Govt to save money by funding 500km of key roads

Aug 22, 2013

The Government has underlined its growing stature as a key financier of roads development by taking over the construction of 500km of roads formerly meant to be worked on under the new Contractor Facilitated Financing (CFF) mechanism.

By Joel Ogwang

The Government has underlined its growing stature as a key financier of roads development by taking over the construction of 500km of roads formerly meant to be worked on under the new Contractor Facilitated Financing (CFF) mechanism.

The decision to take over the financing of the roads is economical, said Eng. David Luyimbazi, the Uganda National Roads Authority’s (UNRA) director in charge of planning.

“It is cheaper for the Government to finance roads when it has the money,” he says. “This will save the tax-payer from paying interest on the borrowed funds and reduce Uganda’s debt burden.”

Under CFF, a total of 1,900km of the 20 roads central to Uganda’s primary growth sectors of tourism, agriculture and oil and gas were to be upgraded from gravel to tarmac under a Public-Private Partnership over the next three to five years. By tendering the roads, the Government

expected to raise $2b by entering a memorandum of understanding with shortlisted firms to confirm their relationship in respect of financing and implementation of the works that kick-off this financial year.

The 500km are valued at $400m, according to Dan Alinange, the UNRA spokesperson. “The other 1,400km will be done under CFF,” he says.

“We are working out details of finalising the memorandum of understanding with pre-qualified companies to allow them negotiate with their financiers before submitting their bids.”

The shortlisting of the contractors is being conducted in accordance with the public procurement procedures contained in the Government Public Procurement and Disposal of Public Assets Act, 2003, and will be open to all bidders from eligible source countries.

Why internal financing is better

Roads are a key government priority. It now funds 60% of the roads budget, whilst development partners’ share has fallen to 40%, down from 60% over the years, the state will save on interest when it finances works on the 500km of roads it has taken over.

Some of the roads include Mukono-Katosi- Kyetume, Mpigi-Maddu-Sembabule, Villa Maria-Sembabule, Olwiyo-Gulu- Kitgum and Musiita-Lumino. The African Development Bank has also taken over the financing of the Kapchorwa- Suam road that was also to be worked on under CFF.

The 500km have been indicated in the 2013/ 2014 financial year budget that finance minister Maria Kiwanuka read in July, indicating a growth in  roads and transport sector financing from sh1.6trillion in the last financial year to sh2.3 trillion of the sh12trillion this financial year.

 UNRA, in consultation with the finance ministry, is exploring the roads the Government has taken over. “We are seeking guidance from the Government on whether to replace  the 500km or continue with the reduced scope (of the remaining 1,400km),” says Luyimbazi.

Works state minister Eng. John Byabagambi noted that with an addition sh744.7b allocated to the works and transport sector in this financial  year,  more road projects will be undertaken. “Seven road projects were completed in the 2012/ 13 financial year,” he said. “The expectations are high now. We will start five new projects this financial year, especially those in the NRM manifesto.”

UNRA trims down bidders

UNRA advertised requests for expression of interest in local and international media on July 12, 2012, attracting 46 international companies.

However, while Uganda boasts over 100 local contractors, none of them tendered in their interests, compared to 16 from China,  nine from India, five from Turkey, three from South Africa, two from the US, two from Spain and one each from Egypt, France, Portugal, Israel, Ireland, Netherlands, Malaysia, Switzerland and the UK, according to UNRA.

“Over 40 contractors bid for the tenders, but we scaled the number down to 20,” says Alinange. “That is the number we are evaluating now. Procurement of contractors is on-going, but we shall see which projects take off this financial year. It is a complex undertaking we have not done before, so it will take time (to procure contractors).”

Tarmac network

Uganda has a national road network totaling 21,000km managed by UNRA. The body has upgraded 500km to tarmac and rehabilitated 1,000km over the past four years. Today, Uganda’s paved/tarmac network totals 3,800km, up from 3,000km by 2008. “In one year, we will have 4,000km,” says Alinange.

“Over the next three years, we expect to have 5,000km of tarmac if all projects go as planned. This will go a long way in selling Uganda as a tourism and investments destination.”

Byabagambi noted that Uganda’s construction industry has turned competitive, with contractors eager to finish projects ahead of time.

“We are taking on more projects and, right now, the absorption capacity for project funds is 120%,” he said. “Contractors are now more efficient as everyone has to prove their worth by working ahead of schedule.”

 

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