23 October 2012

Uganda: Kenya-China Rail to Aid Coal Imports to Uganda

Kampala — The new railway line Kenya and Chinese authorities are planning on will transport coal from Tanzania to Uganda for steel making.

The rail deal worth $2.6 billion is one of those infrastructure components that Beijing has budgeted for in its three-year $20 billion planned investment in Africa, which is double the amount China gave three years ago.

Kenya secretly signed with a Chinese construction company, China Roads and Bridges Company, to build a new standard gauge railway line between Mombasa and Nairobi to be completed in five years.

According to information from the Chinese commercial office in Kampala, the rail will facilitate importation of coal from Tanzania to boost steelmaking by private Chinese firms. Tanzania, which boasts of an estimated two billion tons of coal, recently signed a $3 billion deal with China's Sichuan Hongda with Tanzania to mine coal and iron ore in the resource-rich East African country.

This partly explains why the Chinese have shown interest in tapping into Uganda's largely unexploited iron reserves.

Uganda is estimated to hold reserves of 150,000 million tons yet Uganda's steel and iron industry has also been growing at unprecedented rates averaging over 30 and 40 percent annually for imports and exports respectively mainly due to the booming housing and construction sector in the country itself and the region as a whole. In fact much of the country's steel is imported.

China Machine Building International Corporation, a Chinese government company, has pledged to establish a $100 million iron ore mining and integrated steel plant in Mbarara district. In addition, Tiantang Group, another Chinese firm, has set up in Mukono, what is going to be the biggest steel producing factory in East and Central Africa.

The Chinese, according to sources in the Transport and Works Ministry, decided to construct a new railway line after realizing that the existing line operated by Rift Valley Railway was no longer feasible transport facility. But initially China through their embassies in Uganda and Kenya had engaged authorities in the two East African countries to invest in the existing rail infrastructure.

"We have spoken to the two governments (Kenya and Uganda). Negotiations are at very high levels," said Xiaoming Zou, the Commercial Counselor at the Chinese Embassy in Kampala, said before the new rail deal between China and Kenya leaked to the media.

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