President Museveni letter to Hon. Monica Azuba Ntege – Ruling out external or internal borrowing for development infrastructure (18.09.2019)

Another look into the Oil-Road Cost: “Package 2” Hoima-Butiaba-Wanseko Road!

In the newest report of Oil Roads, which is expected to borrow funds for. The China Exim Bank is supposed to be provider of 85 % of the cost of the operation and building of the roads in these projects. I will only look into one of them, as I have previously looked at this significant one.

This is the Hoima-Butiaba-Wasenko Road. A project that was supposed to start in 2015 and was clocking in funds from the state budgets in 2017. Back in 2015, the road was estimated to cost $126m USD. Today, with the recent report, the same road is costing $179,538m USD. That is jump of nearly $50m in a five years time. In addition, of these bloated funds, 85 % of it will be loaned from China and the rest 15% covered by the Government of Uganda (GoU).

In 2017, this project was designated the China Communications Construction Company (CCCC), which signed a deal in January 2016. However, by the time of the report 2019, it is another Chinese Company who has the contract. This is Chongqing International Construction Corporation (CRC) Ltd. With the recent contract, the loans are clearly getting direct back to the Chinese, as their corporations are the ones with the contracts to build. A clever way of borrowing and then getting returns.

With this mind, we can see the changes, see over the years how the price has changed. If Members of Parliament was afraid of the price per kilometre in the past. They should be now. As the changes of price on the same project has changed significantly. There is no doubt, that the Chinese government are getting added loans on each of the packages in this deal. As this is just one of the roads in question.

This is 111km is now costing 659,921,964,460.17UGX in Ugandan terms or 659bn shillings and that equals to about 5,9bn shillings. Therefore, the prices has sky-rocketed and the price per kilometre is abnormal and extremely costly. The overpriced asphalt and the consultation is in absurd levels. The previosly estimated price for this road was about 444bn shillings. Therefore, we can see rising price between the years in both currencies. About 200bn shillings growth in 5 years. 

To many cooks and too few ingredients. They are boiling soup on nails on this one. Wonder how this will end. As I felt in 2017, that the pricing of this particular road was a bit too much, but now they have just escalated it.

We can wonder whose eating, but someone is. We just don’t know who, because there been designated funds to build this one in the past and it has still not commenced. Surely, this road will be built, but at what point. However, with the added loans, the pressure should be on. Also, to secure the oil so it makes financial sense too. That the added value is there. It got to be. Because this project is over the top. This is the real OTT service, paid for by the Chinese and the tab is all taken by the Ugandans. Peace.

China-Uganda relationship benefits the Chinese, BoU Paper states!

This should not surprise you, that the Chinese government and their subsidiary businesses are making sure they are gets the best deal with the Ugandan counterparts. The Bank of Uganda policy paper are spelling out the advantages for the Chinese in the bilateral and the state-to-state offerings given to the Ugandans. They are clearly getting infrastructure loans and plyaing minor rolse in GVCs, therefore, the Ugandans are people loaning for infrastructure and then repaying, while the Chinese contractors and Chinese labor are working on the indebted projects. Just take a look, it is not a positive read!

“It should be emphasised, however, that for Uganda to leverage the shifting growth dynamics in China (such as a shrinking labour force, rising wages and an appreciated Renminbi), it must create a conducive investment climate. Low wages and a competitive exchange rate alone will not make much difference without reliable power and transport links, or in the face of suffocating bureaucracy and corruption” (Bank of Uganda, P: 6, 2017).

“With the migration of labour-intensive manufacturing shifting from China and an improvement in investment climate, Uganda also stands to expand its involvement in global trade, including Global Value Chains (GVCs). Historically, countries like Uganda have played a relatively minor role in GVCs. Figure 5 below, which illustrates a useful measure of Uganda’s integration in GVCs, relative to other sub-Saharan countries, indicates that Uganda is below the average value-chain position for developing countries” (Bank of Uganda, P: 6, 2017).

“It must be pointed out that while China has emerged as a significant financer of infrastructure projects in Africa, it still lags behind both private investment and the more traditional sources of funding. Recent research actually reveals that, over the past few years, China has contributed about only one-sixth of the US$30 billion Africa receives annually as external finance for infrastructure” (…) “Moreover, most of this financing to the transport and energy sector takes the form of state-to-state, non-concessional deals and comes from the Export-Import Bank of China (China Exim Bank). Examples of the major state-to-state deals signed with China Exim Bank in Uganda include: US$1.4 billion and US$483 million for Karuma and Isimba hydropower dams as well as US$350 million for the construction of the Kampala-Entebbe express highway” (Bank of Uganda, P: 7-8, 2017).

“For Uganda, which has so far committed up to US$ 2.3 billion in contracts with China Exim bank and is soon to take on more debt for projects like the Standard Gauge Railway, debt sustainability is a growing issue of concern; underscored by the fact that the country faces a low tax-to-GDP ratio relative to its regional peers and significant public investment challenges. Uganda’s debt as a percentage of revenues has risen by 54% since 2012 and is expected to exceed 250% by 2018, raising calls for caution and improved public investment management from various policy circles including the IMF, World Bank and Moody’s, which downgraded Uganda’s long-term bond rating in 2016 citing deteriorating debt affordability” (Bank of Uganda, P: 10, 2017).

This here report shows both the possible troubles with the debt, that already are problem with current budget, but will become bigger. Secondly, that the relationship and bilateral business agreements with China, will only benefit China and not Uganda. As they might get the infrastructure projects, but they have to repay the debt and also use funds on labor from the Chinese contractors and businesses. They are not hiring and educating locals to work these sorts, because Chinese are getting their own hired.

This here is not bringing positive results, but instead are being a nice debt collector for China and will be indebted to them. While the Ugandans gets scarps from the Chinese, as the infrastructure projects like the Dam they have bought on debt, has been said is “shoddy” work. That proves the Chinese gets easy money, get expat workers and later returns on every single Yen. Peace.

Reference:

Dollar, David; Mugyenyi, Akura & Ntungire, Nicole – ‘How can Uganda benefit from China’s economic rise?’ (August 2017) – International Growth Centre Uganda & Bank of Uganda

Kampala’s BRT at this stage is a pipe-dream!

The Bus Rapid Transport system together with a Metropolitan Area Transport Authority (MATA), in the midst of the Kampala Capital City Authority (KCCA), Kampala City Hall and Ministry of Kampala. This are having different heads combined with the mastermind on the top President Yoweri Kaguta Museveni. Doesn’t matter what the ones in the parishes are considering, the Division Mayors, Lord Mayor Lukwago, KCCA Director Musisi or even State Minister Kamya. The one rubber-stamping the initiatives is and will be the President. Since he has his finger into everything.

That is why I have no faith in BRT. Even if it is stop the congestion, the lack of public transport in Kampala and problems of control of the Boda-Boda’s, the authority of the Taxi’s and the Specials. There are still significant issues to be reached. It doesn’t matter if they are banning or stopping certain transport options. As long as the ones working, are the taxis and boda-boda’s. These are the ones who has designated routes and travels with licensing for their routes. The Taxis are usually used Toyota Hiace imported from Japan, second-hand ones who was former bread-trucks, who are rebuilt to fit as many people as possible.

While a BRT means there will be heavy investments in stages, in divisions and in congested areas to fit the paradigm of buses. It isn’t barely putting buses on the road and assume the population will start taking it. The need for steady implementation of road structure, of bus-companies, of driving schools and of time-tables has to be put on order to make sense for the citizens to use it. Since it needs to be better than the transportation options that are today, like the taxis, boda-boda’s and specials. At this stage the Uganda Investment Authority (UIA) in their feasibility study estimates the needed funds to get it going at this point to be the staggering $612.06 Million. With today’s value of the Uganda Shillings it is about Shs. 2,193,883,999,999 UGX, in other terms over 2.1 trillion shillings. Which means one tenth of the Financial Year budget of 21 Trillion Shillings in FY 2017/2018. Just to put in perspective.

This infrastructure project of this size and ramification better make the roads of Kampala into bricks out of gold. Clear every single pothole and make sure the gravel grade more than standard. This project has been going on for ages without any movement or significant progress. Why I am writing about it, well there suddenly if it is true, some Chinese Investors who wants to touch the erratic transport system of Kampala. This are together with the Chinese Ambassador to Uganda, at the State House discussing investments into it. Therefore, the sudden move of actual fueled money into it. As the 2.1 Trillion shillings doesn’t grow on trees.

President Museveni stated this today:

“The Kampala Metropolitan Rapid Bus Transport project is a necessity. We should not continue to have so many cars with limited capacity” (…) “The investor will construct 26 rapid bus stations, 420 stage shelters and an initial 400 buses with a carting capacity of 74 passengers” (Museveni, 18.06.2017).

With this unknown Chinese Investor, they are clearly indicating some infrastructure and some buses to put up. If this will see the light of day and will be honestly implemented, than there are start, but it takes time to find routes and needed ways to make it profitable, as there will also be lost oppertunities for the ones who used taxis, specials and boda-boda’s on these roads. That is if this isn’t a scheme and plot of manufacturing more monies through the state-house. Which wouldn’t be surprising knowing how the President often operate.

The BRT would be a bonus and strengthen the congestive traffic of Kampala, a needed one for more time working and less time stuck in traffic jams. It would be important for the citizens leaving the divisions and traveling across town to work. But the state haven’t been able in the recent years to pull it off. Maybe Chinese investments would help it and their involvement in it would see it moving. But it shouldn’t just be the President’s blessings over the investments. The KCCA, Ministry of Kampala and City Hall should all have a say and make reports on how to build it properly. As the UIA even states there have only been a feasibility-study. That is preparation for the solution, but not the white paper or even framework for the Divisions or Central Business District of Kampala to make the BRT a success. Right now it is dream, which most likely could turn into a nightmare before its shuttle.

NAMA Proposals in 2013 are even more costly: “The capital costs budgeted over the 15 year period were estimated to total some US$ 1.181 Billion”. That is the double of the estimates from UIA in 2017. Therefore, something has either been scaled down or the NAMA was considering more aspects in their plans, than the UIA has. But is not like the President today has delivered any paperwork or reveled any sort of information what sort of possible deal he done with the “the Investor”. He could be scapegoat or even a mirage for all we know. Because none is on the up and up.

Especially considering he had a meeting with them at the State House in Entebbe with none of the leadership of Kampala. The ones in Kampala will just later get the news of the building and investments, therefore has to figure out how to implement it and work-out the perks. Parts of me wonder if the President even has looked into the documentation and considered the needed partners in play. But that is just how the President operates. He just can build Rome on his own or Kampala for that matter. He has all the skills and the brown envelopes at his disposal. Peace.

A look into the Oil Road Cost: the Hoima-Butiaba-Wanseko Road!

As the Budget Framework paper for Financial Year 2017/2018 in Uganda, the Uganda National Roads Authority (UNRA) requested for the roads a total of Shs. 1,779bn and the required just to build the road in this budget year alone where 1,107bn. This was seen as a strategic area from the state, as the road is seen as one of them Oil Roads. Which, is one of the most important projects the government has, as the future profits of these are soon all used before the drilling starts. This with the giant projects and the misuse of funds. This is epitome with the Hoima-Butiaba-Wasenko road! Just take a look at the reports collected on the road. But the official paper of the budget said otherwise than the framework, who was just nonsense.

While the Budget report to the Parliament of May 2017 Vote 113 UNRA Hoima – Wanseko Oil Road Shs. 29.00bn. This funds will be available after reconciliation of numbers. While the Ministry of Finance, Planning and Economic Development (MoFPED) where planning proposed numbers for the Oil Roads and the Hoima – Wanseko road where the length of 83 kilometers, and the budget was 444bn. Which is a bit more than the vote! And doesn’t fit with the records even. The numbers are staggering and confusing. As to put it further every unit or kilometers are estimated to cost 5,35bn. So the cost of the oil-road just in this budget year is insane.

“Hon. Cecilia Ogwal expresses concern about the cost of the Hoima-Butiana-Wasenko oil road of shs53billion per kilometre” (Parliament, 31.05.2017). The Road that is under construction and is upgraded are 111 kilometers road. If the MP’s estimate is correct means the road cost shs. 5,883bn or Shs. 5.8 trillions. In the budget plenary session on the 31^st May 2017 she was also very adamant that the roads who we’re budgeted without feasability studies should be cut and get other use of the funds. Still, that didn’t happen. One of these roads was the oil-road of Hoima-Butiaba-Wasenko. But with this years Budget report and actual feasibility study alone, proves the state will use 444bn on the road. As the other reports prove what they we’re planning to use. But this project started in 2015 and the reports of the misspending on it, seems so big as it gets. So the Road development and the Oil Road could be proof of another UNRA scandal. Take a look!

“The works on Hoima-Butiaba- Wanseko road are expected to start during the second half of 2015. This is subject to availability of funding for the project,” said Dan Alinange, the UNRA head of corporate communications” (Rwothungeyo, 2014).

Hoima-Butiaba-Wanseko cost Shs. 454bn:

“Works minister John Byabagambi and the new Uganda National Roads Authority (UNRA) executive director Allen Kagina have agreed to handpick a contractor for Hoima-Butiaba-Wasenko road despite an earlier petition on influence-peddling and fraud in the process. Mr Byabagambi has also changed from his earlier position where he opposed the move, when he was still a junior minister. A whistleblower had raised the red flag in a petition to Ms Kagina indicating that the project cost had been inflated by Shs66 billion ($20 million)” (…) “The 111km road stretches from Hoima to Butiaba on Lake Albert and one of the major corridors in the oil-rich Albertine Graben in south western Uganda. The project is expected to cost Shs454 billion” (Musisi, 2015).

UNRA on the Spot:

“The third road project, pointed out by the whistleblower is the 55km Hoima-Butiaba-Wanseko road. According to the dossier, bids for the road were opened on January 22, 2016 and the deal was awarded to China Communications Construction Company (CCCC) at Shs 398 billion. According to the whistleblower, this would translate into $2m per kilometre, which is exorbitant. The whistleblower notes that this is way above construction estimates posted on the Unra website, which are at $960,000 per kilometre. Later, after an outcry from some bidders, Unra cancelled the deal, the whistleblower says. “The IGG should investigate the people who crafted this ignominious evaluation and bring them to book. They should even be interdicted as investigations continue,” notes the dossier. The whistleblower claims that roads in the oil sub-region of Bunyoro have been restricted to only Chinese firms because of the funding from Exim bank. Local and other foreign firms, the dossier noted, were left out” (Kiggundu, 2017).

So the prices of the budget framework and the budget report of 2017/2018, as the whistleblower of early May 2017 are clearly saying that the $2m per kilometers on the Hoima-Butiaba-Wanseko. If the US Dollars are Currency converted into Uganda Shillings which means the price per kilometers are Shs. 7,187bn, that means the price calculated by the budget and the MoFPED are Shs. 5,35bn. That means that are a difference in the price per kilometers which is Shs. 1.837bn. If the budget would be correct than the total price for the 83 kilometers, would e 596bn. I also find it strange that the UNRA budget and length on the FY 2017/2018 is 83 kilometers, as the initial length was 111 kilometers. That is also a length of roads that suddenly couldn’t disappear.

This road is surely more expensive than the government wants it to be, or certainly some lost public funds. Not shocking in the nation run by National Resistance Movement. The total tally of the cost will be revealed, but is not yet. Peace

Reference:

Kiggundu, Edris – ‘UNRA on spot over Chinese contracts’ (03.05.2017) link: http://observer.ug/news/headlines/52685-unra-on-spot-over-chinese-contracts.html

Musisi, Frederic – ‘Minister, Kagina hand-pick contractor’ (26.06.2015) link:http://mobile.monitor.co.ug/News/Minister–Kagina-hand-pick-contractor/2466686-2765360-format-xhtml-9uhqklz/index.html

Rwothungeyo, Billy – ‘Hoima-Butiaba-Wanseko road for upgrade’ (02.01.2014) link: http://www.newvision.co.ug/new_vision/news/1336203/hoima-butiaba-wanseko-road-upgrade

Press Release: URC, KCCA and RVRU resume Passanger Rail Service in Kampala (02.12.2015)

They have done it before, take a look:

In 2012:

“The Ministry of Transport at the weekend authorised the Rift Valley Railways (RVR) to temporarily run passenger rail services in a move to add pressure on striking taxi drivers.RVR will transport passengers Monday to Friday, from Namanve to Kampala and back at Shs1,500. In the morning, there are two shifts that depart Namanve at 7am and 8am. Evening shifts leave Kampala at 5:30pm and 7pm. Each shift can transport 550 passengers using five coaches”.

Quick thinking:

So they have done it before, will be able to do it now? Secondly, how long will it last before it break down or the money is gone and the trains lay astray somewhere? Peace.