Museveni’s Comments Shock Western Investors

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Museveni's Comments Shock Western Investors
President Yoweri Museveni

AFRICANGLOBE – A high-level summit aimed at promoting a $250 billion investment drive across Africa has been overshadowed by criticism from international investors over comments made by Ugandan President Yoweri Museveni.

Uganda’s leader told 450 investors at The Global African Investment Summit in London, held from October 20 to 23, that he was not convinced of the wisdom of using private investment funding for the energy sector, or for the construction of future power plants.

Instead, he said, he was counting on China to provide $10 billion to build much of his country’s infrastructure backbone because Beijing offers the cheapest capital, does not interfere in African politics and has “big money” available.

His remarks, which were given widespread publicity in the Wall Street Journal and Britain’s Financial Times, drew a chorus of criticism from investors.

“The only problem I’ve seen with energy is that when the private companies come in they use borrowed money, and that borrowed money has high interest. Once they produce electricity, they try to recover money through high electricity prices,” President Museveni said. “I want cheap electricity for my factories to be competitive.”

But David Triesman, director at the London-based merchant bank Salamanca Group, said Uganda’s president would “have to rethink his model, or he’s not going to have the electricity.

“It’s very important for us (investors) to be able to stand in the shoes of people who are at the head of very complex countries in Africa, but it’s very important, if they really want investment, for them to try and stand in investors’ shoes.”

President Museveni was one of three East African leaders speaking at the summit at London’s Savoy Hotel, held to consider the merits of 136 African investment projects worth $246 billion.

The comments are controversial because the 250-Megawatt Bujagali dam, which was inaugurated in 2012, was built with funding from Blackstone, the New York-based private-equity firm, in partnership with the Aga Khan Development Network.

Blackstone said at the time that the $900 million project was one of the largest privately funded power-sector investments in Africa.

Elly Karuhanga, a Ugandan lawyer and chairman of the Ugandan Chamber of Mines and Petroleum, defended the president’s views.

“At the back of his mind he has the Chinese investors, because they build these dams at extremely low prices,” Mr Karuhanga said in an interview. “They are investing in Africa in a big way.”

Uganda’s Finance Minister, Maria Kiwanuka, said global investors are welcome to build dams in Uganda if they offer the most cost-effective proposals.

“If they are using borrowed money, there is a premium inherent in that, and then of course they need to put their own overheads on top of that,” Ms Kiwanuka said.

But she added that she didn’t care where the investors came from. “A euro is a euro, a ruble is a ruble, a yen is a yen,” she said. “I don’t look at the source. I say, ‘What is this deal going to offer us in Uganda?’”

The summit was opened by former UK foreign secretary William Hague and by former president of Nigeria Olusegun Obasanjo. Mr Hague said the UK government was investing in relationships across Africa “as never before.

“We are expanding our diplomacy and backing British businesses investing and trading in Africa with unprecedented energy and determination, because we know that this is Africa’s moment and we want to be the partner of choice for African nations in the coming decades,” Mr Hague said.

“We see an Africa of opportunity, with six of the 10 fastest growing economies in the world, a young and growing population, vast natural resources and limitless potential if aspirations can be met with education, job creation and good governance.”

The row over private investment in the energy sector as well as the decision of the Rwandan government to ban the BBC’s service in Kinyarwanda dominated the news after the event.

Rwandan President Paul Kagame gave one of the keynote addresses at the summit, which focused on key infrastructure projects in the energy, mining and banking sectors.

Despite the row over the BBC programme Rwanda, The Untold Story, DfID Minister of State Desmond Swayne described Rwanda as a transformed nation in terms of its business opportunities.

“Rwanda is a country that is absolutely transformed from the human disaster area of 20 years when the world turned its back on Rwanda into the modern, safe, prosperous and corruption free zone that it is today,” he said.

High on the agenda was the issue of financing increasing energy generation across Africa, the issue President Museveni spoke on.

Uganda is expecting Chinese state-backed capital to finance two hydropower plants — the 600MW Karuma and the 188MW Isimba dams — and a railway line connecting Kampala to Kenya, South Sudan and the oil-rich West Nile region that borders the Democratic Republic of Congo.

President Museveni said China’s Ex-Im Bank has signed an agreement to finance 85 per cent of the estimated $2 billion cost of the Karuma power plant, with Uganda providing 15 per cent.

Stressing the energy gap on the continent and the massive opportunities for investment, Scott Mackin, managing partner at Denham Capital Management LP, said, “if you take out South Africa, Africa has the same level of electricity generation as Spain. If you include it, it is still equivalent to only Norway.”

 

By: Paul Redfern

 

The New Scramble For Africa

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