Gambling on a Nile dam project

Six miles north of Lake Victoria, the Nile awakens, exploding into a cauldron of white water known as the Bujagali Falls. Offering some of the world’s most spectacular rafting, it is one of Uganda’s top attractions. Soon it will be destroyed.

After 13 years of seeing plans delayed by corruption allegations, financial strife, obdurate spirits and opposition from environmental groups, Uganda has authorised an international consortium to begin a 30-metre-high dam across the Nile just below Bujagali Falls.

The $800 million (£400 million) hydropower project — the biggest-ever foreign investment in east Africa — will flood the rapids and, according to critics, leave the country dangerously exposed to an energy crisis if predictions of global warming are realised. But the government and the World Bank, which is backing the project with $360 million in loans and guarantees, insist that it is crucial to the country’s development. "When the dam is finished [in 2011] we will be rid of the darkness," said Daudi Migereko, Uganda’s energy minister, at the ceremony to approve construction.

In Uganda, where only one in 20 households has access to electricity, nobody doubts that desperate measures are required to solve the chronic power shortage. Even in the energy ministry, lights are often off. Factories have had to cut back production and lay off workers, slowing economic growth. In the capital, Kampala, which hums with the sound of generators, streetlights have been fitted with wind-turbines and solar panels to ensure they are not redundant.

At first glance, harnessing the power of a natural, clean and seemingly abundant energy resource such as the Nile seems logical — and not only to Uganda. In Ethiopia, source of the Blue Nile, Chinese engineers are building the 300MW Tekeze Dam on a Nile tributary and the government has plans for dozens more large dams. In Sudan, where the Blue Nile and White Nile meet at the capital, Khartoum, construction is advanced at the giant 1,250MW Merowe Dam.

But huge hydropower schemes come with similar risks. As the World Commission on Dams — a joint project of the World Bank and the World Conservation Union (IUCN) — reported in 2000, the social, environmental and financial costs of big dams often outweigh benefits. Merowe, which has displaced 50,000 people and submerged a rich archaeological site, is a case in point. Bujagali, according to environmentalists such as Lori Pottinger, Africa director at the US-based International Rivers Network (IRN), is another. "Uganda is making itself wholly dependent on a stretch of river for its electricity," she said. "No northern country would accept such a situation."

Though Bujagali Dam will only displace a few hundred families, the project proved contentious from its inception in 1994. Traditional leaders said it would disturb spirits. Tour operators protested that their livelihoods would be lost.

Critics said that the original contractor, US power company AES, which was to own and operate the dam, stood to make huge profits. A bribery scandal involving a contractor and a senior Ugandan World Bank official further muddied its image, and few people were surprised when AES abandoned the project in 2003, citing financial difficulties.

Still, the Ugandan government was not about to give up. In 2005, IPS Kenya, part of the Aga Khan’s group of companies, and Sithe Global Power, owned by the giant US private equity firm Blackstone, formed a joint venture called Bujagali Energy to take over the scheme.

But the controversy was just heating up. A devastating drought had hit east Africa, and the level of Lake Victoria, the main source of the Nile, had dropped sharply. The Ugandan government blamed evaporation and decreased river inflows. But independent experts reported that more than half of the drop was man-made. Nearly all Uganda’s electricity capacity comes from Nalubaale and Kiita Dams, a short paddle upstream from Bujagali, where the Nile drains out of Lake Victoria. In an attempt to produce more power to cope with increased demand, engineers had made excessive releases through the dam wall, causing more than half of the drop in the lake.

Though Lake Victoria has risen slightly since last year, its low level means that the dams are producing less than a third of their capacity — the main reason for the power crisis. Frank Muramuzi, head of Uganda’s National Association of Professional Environmentalists (NAPE), said there were severe doubts that future river flows would allow Bujagali Dam to produce near its 250MW capacity. "We say output will be closer to 100MW, which will make the power far too expensive," he said.

Smaller, cheaper options such as micro-hydro, solar and geothermal projects located in areas that would be of more benefit to the rural poor have not been adequately explored, Muramuzi said.

But Bujagali Energy denied this. Kenneth Kaheru, technical coordinator for the company, said that though the cost of building the dam had risen to $800million — which would have to be recouped from consumers through higher tariffs — it was still the least costly, and best, option. "This is a clean project, with minimal impacts. The detractors just don’t want dams to be built anywhere."

Fred Kabagambe-Kalissa, an energy official, agreed, comparing environmental groups to "religious groups who see stopping dams a cause worth dying for". The economy was losing $250 million a year because of the power shortage, he said.

And World Bank officials in Kampala down-played the possible effects of climate change on the Nile’s flow, arguing that the fall in the level of Lake Victoria was cyclical. They also dismissed arguments that Uganda’s poor will see no benefit from the dams. If the Ugandan economy benefits from a more reliable energy supply, they said, everybody will win.

But Godfrey Buyera, who takes tourists around the Bujagali rapids on his motorboat, does not feel like a winner. Like others — guides, acrobats and swimmers who, for £2, hurl themselves into rapids clutching a jerry-can — he sees dark days ahead. "We are going to lose our jobs and we never have electricity in our houses. How are we going to earn when the Bujagali Falls disappear?"