The Environment Governance Institute (EGI) has published a report that highlights the role that Export Credit Agencies (ECAs) have played in supporting fossil fuel and hydroelectric projects across Uganda, the Democratic Republic of Congo (DRC), and Tanzania for the past five years.
The report notes that while these countries are facing increasing pressure to transition to cleaner energy sources, the majority of ECA-backed funding continues to flow into fossil fuels undermining these possibilities.
The report which covered a six-month research process reveals that a stark from January 2017 and July 2023, a total of US$69.6 billion in energy-related financing directed to Uganda, DRC, and Tanzania, had 87.8% (US$31.4 billion) of this amount allocated to fossil fuel projects, mainly in oil and gas while US$3.7 billion (5.3%) went to hydroelectric dams, which is also revealed as contentious form of renewable energy due to the wide gross violation of human rights, mass displacement of people. The shocking revelation pointed out that, only 0.6% (US$205 million) was allocated to renewable energy projects.
Over 72% of this support came from Asian ECAs, including China’s Exim Bank, India’s Exim Bank, and Korea’s Exim Bank.
The report also highlights the dominant preference of ECAs for hydroelectric projects, which, while often touted as “green” energy solutions, have also caused significant environmental and social disruption. Tanzania’s Nyerere Hydropower Project and Uganda Karuma Hydro dam, which has received substantial ECA backing, involve the construction of one of Africa’s largest hydroelectric dams. The projects have led to large-scale flooding, displacing thousands of people, without adequate compensation while also having negative impacts on local biodiversity and water quality.
While these investments are often justified by promises of economic growth and energy security, the social and environmental costs are disproportionately borne by local communities.
In Uganda, displaced communities along the EACOP route have reported significant hardships. For example, families who once depended on agriculture and fishing for their livelihoods have lost access to vital land and water resources. Many of those displaced have received little or no compensation, and the resettlement options offered by the government have been inadequate, leaving many in temporary shelters without access to basic services such as clean water and healthcare and the capacity to take their children to school.
Gender inequality is also a significant issue. The report highlights that women, particularly in rural areas, have been excluded from consultations and compensation processes. As land ownership is typically passed through inherence, many women find themselves without compensation for the land they helped cultivate, further exacerbating their economic vulnerability.
In addition to the social costs, the environmental impact of these fossil fuel projects is severe. Oil extraction and the construction of large hydroelectric dams have led to deforestation, water pollution, and the destruction of vital ecosystems. In Uganda, the Albertine Graben, a biodiversity hotspot, has been heavily impacted by oil exploration, with forests being cleared to make way for drilling sites and pipelines. In Tanzania, the construction of the Nyerere Hydropower Project has caused the flooding of crucial wildlife habitats, further endangering species already under threat.
The report concludes with a call to action demanding that ECAs prioritize clean energy investments that support sustainable development and contribute to a cleaner, more resilient energy future. The Governments in Uganda, DRC, and Tanzania are encouraged to adopt policies that support renewable energy initiatives and reduce reliance on fossil fuels.
The ECAs are urged to ensure that their investments are aligned with the goals of the Paris Agreement, which calls for a global shift toward low-carbon energy systems.
In conclusion, while the financing of energy infrastructure projects in Africa’s Great Lakes region has the potential to drive economic development, the current focus on fossil fuels presents serious environmental and social risks. The region’s reliance on these outdated energy systems hampers efforts to tackle climate change and undermines the well-being of local communities. The time has come for ECAs to reassess their priorities and take meaningful steps toward supporting a just and sustainable energy transition in the region.
