Damming the White Nile

19 February 2020 Mervyn Piesse, Research Manager, Global Food and Water Crises Research Programme

Background

According to a Reuters report, a Chinese hydropower developer has applied to build the US$1.4 billion ($2.1 billion) Ayago hydropower plant between Lakes Kyoga and Albert on the White Nile in Uganda. Sinohydro, another Chinese construction company, is expected to complete the Karuma hydroelectric dam, located upstream of Ayago, later this year. The dams are mostly financed by loans from the Export-Import Bank of China. The dams are unlikely to affect the hydro-politics of the greater Nile basin, but could further Chinese interests in Uganda and add to US concerns about Beijing’s rising influence in Africa.

Comment

Egypt has long been the dominant hydro-political power in the Nile basin. The signing of the 2010 Co-operative Framework Agreement, however, emboldened upstream countries to develop projects without Egyptian consent and Cairo has lost its dominance. Chinese companies and financiers have also provided funds and technical knowledge to regional countries seeking to develop hydropower projects in the Nile basin. This shift in the hydro-politics of the region has ramifications for political stability, security, economic prosperity and environmental sustainability. The Egyptian unease about the Grand Ethiopian Renaissance Dam is the most visible manifestation of that shift in regional hydro-politics.

The damming of the White Nile in Uganda is unlikely to be of great concern to Cairo. Almost all of the water used in Egypt is sourced from the Nile River and most of it – about 86 per cent by some measures – originates in Ethiopia. The White Nile accounts for only about 15 per cent of the water flow in the Nile basin and about half of its water is lost to evaporation in the Sudd wetlands in Sudan, downstream from both Ugandan dams.

Africa has the potential to become another stage for the ongoing confrontation between the US and China. While Beijing has deepened its ties with most of the continent over the last 20 years, the US still invests more in the region. China invested US$294 billion ($440 billion) in Sub-Saharan Africa between 2005 and 2018, markedly less than the US$660 billion ($987 billion) that the US invested over the same period of time.

The Trump administration launched the Prosper Africa initiative in 2019, to better co-ordinate US trade, investment and aid in Africa. The initiative is expressly designed to counter Russian and Chinese influence in the region. John Bolton, the former National Security Advisor, described that influence as ‘predatory’ and designed to ‘… gain a competitive advantage over the United States.’ On his recent visit to three African countries, US Secretary of State Mike Pompeo stated that the US has ‘… an obligation to get security right here, in the region – it’s what will permit economic growth and we’re determined to do that’. While Africa is not a major strategic concern for Washington, it is interested in ensuring that the continent is not dominated by strategic rivals.

There is pushback within Uganda, and other African countries, against Chinese investment. In a confidential letter to President Yoweri Museveni that was leaked to the media, Finance Minister Matia Kasaija wrote that ‘Given what is happening in our peer countries as regards to China debt, we strongly believe we should protect our assets from possible takeover’. Ugandan national debt currently stands at about US$12 billion ($18 billion), with about two-fifths of it owed to China. Economic growth in the country will need to be above seven per cent for it to service that debt – which projections suggest is unlikely to occur. China might restructure its loans, as it did with Ethiopia, or take control of infrastructure, as it did in Sri Lanka.

Critics of debt-fuelled development in Uganda argue that infrastructure is being financed with expected future revenue from oil production. Uganda has the fourth-largest oil reserves in Africa, with Total, China National Offshore Oil Corporation and Tullow jointly controlling three of the country’s oil blocks. Upstream development costs are estimated at US$10 billion ($15 billion). To transport the oil to Tanga port in Tanzania will require an electrically heated, 1,443 kilometre pipeline – which would be the longest heated crude oil pipeline in the world. The development of the oil industry has stalled, however, as the three companies have struggled to come to an agreement on funding arrangements.

The development of hydropower infrastructure could improve Ugandan energy security and possibly lend support to the development of the nascent oil industry. It could also further Chinese interests in the country, however, mainly due to the high level of debt already owed to Beijing. It is unlikely to further complicate the regional hydro-political situation, however, due to the limited amount of water from the White Nile flowing into Egypt.

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International.

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