The commissioning of the Karuma hydroelectric plant represents a major strategic step forward for Uganda. With a capacity of 600 megawatts (MW), this installation brings the country’s total production capacity to more than 2,000 MW. This project, costing $1.7 billion, was 85% financed by a loan from China Exim Bank. Karuma is located on the Nile River, a strategic geographic position that allows it to meet both internal demand and export needs to neighboring countries, including Rwanda, Tanzania and Kenya.
An economic and energy lever for Uganda
The construction of Karuma, undertaken by the Chinese company Sinohydro Corporation, is part of a national strategy aimed at guaranteeing access to stable and competitively priced energy. Uganda aims to become a reliable regional energy supplier, strengthening its trade relations with its East African neighbors. At the same time, additional projects are already underway, such as the construction of a 400 kilovolt (kV) transmission line over 248 kilometers, allowing the export of electricity produced by Karuma.
Furthermore, Uganda plans to strengthen its exports with the construction of a new transmission line to South Sudan, an energy-deficient country. This project, estimated at $180 million, adds to the current infrastructure, cementing Uganda as an energy hub in the region. This export capacity allows the country to diversify its sources of income while playing a key role in the electrification of East Africa.
Sino-Ugandan cooperation at the center of major projects
China’s role in the development of energy infrastructure in Uganda is confirmed through the Karuma project, the second large hydroelectric plant financed by Chinese loans. In 2019, Uganda already inaugurated the 188 MW Isimba power plant, a $500 million project also supported by the China International Water and Electric Corporation. These initiatives illustrate Uganda’s growing dependence on Chinese financing for its major infrastructure projects.
Although China has provided significant financial support, these projects are not without challenges. The Karuma project, initially scheduled for completion in 2018, has suffered several delays, due to logistical complications, as well as the impact of the COVID-19 pandemic. However, despite these obstacles, the Ugandan government persists in its efforts to finalize projects of national scope, with a view to strengthening its energy network and improving the quality of life of the population.
Impact on the economy and infrastructure
The inauguration of Karuma is part of an overall strategy to make energy accessible and affordable in Uganda. President Yoweri Museveni has stressed the importance of access to low-cost energy to boost the economy and attract foreign investment. Cheaper energy, combined with increased capacity, allows Uganda to support its nascent industrialization, particularly in the manufacturing and extractive sectors.
The development of electricity transmission infrastructure is also crucial. Uganda has invested in high voltage transmission lines to ensure efficient distribution of the power produced by Karuma. This infrastructure should also help reduce electricity losses, a chronic problem that hampers the profitability of power plants. By investing in these networks, the government intends to improve the stability of the national network while meeting the needs of the region.
Outlook for Uganda’s energy future
With the increase in its energy capacity, Uganda seeks to strengthen its regional positioning. However, challenges remain, particularly in terms of maintaining infrastructure and managing relations with creditors, mainly China. The use of external financing raises questions about the sustainability of these investments, particularly regarding the repayment of long-term loans. The stability of regional electricity markets will be crucial to guarantee the return on investment of these projects.
Uganda, by becoming a regional energy supplier, is strategically positioning itself to benefit from the opportunities offered by the growing demand for electricity in Africa. Improved production and transmission capacities are also expected to encourage new investments in other key sectors of Uganda’s economy, such as extractive industries and services.
