In a move that has further intensified tensions between Uganda’s government and Umeme, the country's electricity distributor, the company announced on June 2, 2025, that it would pursue arbitration in London’s international courts over a longstanding financial dispute. The disagreement centers around claims that Uganda owes Umeme $292 million for unrecovered investments made during the company’s 20-year tenure managing Uganda’s electricity distribution network.
Umeme, which held the concession for distributing power across Uganda from 2005 until its contract expired in March 2025, asserts that its claims remain unpaid despite receiving an initial $118 million from the government. Kampala, on the other hand, maintains that it does not owe any further payments unless the ongoing audit reveals additional costs that have not yet been accounted for.
This dispute marks the latest chapter in a broader saga that has been playing out for decades in Africa’s electricity sector, where questions about privatization, pricing, and who benefits from infrastructure investments remain contentious. At the heart of the current conflict is Uganda’s decision to wrest control of the electricity distribution network from Umeme and return it to state hands—an issue with wider implications for the region’s power sector.
Privatization: A Long-Standing Debate
The fallout between the Ugandan government and Umeme stems from Uganda’s pivot away from privatization in the electricity sector—a decision that may have ripple effects for other African countries grappling with similar dilemmas. Since the 1990s, global financial institutions, especially the World Bank, have advocated for the liberalization of African energy markets, arguing that private investment can bolster sector efficiency and attract much-needed capital.
Uganda was at the forefront of these reforms in East Africa. In 2005, the country became the first in Anglophone Africa to privatize its electricity distribution, awarding Umeme a 20-year concession to take over the Uganda Electricity Board (UEB).
But now, Uganda’s leadership has shifted course, believing that returning control to the state-run Uganda Electricity Distribution Company Limited (UEDCL) is the best way forward, at least until a new private investor is identified. The decision is part of President Yoweri Museveni’s broader effort to rein in electricity prices and expand access across the country.
This shift in policy has caught the attention of other African nations, particularly Ghana, which is weighing whether to follow Uganda’s example and introduce private participation into its electricity distribution sector.
The Push for Free-Market Reforms
The privatization push in Uganda was part of a broader trend in the 1990s inspired by market reforms in countries like Chile and the UK. Under these models, national utility companies that previously handled everything from power generation to distribution were unbundled into separate entities. The market was then opened to private players, with the expectation that competition would enhance efficiency, attract investments, and lower consumer costs.
But the reality has been far more complex. By 2016, only six countries in sub-Saharan Africa had fully unbundled their power utilities and invited private sector participation, while another 23 had undertaken some form of reform, but not all. In contrast, 19 countries retained vertically integrated, state-owned utilities, largely untouched by privatization. Research from the World Bank in 2017 acknowledged that the model was far more difficult to implement than initially anticipated.
Uganda, however, pursued the reforms vigorously. By the mid-2000s, the government was deeply in debt and had few alternatives but to heed the advice of the World Bank. The country’s energy sector was in dire need of investment and reform, especially after the Uganda Electricity Board (UEB) had failed to meet demand and was plagued by widespread inefficiency and financial losses.
Fred Kabagambe-Kaliisa, who served as Permanent Secretary at the Ministry of Energy from 1997 to 2016, explains that the drive for electricity sector reform was driven “50/50” by external pressure from the World Bank and internal discussions on how to capitalize the sector without adding to the government’s fiscal burden.
The Rise of Umeme: A Double-Edged Sword
In 2005, a consortium of private investors, including Globeleq (a subsidiary of the UK’s CDC Group), took control of Uganda’s distribution network through Umeme. The company’s role was not to create competition—Umeme was granted a near-monopoly—but to invest in infrastructure that the government could not afford.
Over the years, Umeme invested hundreds of millions of dollars, and by 2012, it was publicly listed on the Uganda Securities Exchange, with a cross-listing in Nairobi. By 2023, nearly 40% of its shares were owned by Ugandans, including the National Social Security Fund, which manages the pensions of hundreds of thousands of citizens.
However, Umeme's role was not without controversy. A central component of the concession was the guarantee of a 20% return on new investments, something that critics argue led to higher tariffs for consumers. Although electricity prices were raised significantly in the early years of the contract, they have remained high by regional standards, and some consumers—especially those in rural areas—still struggle to afford power.
The higher tariffs were part of an agreement that allowed Umeme to recoup its investments, but the arrangement sparked political backlash. Bobi Wine, a popular musician-turned-opposition leader, vocalized the frustrations of ordinary Ugandans, declaring, "I don’t know why the price of electricity is too high."
State-Led Energy: A Step Toward Affordability?
Despite the initial success in reducing technical losses and increasing the customer base, President Museveni’s patience began to wane. As privatization fell out of favor globally and state-led economic models regained popularity, the Ugandan leader’s government began to signal its intention to take control of electricity distribution once again.
By the time Umeme's contract expired in March 2025, discussions over a renewal had broken down. The government was firm in its plan to transition the responsibility to UEDCL, which would operate the grid at least until 2028, with the option to explore other public-private partnerships in the future.
A spokesperson from the Ministry of Energy stated that the government's new model would “allow for reinvestment in infrastructure, ensure more direct responses to service concerns, and contribute to broader economic transformation, including industrialization and rural electrification.”
Meanwhile, Umeme, which has seen its reputation tarnished by the high tariff structure, defended its two decades of service, arguing that it “delivered lasting impact” in a sector previously plagued by dysfunction and inefficiency.
The Road Ahead: A New Energy Vision for Uganda?
The dispute over the $292 million in unrecovered investments is not just about money—it's about the future direction of Uganda’s electricity sector. While the government is insisting that UEDCL will pick up where Umeme left off, some experts are skeptical. Peter Twesigye, a former manager at Umeme and now an energy policy researcher at the University of Cape Town, cautions that state-owned enterprises often lack the efficiency and governance structures needed to thrive.
“The culture of governance in private companies is more efficient than in public-sector entities,” Twesigye explains. "Public enterprises are often vulnerable to political interference, which can undermine long-term planning and sustainability.”
Despite these concerns, some Ugandans argue that the government is the only party that can ensure electricity is affordable and accessible to all citizens, particularly in rural areas. Dickens Kamugisha, the executive director of the Africa Institute for Energy Governance (AFIEGO), claims that Umeme’s focus on profitable urban areas left many underserved, even though the company’s operations led to improvements in infrastructure and service quality for those who could afford it.
The next few years will be critical. By 2028, Uganda will assess the performance of UEDCL and decide whether to continue with a fully public model or invite new private investment. Until then, it remains to be seen whether this marks a significant shift in Uganda’s energy policy or simply a temporary detour on the long road toward finding the right balance between public and private roles in Africa’s energy future.