World Bank gives green light to controversial Bujagali Dam in Uganda

27 April 2007

Bank approves $360 million financing package for dam on Victoria Nile despite concerns about climate change, environmental impacts and cost.

Despite significant outstanding concerns about the project’s economic and environmental viability, recent unrest in Uganda, and a pending Inspection Panel investigation, the Board of Directors of the World Bank Group yesterday approved $130 million in IFC loans and over $230 million in guarantees from IDA and MIGA to support the construction of the Bujagali dam on the Victoria Nile. Activists and scientists are concerned that the project could further threaten the health of Lake Victoria, the planet's largest tropical lake, while increasing dependence on hydropower in a warming world, and failing to provide affordable electricity to the majority of Ugandans who lack access today.

Controversy has surrounded Bujagali since the World Bank first expressed its intent to support the 250MW hydropower project over ten years ago. While World Bank financing for the dam was approved in 2001, the project was suspended following a corruption scandal and eventually derailed entirely when the original private sector sponsor pulled out. With the identification of a new private sponsor in 2005, the government of Uganda again appealed to the World Bank Group to help cover the cost of the project, which is now estimated to be $750 million – nearly $200 million more than when the dam was first approved.

There is little debate that Uganda is facing an energy crisis; nearly 90% of the population lacks access to electricity and recent drought-related power cuts have interrupted supply to the minority that enjoys service. Rather, the debate is about what is the best, most cost-effective and sustainable way to generate energy for the country’s population, while protecting biodiversity and minimizing climate-related risks. 

Recent studies by independent experts have added to fears that Bujagali could slow the recovery of Lake Victoria from its recent low levels and jeopardize the survival of fisheries. Additional research warns of the risks that global warming poses to hydropower supply in East Africa. Beyond these environmental issues, doubts remain about the economic soundness of the high-cost project. 

Defending Bujagali, the World Bank and project sponsors claim that the dam will have no impact on the levels of Lake Victoria and that it represents the lowest cost option for Uganda. The Bank argues that Bujagali is necessary to meet the needs of energy-intensive industrial sectors, asserting that a reliable electricity supply is critical for economic growth and development. Although some press articles suggest otherwise, the project does not contain provisions to deliver energy to rural areas or to expand the electricity distribution system. It is designed to feed the national grid and existing consumers. The poverty reduction rationale for the project, it seems, rests on the assumption that powering industrial development in Uganda will trickle down to benefit the poor. Whether and when these purported benefits will materialize remains to be seen. 

Resources

• Activists decry Bank's loan approval for Uganda dam by Emad Mekay, Inter Press Service, April 27, 2007 (IPS website)
• World Bank to decide on Bujagali Dam by Ibrahim Kasita, New Vision, April 22, 2007 (AllAfrica website)

• World Bank ignores inconvenient truths in approving Bujagali Dam, IRN and BIC, April 26, 2007 (BIC website) (Acrobat PDF 16 KB)

• NGO Letter to World Bank: Don't vote on Bujagali until all facts are in, April 24, 2006 (IRN website)
• World Bank Group approves support for Bujagali Hydropower Project that will address Uganda’s power shortages, World Bank, April 26, 2007 (World Bank website)
• Bujagali Campaign webpage, International Rivers Network (IRN website)