KAMPALA, Uganda
Government of Uganda this week
formally terminated the contract of China Harbour Engineering Company (CHEC) to
build the country’s first phase of the standard gauge railway (SGR), a 273-km
line from Malaba to Kampala, almost eight years after the project was launched.Standard gauge railway (SGR) cargo train makes its way to the Mombasa Port from Nairobi
The Chinese firm failed to
convince Beijing to finance it so Kampala terminated the contract in November
2022, and has now opted for a different financing model with Yapi Merkezi of
Turkey.
The Turkish firm which,
incidentally, is building part of the Tanzanian SGR network, is expected to
submit a response to government’s request for construction in the next few
weeks, paving the way for procurement, said Uganda SGR Project Coordinator
Perez Wamburu.
In June 2022, Uganda’s
Attorney General Kiryowa Kiwanuka started to review CHEC’s contract after it
became apparent that China Exim Bank – Kampala’s main infrastructure projects
financier of the past decade – had grown cold feet on bankrolling the SGR.
“We read between the lines
when China’s Ambassador to Uganda said that after the Covid-19 pandemic, China
has become more cautious on financing big infrastructure projects in Africa. We
all know that Covid didn’t leave economies of the world the same,” Wamburu
said.
He explained that Uganda was
forced to rethink its options and cast its net wider for other financiers when
its last submission for financing to the Exim Bank went unanswered for nearly
two years – a departure from the earlier practice when the Chinese responded to
Kampala’s proposals within weeks.
“From the time of our last
submission for financing in February 2021, we have heard only silence. After
submission, we wanted for a few months, it was silence, and up to now, it’s
still silence from Exim Bank,” he said.
Uganda’s SGR first phase,
initially awarded to CHEC in 2015, starts from the Malaba border post, and was
expected to cost $2.2 billion – 85 percent of which was to be borrowed from
Exim Bank – but the lender held back funding and repeatedly asked Kampala to
table new requests for financing.
At the back of the Chinese
reluctance was doubt that Kenya would build its SGR – also funded by the Exim
Bank – all the way from Mombasa to Nairobi, Naivasha, Kisumu and through to
Malaba, to link with Uganda’s in order to make the project viable.
Uganda’s decision to ditch the
Chinese changes the realignment of the region’s project financing to Western
financiers, raising the question of whether Beijing’s Africa juggernaut – using
infrastructure-led diplomacy to win over the continent against its Western
rivals – is finally losing steam.
After hitting a dead end with
China Exim Bank, Uganda is now in discussions with several Export Credit
Agencies (ECAs) to bankroll its SGR project, with officials suggesting that Kenya
will go the same route.
Tanzania’s project is
bankrolled by Western lenders.
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