Uganda loses $300m annually to poor execution of projects

Uganda loses over $300m (sh1.1 trillion) per year due to inefficient infrastructure spending.

This is mostly through under-pricing to get contracts and inability to complete projects within costs and schedule, according to the World Bank's Uganda Economic Update, 9th Edition.

Rachel Sebudde, a senior economist at the World Bank who presented the report, said the financial loss worsens the gap in infrastructure deficits for Uganda which the country has been trying to fill. The function took place at the main conference hall of the Ministry of Finance, Planning and Economic Development. The report was entitled "Infrastructure Finance Deficit: Can public-private partnerships (PPPs) close the Gap?".

Sebudde explained that the estimated level of investment required for Uganda to close the infrastructure gap amounts to $1.4b (sh3.9 trillion) annually. She said the country invests $1b (sh3.5 trillion) annually and with further losses in expenditure, the financing gap and infrastructure cannot be filled.

Sebudde said the Government has to leverage private resources to enable it close the financing gaps and achieve higher levels of efficiency.

"One way to achieve this is through the public- private partnership (PPPs). "PPPs can help minimize the risks related to inadequate funding of government's infrastructure programs and to the longer term aspects of ensuring efficiency of investments to support the economic and socio-economic transformation of Uganda," Sebudde also task team leader Uganda Economic Update Team, World Bank said.

PPPs involve partnership between the government and the private sector to finance and manage infrastructure assets, to facilitate the provision of services over the long term with some transfer of risks.

The update analyses recent economic developments and outlook - this time with a particular focus on how public-private partnerships (PPPs) can support in financing Uganda's large infrastructure program. On a positive note, Sebudde revealed that Uganda's economic growth is forecast to accelerate from an estimated 3.5% to 5.2% this financial year (2017/18) and to 6% next financial year (2018/18). She explained that the acceleration is premised on weather conditions improving, public investment projects being executed faster and credit to the private sector increasing.

She noted that private investment may still be constrained by low levels of business, the ongoing strife in South Sudan and the high cost of credit. She underlined that overall investment growth is expected to be boosted as foreign direct investment in the extractives sector projects increase.

She added that there were still risks to the economy. She cited lowering revenue collection by government through granting tax exemptions to certain projects though they might be necessary to attract investment.

On PPPs, Sebudde cautioned that they are not a cure for all infrastructure problems. "PPPs can also raise the cost of public investment if they turn out to be more expensive. Not all projects are suitable under PPPs. PPPs are bound to fail if they operate within environments surrounded by poor governance," Sebudde observed. She said South Africa has over 85 PPP projects, Nigeria (35), Kenya (22), and Uganda (22).

Moses Kibirige, acting country manager, World Bank said that for the benefit of the PPPs to be realised, the necessary legal, institutional and regulatory frameworks have to be put in place.