East African Business Week

KAMPALA, UGANDA- The construction sector, Uganda's fastest growing services sector is headed for a huge slump as the dwindling volumes of cement production could hit it.
Figures collected by the Uganda Bureau of Statistics show that the on and off power supply is already hurting the sector hard, registering huge reductions in the volumes of cement produced per day. It comes as a result of the long hours of unproductive work spent due to load shedding.
It leads to 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 Mr. Peter Opio, the UBOS principal statistician for energy and infrastructure, the month to month construction sector indices rose by 2.5% as a result of increases in the price of cement that was due to reduced production, increased wage rates due to increased costs of living, lime that went up due to increased costs of importation and electrical wires whose cost rose due to a hike in the cost of imported raw materials.
Power break off as commonly referred to "Load shedding" started in 2007 but early this month hit the peak when thermal power generators Aggreko switched off their remaining 50MW generating plant in Mutundwe a Kampala suburb due to what the company termed as "a shortfall in diesel supply."
This led to massive demonstrations by Kampala city traders especially in the paper and printing business who protested the 24 hours day and night loadshedding.
"The costs of production and prices of commodities manufactured will continue to rise as the government has failed to address our concerns adequately," said Mr. Kaddu Kiberu, the chairperson of the Uganda Manufacturers Association (UMA) while commenting on the released producer price indices.
For years, local manufacturers have been lobbying the government to continue subsidizing on the power prices as well as reducing on the taxes levied on them.
The power problems could worsen as some analysts have argued that Aggreko's switching off of the Mutundwe station could signal that the company could be heading out of the Uganda due to the government's failure to clear the company's dues together with Jacobsen and Electromaxx .
The three thermal power generators at least demand Shs207.5 billion for the months of May to August 2011.
The debt is part of the shs663.4 billion in subsidies that will be due to electricity suppliers during the 2011/12 financial year.
Aggreko's switching off of the 50MW power has led to an acute electricity shortfall as well as the return of 24 or so hour load shedding as the capacity of electricity supply to the national grid has continued to go down.
The government was of recent considering the removal the 60% thermal power subsidy, as the long awaited 250MW Bujagali Power Plant start full operation in April 2012. Some 50MW from Bujagali are being expected this November.
Opio indicated that the prices of cement and other construction materials have increased by 35.3% comparing it with September 2010 and September 2011, while the total producer price index rose by 35.7% in the same ending year.
It means that one has to pay by more than 35% for a bag of cement today as opposed to the price they paid for it a year ago. Local and regional cement producers have in the past made noise about cement from places like China, Dubai entering the market, but going forward, it is inevitable.