The consortium Sogea-Satom (VINCI Construction) and ETF (Eurovia) – the contractor hired to rehabilitate the old metric gauge railway (MGR) from Tororo to Gulu – is threatening to stop work, citing inconsistencies in payment.
The contractor, senior sources told The Sunday Monitor, has sent several protest notes to the Department of Works and Transport over delays and inconsistencies in payment for the Union-funded railway rehabilitation works European (EU).
The company filed a redundancy notice on Wednesday, prompting a meeting with technocrats from the Department of Public Works and Transport, as well as EU officials, to save the day.
In 2018, the EU provided a grant of 21.5 million Euros (Shs82b) to the government for the revival of the Tororo railway line through the districts of Mbale, Kumi, Soroti, Lira to Gulu. The overhaul, the EU said at the time, was intended to “contribute to better value chain performance of key commodities and private sector development in northern Uganda”.
Four years later, there is barely any functional rail transport left on the route, the work of which was originally supposed to last 36 months.
The poor progress report came to light as the African Development Bank Group (AfDB) embarked on a $307 million (US$1.1 trillion) loan appraisal mission last week. shillings) requested by the government for the rehabilitation of the eastern railway line from Malaba to Kampala.
In May last year, Parliament approved a loan of 216.7 million euros (810 billion shillings) from the African Development Fund, 84.41 million euros (321 billion shillings) from the ADB and 25.9 million euros (97 billion shillings) from the Fund for the internalization of companies in Spain.
The funds were supposed to be channeled towards the rehabilitation and renovation of MGR Malaba in Kampala.
Pending bureaucratic loan approvals, the government is also expected to disburse $52 million (Shs194b) from its grant to begin initial rehabilitation works on the same line.
Officials from the Ministry of Finance, as well as that of Public Works and Transport, say the overhaul aims to address a “transportation deficit”. A Chinese company, China Road and Bridge Corporation (CRBC), has been hired to start the work.
Mr Bageya Waiswa, permanent secretary to the Department of Works and Transport, told The Sunday Monitor that they had engaged EU – the co-signer of the accounts – to address the company’s grievances after receiving notice from termination of Sogea-Satom.
“This issue, we are managing it,” Waiswa said by telephone. “These other loans you’re talking about are also different. These are three projects: CRCBC is in the field for the refurbishment of the railway link from Malaba to Namanve because as you know, Kenya is also rehabilitating their MGR. The Spanish loan is intended to extend the line to Kampala, including the modification of the railway tracks.
He added: “The AfDB loan is a larger project, which will include the renovation of the whole line, the purchase of locomotives, capacity building, among others… there is good value for money here- price”.
The cost of 1.5 trillion shillings for the rehabilitation of a 273 km stretch – Malaba to Mukono, 250 km, Kampala to Port Bell, 8.3 km, and Kampala to Nalukolongo, 12.3 km – is particularly breathtaking. when juxtaposed with that of Kenya, which is nearing the end of the redesign of a 460 km stretch of its MGR from Longonot to Naivasha to Malaba on the border with Uganda.
Kenya intended to spend $100 million (Shs374b).
Despite the sparkle disparity, Waiswa argues the cost is justified.
Two officials familiar with the matter have also separately defended the cost, arguing that Uganda’s rail network is generally in a dilapidated state.
Officials further noted that the much-vaunted Standard Gauge Railway (SGR) is set to become distant due to, among other factors, reluctance towards the project by the Bretton Woods institutions and their surrogates in Kampala ( Bank of Uganda and Ministry of Finance) on debt fears.
“Our SGR is not coming anytime soon. It ends in Naivasha [in Kenya] yet Kenya also completes some of the freight bound for Uganda from road to rail. From SGR they are also rehabilitating their MGR to the border at Malaba so we have to follow,” an official from the Ministry of Public Works and Transport said on condition of anonymity as they are not authorized to speak about the question.
For over 30 years now, MGR’s level of service has been poor and lackluster. This reduced freight to the point that by the mid-2000s less than 5% of total freight between Mombasa and Kampala was carried by rail and less than 2% of freight available on northern and western routes .
Around the world, it has been empirically proven that rail-to-water transport is the cheapest mode of transport, followed by road and air transport. Yet in landlocked Uganda, the current government has pushed this mode of transport back on the back burner.
As a result, President Museveni and his policy backers have continued to decry the high cost of doing business in the country, including high transportation costs.
However, there is no indication that anything is being done.
Even with the rehabilitation of the MGR, it remains unclear whether officials have fully understood its technical limitations. A fully rehabilitated MGR system cannot transport more than 3.6 million tonnes per year and yet currently there are over 18 million tonnes of cargo on the Malaba-Kampala route. It is expected to reach around 30 million tonnes by 2028.
Mr Waiswa told The Sunday Monitor that Uganda’s SGR plans are still ongoing, while the ongoing plans are justified to fill a gap.
“In fact, I have just written to the PSST (Permanent Secretary of the Ministry of Finance and Secretary to the Treasury) to remind them that they (Ministry of Finance) should write to EXIM Bank in order to continue to show [Uganda’s] commitment to the project,” Mr. Waiswa added.
Uganda’s first section of the SGR from Malaba to Kampala is tagged at a cost of 8.1 trillion shillings ($2.17 billion). The government initially considered repaying the loan through, among others, the Consolidated Fund.
Sunday Monitor understands that EXIM Bank remains nervous about the proposal, due to Uganda’s deficit budget.
EXIM Bank, according to officials, has suggested that the government open an escrow account where it is obligated to deposit funds during the life of the loan to cover high annual interest and fees under the agreement as security in case of default.
Sources tell The Sunday Monitor that finance ministry technocrats are not engaging on this.
The government had to open escrow accounts at Stanbic Bank for all major projects financed by the Exim Bank. These include the expansion of Entebbe Airport, Isimba and Karuma Dams, the National Infrastructure Backbone and the Kampala-Entebbe Highway.
Auditor General John Muwanga, however, flagged this in his previous audits of Uganda’s mounting debt. He felt that this distorts government treasury cash flow and that there is no interest earned on mega bank balances.
Several policy documents from the last fiscal year (FY) 2021/2022 detailed that the construction of the RMS will begin this fiscal year 2022/2023, which started last week on Monday. The same detail, however, is missing from the documents for this exercise.
President Museveni at one point also froze all new loans, except for rail and power lines. However, he turned around.
These developments around the SGR come as Kenya has yet to commit to the two remaining connections: the 266 km line between Naivasha and the port of Kisumu at a cost of $3.6 billion (13,000 billion) and the 107 km line estimated at 1.7 billion dollars (6 trillion shs). from Kisumu to Malaba, the forerunner of Uganda starting its own 273 km line from Malaba to Kampala.
Nonetheless, the government is scrambling to acquire land on the right-of-way across 11 districts from Malaba to Kampala amid budget cuts for the fiscal year.
While the Kampala regime remains optimistic, the project – conceived in 2008 and intended to meander from the port of Mombasa to Kampala via Kigali – will one day come to fruition. However, it remains unclear why the government is not considering other funding options.
Kampala is a major transit route for goods bound for South Sudan and eastern Democratic Republic of Congo (DRC), which was recently admitted to the East African Community; the cargo puts a lot of pressure on the already badly maintained roads.
Meanwhile, early last week, Tanzania tested its first SGR electric train as part of its first phase of the new railway, traveling 300 km from the commercial capital, Dar-es Salaam, inland from Morogoro. It is also expected to reach Mwanza on the shores of Lake Victoria and Kigoma on the northeast shores of Lake Tanganyika in five phases, with plans to connect to Burundi, Rwanda and DRC.
Tanzania, which was left out of the Kenya-Uganda-Rwanda-South-Sudan SGR, began building its line in 2017. Then President John Magufuli forfeited a Chinese loan and opted for a hybrid approach with government funding Turkish and national funding.
Standard Gauge Railway (SGR) is one of the worldwide railway classifications for high-speed trains. It differs from the MGR left over from the British colonial administration in terms of cargo carried and design speeds.
Currently, Kenya has 592 km of the SGR network; while Tanzania has so far embarked on 600km.
Uganda, which undertook feasibility studies 10 years ago, has not even undertaken an inch.
Studies by the Ministry of Works and Transport show that an SGR train can carry 216 containers, moving them to and from Mombasa in a day at a cost of around $1,600 (Shs. 5.9 million) per container. This contrasts with the current MGR, which carries less than 50 containers taking around 14 days to move to and from Mombasa at a much higher cost.