10 August 2014

Uganda: Railway Deal Saga Explodes

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(file photo)

Minister says Museveni was made aware of the MoU cancellation and didn't object

In his response to criticism over his cancellation of the MoU between government and China Civil Engineering Construction Corporation (CCECC), which has thrown the grand East African railway project into jeopardy, the minister of state for Works, John Byabagambi, has asserted that President Museveni was aware of his move.

Byabagambi wrote to Peter Nyombi, the attorney general, in June 2014, saying that he had sat in a meeting chaired by President Museveni in May 2014 in which the president showed no opposition to the cancellation of the MoU. Byabagambi added that the president, then, directed the ministry of Finance to sign an MoU with another Chinese firm, China Harbour Engineering Company (CHEC), as "soon as possible upon the expiry of the notice that was given to CCECC."

The meeting, Byabagambi wrote, was also attended by Keith Muhakanizi, the secretary to the treasury, Brig Sabiiti Mutebile, the head of UPDF Engineering Brigade, and Christopher Gashirabake, the acting solicitor general, who represented the attorney general.

In the same meeting, Byabagambi said, Museveni concurred that the MoU signed between government and CCECC was for the "repair of the old one-metre railway, not for the construction of a new standard gauge railway."

"The distribution of routes was reconfirmed by H.E the president and upheld by the meeting. Mr Gashirabake, who represented the attorney general, did not object to that position," Byabagambi wrote.

Byabagambi concludes: "With all this information I have given above... I expected you to know the reasons why we are terminating the MoU between government and CCECC. I also expect you to support His Excellency the president regarding this issue. Therefore, unless there is an alternative directive from the president, I cannot withdraw the termination notice."

This letter presents a new twist to the saga, which got into the public spotlight recently after Byabagambi wrote in a July 8, 2014 letter that he would go ahead and terminate the MoU signed between government and CCECC in 2012. According to earlier correspondences seen by The Observer, Museveni has been walking a fine line on the matter.

In a February 19, 2014 letter, Museveni proposed that both Chinese firms (CCECC and CHECL) could undertake the construction of the standard gauge railway as per the agreed terms. At that time, Museveni did not say anything about the MoU and his concern appeared to be ensuring that the project is not delayed.

We reported last week that the railway deal had taken a chaotic turn after Byabagambi said he would terminate the MoU signed between government and CCECC in 2012. Under the MoU, CCECC was supposed to upgrade the eastern/northern route of the railway.

Surprisingly, he proposed that CCECC instead handles the western route (Kampala to Kasese and onto the border with Rwanda) while the eastern route is taken by CHECL. CCECC went to court to oppose the swap, arguing that they had already spent money on the eastern/northern route. The court last week ruled in their favour.

Byabagambi's colleagues in cabinet, particularly Maj Gen Kahinda Otafiire, the minister of Justice, Peter Nyombi, the attorney general, and Simon Lokodo, the minister of Ethics, have roundly opposed his actions.

"I am not certain that the intended termination of the memorandum of understanding is consistent with the spirit of the above quoted letter (Museveni's letter of February 19), especially since I remain totally ignorant concerning the reasons giving rise to the intended termination. I am, however, still concerned about the legal ramification if the intended termination is carried out without due regard to the law," Nyombi wrote on May 28, 2014.

On June 13, Otafiire also wrote to President Museveni: "All stakeholders as per your [Museveni] directive must be involved because this project is sensitive and grandiose unlike the situation where the decisions are taken by the current minister of state for Works alone."

New conditions:

Meanwhile, The Observer has learnt that through its lawyers Ligomarc Advocates, CCECC has proposed new conditions that must be met before it undertakes the project. In an August 5, 2014 letter addressed to the attorney general, CCECC maintained that it would only undertake the Kampala-Malaba-Tororo-Pakwach and Gulu-Nimule route as previously agreed in the MoU.

The company wants government to arrange a meeting to conclude a commercial contract for the construction of this route. Secondly, if this meeting is to take place, CCECC wants government to reconstitute its negotiating team, saying some government officials are biased against the firm.

"Our client has learnt that a private law firm has been specifically hired by these officials purposely to advise them on how these negotiations can be failed and our client eliminated from contention.

It is because of the past conduct of these officials that our client was compelled to take court action to challenge the directives of the minister of state for Works," the letter partly reads.

Lastly, the company wants the meeting to discuss in detail the proposal of offering technical training and assistance to the UPDF. The firm says that this aspect had been discussed during their earlier meetings with Museveni, and hopes that in the new meeting progress, can be made towards the signing of an MoU.


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