Transformer and electric cable market study to support local content policy reforms

Transformer & Electric Cable
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Situation

In the past 15 years, Ugandan manufacturers have increased investments and capacity to make products used in electricity generation, transmission, and distribution networks. These include electric cables, poles (wooden and concrete), distribution panels, transformers, cement, and steel, among others. 

However, due to past policies, the Electricity Supply Industry (ESI) has yet to begin purchasing economic quantities of these locally manufactured products. This has resulted in the industry's return on investment remaining sub-optimal.

The current situation presents a significant problem with a long history, affecting supply and demand. Manufacturers are grappling with low capacity utilization, leading to poor cost competitiveness and weak business performance. On the other hand, the ESI has been spending significant resources (>$200m per annum) on procuring imported transformers, electric cables, and other equipment.

If the ESI can sustainably increase its purchases of transformers and electric cables from local manufacturers, the results would be enhanced business performance, jobs, economic growth, and a positive impact on the balance of trade. It would further reduce the effect of forex exposure on electricity tariff determination, effectively lowering the price of electricity to the end consumers while encouraging increased investment in Uganda’s manufacturing sector.

Industries
Strategy, Data & Insights
Public Policy
Implementation Services
Electric Power & Clean Energy
Manufacturing & Consumer Goods
Engagement

Our client, the Uganda Manufacturers Association (UMA), had the objective of conducting a detailed study of the transformer and electric cable market to (i) understand the industry trends in the local, regional, and global markets, (ii) size the current and projected demand for transformers and electric cables in Uganda, building on the past trends and future projections (e.g., by evaluating planned projects in electricity densification and new connections); (iii) determine the capacity of local manufacturers of transformers and electric cables to produce transformers and electric cables in Uganda per agreed industry specifications; (iv) conduct a gap analysis of the regulatory constraints and prepare policy positions to address the gaps; and (v) provide recommendations for enhancing the demand of locally manufactured transformers and electric cables in Uganda.

ORI and UMA joined forces to:

  • Conduct a detailed industry analysis of the transformer and electric cable market and determine global, regional, and local trends, growth drivers, and technological changes.
  • Collect primary and secondary data on the current and projected demand for transformers and electric cables in Uganda over five years.
  • Survey and assess transformer and electric cable manufacturing industries to understand their manufacturing capacities, constraints, and employment data, including numbers of jobs and demographics.
  • Analyze the data collected and synthesize information to generate insights and recommendations.
  • Review the policy and regulatory environment governing the industry, including the requirements for public procurement. In addition, review private utilities’ requirements on quality and supply terms.
  • Generate and validate the findings with transformer and electric cable industry representatives.
  • Develop a technical assistance and training program for UMA's Policy and Advocacy Department. The department prepares evidence-based policy positions to engage policymakers and achieve desired policy reforms.
Outcomes
  • The transformer and electric cable market study provided explicit recommendations for addressing the problem of low levels of purchases by the ESI.
  • Recommendations included a plan for capability building of local manufacturers to enable them to produce quality transformers and electric cables consistent with internationally recognized quality specifications, the Uganda National Bureau of Standards (UNBS) specifications, and the requirements of the ESI.
  • A program for supporting manufacturers, most SMEs, to access energy efficient manufacturing technologies and access to capital was developed. These interventions are helping manufacturers achieve the required standards.
  • Review of the public procurement regulations to modernize them and ensure that local manufacturers have an opportunity to supply the ESI, as long as the products are of the right quality and cost competitive.
  • The result has been increased transparency and regulatory certainty for transformer and electric cable manufacturers regarding market access and investment, as well as improved coordination and dialogue with the ESI and policymakers.