Uganda to borrow $13.8b for standard gauge railway

By Moses Mulondo  

UGANDA will have to borrow $13.8b (sh38.5trillion) from the Exim Bank of China to construct the Standard Gauge Railway line.

The total cost was revealed to MPs yesterday by the state minister for works John Byabagambi whom President Yoweri Museveni appointed to chair the implementation of the Standard Gauge Railway project.   

Considering that Uganda's economy is worth sh63.3trillion, the sh38.5trillion coupled with Uganda's current debt of sh20trillion, implies that Uganda's debt sustainability threshold will be exceeded.

Various experts including the secretary to treasury Keith Mukahanizi and the National Planning Authority executive director Joseph Muvawala have warned that if Uganda goes for this exorbitant loan for the railway, it would potentially burst the economy.

Byabagambi also revealed that following instructions he got from President Yoweri Museveni, he has resolved to give China Civil Engineering and Construction Corporation (CCECC) the contract for part of the railway from Kampala to western Uganda.

“After negotiations we had, we agreed to divide the project between China Harbour Engineering Company (CHEC) and CCECC for both of them to have almost the same mileage of the project,” Byabagambi explained.

CCECC had earlier gone to court after Byabagambi terminated their Memorandum of Understanding and entered into negotiations with CHEC.

Asked by the committee chairman Ssekitoleko Kafeero why he had terminated the CCECC contract, Byabagambi explained the MOU they had signed with CCECC was for a feasibility study for upgrading the existing railway, but they had twisted it into study for the standard gauge railway.

Sheema woman MP Rosemary Nakikongoro said, “Since there was a court directive requiring you to negotiate with CCECC because of earlier mistake of terminating their contract. In such circumstances, it is unlikely that the country will get value for money.”

On the cost,  Byabagambi said, “We are aware that this project can cause us to exceed the internationally acceptable debt ratio. That is why we want to it in phases.”

On whether the contract for the project has already been signed, Byabagambi said they are yet to sign the contract pending negotiations.

Regarding whether government is contemplating halting the process in light of the information arising from the probe, Byabagambi said, “It is unlikely that we shall stop the process because we are in advanced stages of entering the contract.”

The project partly stalled after the ministry of works contract committee and the Solicitor General declined to approve the contract over ambiguity on the way the costs were quantified.

Whereas the world average of constructing a SGR line is between $1m to $2m dollars per kilometer, the Kampala-Malaba and Tororo to Nimule branch which will be constructed by CHEC will be at $9m per kilometer which MPs said was too high.

On why he intends to give contracts to these two companies which were blacklisted by the World Bank, Byagambi said, and “The World Bank has blacklisted most Chinese companies on flimsy reasons. They don't want Chinese companies to dominate the African market. As far as we are concerned, they are clean companies.”