The construction sector, Uganda’s fastest growing services sector is headed for a huge slump as the dwindling volumes of cement production appear likely to slow activity.
Figures collected by the Uganda Bureau of Statistics show that the power supply shortage is already hurting the sector, registering large reductions in cement volumes every day.
Power companies have been ’load shedding’ or what is commpnly known as having power break offs. This has been caused by local shortages of diesel supply for the thermal generators, such as the 50MW Aggreko plant in Mutundwe, in a suburb of Kampala.
This has lead to a scarcity of cement, hence hiked prices by manufacturers, whole sellers and retailers. This is not only experienced in the cement production sector, it’s also in other manufacturing sectors that require high electricity voltages.
According to Peter Opio, the UBOS principal statistician for energy and infrastructure, the MoM construction sector indices rose 2.5% as a result of increased costs.
For years, local manufacturers have also been lobbying the government to continue subsidising power prices as well as reducing the taxes being levied on them.
Analysts have argued that Aggreko could be heading out of Uganda due to the government’s failure to clear the company’s dues together with Jacobsen and Electromaxx. The three power generators at least demand UGX207.5bn for May and August. The debt is part of the UGX663.4bn in subsidies that will be due to electricity suppliers during the FY2011-12.
The government was recently considering removing the 60%thermal power subsidy, as the long awaited 250MW Bujagli power plant will start full operation in April 2012.
Opio indicated that the prices of cement and other construction materials have increased by 35.3 per cent comparing it from September 2010-11, while the total producer price index rose by 35.7% in the same period.
Local cement producers have protested about foreign imports from China and UAE entering the market, but going forward it seems inevitable that this practice will continue.