most powerful figure in the country. A nationalist and statist, Saleh has led a silent but effective attack on laissez-faire liberalization, which he argues has mostly benefited foreigners, leaving Ugandans with holes in their pockets. He has assumed a large part of the country’s agricultural budget and several “development” roles under the informal, state-created vehicle Operation Wealth Creation (OWC), which he directs, and placed students in key national economic institutions.

Return to old roots

This state is a dramatic return to old roots. Uganda embarked in the 1990s on the first of a series of economic liberalizations then considered impossible in Africa and anathema to the hypernationalist traditions entrenched in post-independence Africa.

It was the first country in Africa to radically liberalize its foreign exchange market and still maintains one of the least interventionist approaches to money markets on the continent. It was also the first in East Africa to pass legislation giving broad independence to the central bank.

It was the first company on the continent to liberalize the fuel market and introduce subsidies for waste oils in the early 1990s. Again, at least in East Africa, it is the government that is least involved in setting the price of petrol at the pump. When fuel prices skyrocketed everywhere after Russia’s invasion of Ukraine last year, it was the East African government alone that flatly refused to even consider a fuel subsidy and price cap like all other EAC countries did.

food price

Uganda is also the country where food prices are most likely not to be viewed as a government issue. When Ugandans read stories and political struggles about corn in Kenya and the government sets the price, to some it sounds like a story about an alien planet.

The country and economy that Uganda is today is about to change. Some of the changes have to do with the politics of the Museveni succession and how the family and interest groups gathered around the State House view their future security. However, much of this can be attributed to some good things: the rebirth of the EAC; the end of the wars in Uganda and the beginning of the country’s longest period of peace; the rise of a post-KANU Kenya; and the post-genocide recovery in Rwanda.

If there are two people in East Africa outside of Uganda who have brought Uganda to the crossroads where it is today, it is Rwanda’s President Paul Kagame and former Kenyan President Mwai Kibaki.

The author is a journalist, writer and curator of the Wall of Great Africans. [email protected]

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