Uganda’s energy transition will happen naturally, experts say

Uganda’s energy transition will happen naturally, experts say
Porridge being prepared using firewood, according to the Biomass Energy Strategy report of 2014, Schools and prisons top in depleting forests.

Kampala, Uganda | By Michael Wandati | Experts within the renewable energy sub-sector have advocated for the unhindered progression toward a clean energy society, asserting that a forced transition is unnecessary.

The experts emphasize that the energy sector, particularly in renewable energy, is an organic entity, and Uganda, as a burgeoning renewable energy market, will naturally expand as both demand and the capabilities of suppliers increase.

These insights were shared during a capacity-building dialogue held in Kampala, which recently empowered at least 12 Small and Medium Enterprises (SMEs) in Uganda’s solar and cooking sectors through Belli Advisory’s second phase of the Business Development Support training program. This program’s primary goal is to streamline processes and foster the growth of service providers within the renewable energy subsector.

The Ugandan government has prioritized renewable energy as a solution to address the challenges of limited access to cleaner and formal energy sources, especially in a country where charcoal and firewood still dominate cooking practices. This preference arises due to the perceived high costs of available alternatives for the average Ugandan.

Frank Neil Yiga, the Chief Executive Officer at Anuel Energy, highlights the organic evolution of Uganda’s energy landscape. Notably, solar energy, which was once reserved for large organizations, is now accessible to even market vendors, reflecting the country’s gradual transition toward a green energy society. Amanda Kambagambe, Managing Director at Bethel Advisors, also supports this view.

Although resource constraints occasionally hinder Uganda’s transition to clean energy, there remains limited awareness of affordable solutions and a lack of understanding regarding the benefits of adopting clean energy practices. Kambagambe asserts that this transition is inevitable, and the market is expanding, necessitating that investors and solution providers align their offerings with the market’s needs.

The Belli Advisory initiative, supported by GIZ Energising Development (EnDev) Uganda, aims to equip beneficiary companies with training and mentorship in areas such as Strategic Planning, Investment Readiness, Marketing, Operations, Human Resource Management, and Financial Management.

The “Renewable Energy Business Accelerator Dialogue” addresses critical issues confronting SMEs in the renewable energy industry. With over 2.5 million Ugandans employed in this sector, accounting for 90 percent of private sector development, their vital role cannot be overstated. The service sector, inclusive of energy SMEs, constitutes 49 percent of Uganda’s total SMEs, contributing at least 44 per cent to the nation’s GDP.

Despite their substantial contributions, renewable energy SMEs encounter various performance-related challenges, primarily stemming from ineffective business governance and limited access to financing. Jacob Etunganan, an Energy Efficiency Expert at the Dutch development organization SNV, emphasizes the objective of eliminating the use of firewood and charcoal by supporting SMEs that produce energy-efficient technologies to expand their markets and make their products more affordable.

The World Bank’s 2020 report revealed that SMEs struggle to secure mainstream financing from traditional banks due to factors such as a lack of collateral and inadequate record-keeping. Even SMEs with the requisite documentation still face difficulties in raising capital, with micro SMEs often considered high-risk and receiving less priority.

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The Renewable Energy Business Accelerator Dialogue aims to address these pressing issues by emphasizing the role of business development support services in preparing renewable energy SMEs to attract investors.

Regarding proposals for mergers and collaboration as an alternative source of financing, Matthias Möbius, a co-founder of StartHub Africa, underscores the importance of well-thought-out mergers, with all parties prepared for a mutually beneficial outcome. Collaboration and mergers must be based on an expectation of a win-win situation.

The dialogue deeply explored the challenges faced by businesses in accessing financing, the concerns of financiers, and the potential of Business Development Services (BDS) in bridging these gaps.

Belli Advisory, the organization spearheading this transformative dialogue, firmly believes that growth, innovation, and sustainable development are the way forward for Uganda’s SME landscape.