Uganda fuel: Letter to Mudavadi
People queue to buy fuel at a filling station.
While criticising the government’s handling of the ongoing disruption to fuel supply, Amani National Congress (ANC) party leader Musalia Mudavadi wondered why Kenya was struggling yet Uganda had fuel.
“We are seeing people lining up to get fuel in petrol stations. When was the last time you saw that? It last happened in the 1990s, when we had price control. Our neighbouring country, Uganda, has fuel all through yet their fuel passes through pipelines in Kenya. Then the government says we have a shortage of petrol. What is that?” the Daily Nation quoted him as saying.
Part of the answer is in Mudavadi’s statement: Price control. Kenya actually still controls fuel prices, through the Energy Petroleum and Regulatory Authority (Epra). Uganda doesn’t.
On Monday, President Uhuru Kenyatta signed the Supplementary Appropriation Bill, enabling the release of Sh34.44 billion to oil marketing companies as subsidy arrears. Uganda’s President Yoweri Museveni doesn’t know what a fuel subsidy is. Uganda is virtually alone in the region in not subsidising fuel, although it is landlocked.
Dar es Salaam port
Mudavadi was correct to say Uganda’s fuel passes through Kenya’s pipelines, but that is beginning to change. Beginning last year, the country started the delivery of some of its petroleum products from Tanzania’s Dar es Salaam port through Lake Victoria after a 16-year break. The fuel lands in Dar and is transported by rail to Mwanza port, then to Uganda over Lake Victoria. That is nearly 600 kilometres further away from Kampala than Mombasa.
Apart from diversification of routes, it is part of a wider shift in the East African hinterland, which is seeing a revival in the use of Lake Victoria as a transport platform. The larger volumes of Ugandan fuel over the lake originate from Kisumu port.
Uganda has had fuel shortages, the most notable one of recent years late last year and early 2022 following a dispute over testing truck drivers for Covid-19 at the border led to slowdowns and chaos. Fuel tanker queues of up to 80km formed on the Kenyan side of Malaba waiting to enter.
If that had been in Kenya, there would have been no fuel at the pump. There were no dry pumps in Uganda as fuel stations hiked prices, in some places by as much as 50 per cent to Ush6,250 (Ksh203) per litre of petrol. These wild swings work to manage demand and supply and keep the queues away. Such a jump in Kenya would result in great unrest or even a revolution.
Howls of protest
Prices have since dropped to Ush5,000 (Sh162), and closer to Ush4,000 in some places, given the freewheeling and autonomous pricing system. There were howls of protest, and criticism of the government for not doing something to dampen prices, but a lot of it was aimed at fuel companies.
There was not much demand for government subsidies or price control; that expectation is not there. Over the years, the idea that business people, rather than politicians and bureaucrats, are better at managing things like fuel supplies has taken deep hold among the elite in the country.
But there is more. The Kenyan economy is just over two times bigger than Uganda’s. However, that a litre of petrol sells in Uganda for the equivalent of Ksh162 today is unthinkable in Kenya, where it’s Sh135.
Ugandans are able to take greater pain, for historical reasons. From about 1972, when the military dictator Idi Amin expelled Asians, the economy nose-dived. There was so much scarcity; virtually all consumer goods, from soap to toothpaste, sugar, milk, beer, flour and fuel, were rationed. There were government departments that wrote out “allocation chits” that the few connected and powerful people would take to a shop, factory or petrol station and get their supplies. The rest of the people did without or bought from the black market, where the goods sold for up to five times higher.
Privatisation and liberalisation
In fact, those who got the allocation chits didn’t have to collect the goods; a secondary market developed selling allocation chits. The person who picked the allocated beer could be the fourth buyer of the chit.
That ended in 1988, two years after Museveni took power, in easily the most frenzied bout of privatisation and liberalisation in Africa. So, Ugandans are not only able to take greater pain but, for the dying generation in power, the scars of the age of scarcity run too deep for them to gamble on things like the state meddling in fuel.
Additionally, the relatively low tax and other economic structures soak up the high cost of fuel in ways not possible in Kenya. If a Ugandan and Kenyan imported similar used cars from the same dealer in Japan, brought them through Mombasa and the Ugandan drove hers to Uganda and registered it, she could still re-export it to Kenya and make a 15 per cent profit.
Mr Onyango-Obbo is a journalist, writer, and curator of the “Wall of Great Africans”. @cobbo3
