The Independent (Kampala)

18 August 2014

Uganda: Museveni Blamed for Trillion Railway Deal Mess

Photo: Wikipedia
Standard Railway Gauge.

Details of President's meetings exposed Mbabazi, Otafiire, Nyombi, Byabagambi, Byandala, Solicitor General, UPDF officials sucked in Confusion threatens to hurt oil industry.

On July 25 President Yoweri Museveni held a crisis meeting at his country home in Rwakitura with government officials over the roughly US$ 8 billion (Shs 20.8 trillion) railway deal.

Peter Nyombi, the Attorney General, his deputy Fred Ruhindi, James Byandala, the Minister for Works and Transport, John Byabagambi, the State Minister for Works, Frank Tumwebaze, the Minister for Presidency and Edgar Agaba of Agaba Muhairwe & Co. Advocates, attended the meeting.

On the table was how to resolve a dispute between the government and two Chinese companies; China Civil Engineering Construction Corporation (CCECC) and China Harbour Engineering Company Limited (CHECL), which is fronted by the powerful American lobbyist Rosa Whitaker, a former assistant U.S. Trade Representative for Africa and architect of the African Growth and Opportunity Act (AGOA).

Behind the two Chinese companies, it appears, are government officials and private lobbyists fighting over commissions on the deal.

The Independent has learnt that CHECL wants US$1.75 billion to do the job while CCECC is asking for US$1.25 billion. Since US$1.25 billion is enough for the project, some officials claim, CCECC is being edged out such that those backing CHECL can feast on the US$500 million over and above CCECC's budget.

Two days before, on July 23, CCECC had won a case against Byabagambi who had terminated an MoU they entered with government in January 2012.

The previous day, Byabagambi, had met and updated the President on the crisis that threatens to stall the country's ever biggest project.

Until recently, construction of the Karuma Hydropower dam, which will cost the government US$ 1.7 billion, was the country's biggest project. The other big project is the oil refinery--estimated to cost US$ 3 billion. The railway deal money, therefore, can construct two oil refineries and another Karuma.

Financially, that is how big it is and physically, it will connect Uganda to Kenya, Sudan and Rwanda.

Kenya and South Sudan have already procured their own contractors, Uganda, the inaugural chair of the committee overseeing the entire regional project is still struggling with contractors.

Government also risks compensating CCECC billions of shillings and meeting court costs of up to $125 million if negotiations with the company fail.

Although the dispute has been brewing for three years, Byabagambi had pushed it to crisis level when on July 8 he cancelled the MoU that government entered with CCECC to construct the eastern route of railway project.

Byabagambi, acting on an implicit directive from President Museveni, instead awarded the deal to another company, China Harbour Engineering Company Limited (CHECL), fronted by the powerful American lobbyist Rosa Whitaker, a former assistant U.S. Trade Representative for Africa and architect of the African Growth and Opportunity Act (AGOA).

The Independent has seen letters indicating that, as award of the railway deal was being debated, President Museveni on September 9, 2012 wrote to Byandala in support of Whitaker and CHECL.

Museveni wrote: "Some time ago, our Black American compatriot, Ms Rosa Whitaker... brought to us a Chinese group known as the China Harbour Engineering Company Ltd (CHECL).

"It is, therefore, wise that you deal with CHECL who came first and, according to confidential information, have not attempted to pay any bribes."

The Independent has learnt that Museveni has even involved Whitaker in negotiations of the deal.

On August 20 last year, Whitaker attended a meeting to resolve the railway impasse.

When Byabagambi who was chairing and most likely knew her asked who she was and why she was attending, Whitaker said President Museveni had rung her to attend as "a friend of Uganda"

It is at this meeting that Byabagambi, citing "consultations at a higher level", announced that "it has been agreed" to give the eastern route to CHECL.

But CCECC officials declined to abandon their claim on the eastern route citing and earlier MoU with the government and money they had already spent on it.

CCECC deal cancelled

Matters came to a head at a meeting on March 18 at which Byabagambi announced that CHECL would be awarded the eastern route and that "that position was final".

The Independent has seen a copy of the minutes of the 11:45am meeting at why Byabagambi expressed disappointment with CCECC for not being grateful that the government was at least giving them an excellent business opportunity on the western route.

The fourth paragraph of minute 3 reads in part: "He (Byabagambi) warned that unless CCECC's attitude changes, GOU may be left with no choice but to consider the other interested Chinese Construction companies for the western route."

Byabagambi noted to CCECC that the MoU they were brandishing was not legally binding.

After the meeting, Byabagambi moved to terminate CCECC's contract saying that given their unwillingness to resolve the impasse amicably, they would not be a reliable partner in the execution of the project.

But the Solicitor General's representative, Christopher Gashirabake, on April 14, wrote to the Attorney General Peter Nyombi raising concern over Byabagambi's move.

Gashirabake particulary cited a President Museveni directive of Feb. 19 in which he now wanted CCECC and CHEC to share the railway deal.

"... I advised that since the President had directed the way he did, it was not prudent to terminate the MoU yet we are contemplating having an engagement with CCECC. The said advice has been blatantly ignored and all I am seeing is notice of intention to terminate the MoU. What does Ministry of Works and Transport intend to achieve?" Gashirabake wrote.

Earlier, on Feb.26, Gashirabake had warned that termination of the CCECC contract would expose government to litigation and delay the project.

But Byabagambi was immovable and on July 8 he terminated the MoU with CCECC. That is when CCECC sued.

When a ruling was made on July 23, Judge Lydia Mugambe of the High Court had no kind words for Byabagambi.

"I find the minister's unilateral decision to be irrational, high-handed, unreasonable, closed in procedural impropriety... and not in public interest," Mugambe ruled.

After the ruling, Byabagambi hired a private law firm, Agaba Muhairwe and Co Advocates, for legal advice without even the consent of the Attorney General.

On July 24, the law firm advised Byabagambi to appeal such that execution of Judge Mugambe's orders is stayed.

It is this advice that Byabagambi, his team and his lawyers were tabling before President Museveni at the Rwakitura crisis meeting.

But Attorney General Nyombi, and his deputy Ruhindi insisted to Museveni that appealing the court ruling was inadvisable and that if government went ahead, it would again lose.

The meeting resolved that the parties negotiate. Exactly the recommendation Judge Mugambe had made.

Byabagambi gave a hint of why he ignored the government lawyers and hired private lawyers without the consent of the Attorney General.

Sources claim that Byabagambi told the President that the Attorney General's chambers were corrupt, the judiciary was corrupt and that if he was to move on the railway, he needed authority to go it with just his team.

He said that at the Mugambe ruling "the same rogues that were involved in Karuma, were all there".

CHECL offers sweeteners

Byabagambi reiterated the President's position that the other company, CHECL, was offering a much better deal.

Apart from having a powerful lobbyist in Whitaker, who struck a chord with the President as early as when they worked on AGOA, CHECL's offer also touched on the President's softest spot--the UPDF.

CHECL offered capacity building of UPDF Engineers in the construction and maintenance of Lake Victoria Port Infrastructure System and the Railway Infrastructure System.

CHECL also undertook to develop an Inland Port and a ship building facility at Bukasa, a railway infrastructure including a station and other related facilities from Kampala to Malaba with a spur to Bukasa Port and from Tororo to Pakwach, Gulu to Nimule as well as other railway lines.

CHECL also undertook to train UPDF Engineers and Technicians and remodel Tororo Barracks into a polytechnic.

The Independent has seen all the copies of the MoUs, the government entered with all the three companies, it is only CHECL's that mentions the UPDF, the Bukasa Port and a polytechnic. It should be noted that the president has been keen on pushing the UPDF into other sectors--last year he directed UPDF officials led by his brother Gen. Caleb Akandwanaho aka Salim Saleh, who is a Senior Presidential Advisor on Defense, to take over the duties of NAADs. Getting the UPDF at the centre of construction of the railway project is, therefore, the President's pet project.

In his submission,Byabagambi enumerated all this. President Museveni is reported to have become agitated.

"Now, in whose interest is that?" he reportedly asked those presumed to be against CHECL. President Museveni was reportedly not happy that Nyombi and company were not providing a way through for CHECL, which seems to offer a much better deal.

Sources at the meeting say that whenever the lawyers attempted to talk, President Museveni would shut them up and ask them to listen to the engineers who have the expertise.

When contacted, Edgar Agaba, said he could not comment much but he told The Independent that the meeting resolved that the parties negotiate.

Concern over oil sector

As The Independent went to print, the dispute over the railway deal had sparked a string of investigations. Prime Minister Amama Mbabazi, Justice Minister, Kahinda Otafiire, and IGG Irene Mulyagonja are all looking into the railway deal.

If there is anything to learn from past procurement for contractors of big projects in Uganda, it is that given the several interests at stake, investigations spark counter-allegations, which also spark other counter-allegations.

The latest wave of investigations, therefore, mean that the railway project whose deadline is March 2018 could delay for several more years as funders like the World Bank, African Development Bank and even the Exim Bank will hesitate to associate with a project clothed in controversy.

Yet sources inside the oil sector said that they are looking at this infrastructure to transport fast and cheaply over 800,000 metric tonnes of equipment that they will need for oil production in Uganda.

That is why critics are unhappy with President Museveni for allowing powerful local and international lobbyists to determine the fate of a project of such magnitude and significance.

President Museveni has also grown impatient and wants the contract awarded--the reason officials and the companies involved have pushed jostling to another level.

The Independent has learnt that several officials, including Byandala and State Minister for Transport Steven Chebrot, have in a space of two years, signed MoUs with various companies for the construction of the same route.

In January 2012, Chebrot signed an MoU with CCECC. Six months later, Byandala signed an MoU with China Communications Construction Company(CCCC), the parent company of CHECL. At this time, officials had attempted to sign another MoU with CHECL and failed.

But in April 2013, CHECL successfully signed its own MoU with Beatrice Byengoma, the Permanent Secretary Ministry of Defence. The Attorney General and a representative of Solicitor General, Christopher Gashirabake warned both officials at the Works and Defence ministries not to sign MoUs for a route that CCECC had already committed works but his warnings were ignored.

Even the former Works Permanent Secretary, who was later moved to the Gender Ministry, Charles Muganzi raised this concern but he was also ignored.

With the entire railway deal worth almost twice Uganda's national budget, the Chinese companies and their powerful local and international lobbyists want a piece of the action.

The project involves two major routes. The eastern route covers Kampala-Malaba, Tororo-Packwach, Gulu-Nimule and Packwach-Goli. The western route stretches from Kampala-Kasese, Kasese-Mpondwe, Bihanga-Mirama Hills, and Mirama Hills-Mukono.

Construction of Bukasa Port is also part of the deal. Stuck with three companies, the government divided the routes into three but later dropped CCCC, leaving only CCECC and CHECL.

But even after this, the government remains stuck with two MoUs, all for one route, the eastern route.

It appears that CCECC was the first company to sign an MoU and has done preliminary work including feasibility studies worth Shs30 billion under the directive of officials at Works Ministry.

The eastern route is the coveted prize because whoever gets it gets cash first, since the route is more urgent. The companies are also keen on the route because its terrain is better compared to the western route, which goes through hills, right from Kasese, Bihanga and Mirama.

In a September 9, 2012 letter, Museveni wrote: "The Attorney-General should advice on all this in terms of law.

"However, in terms of strategy for development, integrity and clarity, it is clear to me that in this case the principle of first come first served is the correct unless the new comer brings better terms."

It is clear from such documents that The Independent has seen that Museveni is concerned about two things; Whitaker's word that CHECL would help source soft loans to construct the railways and a port on Lake Victoria, and equip the UPDF engineering brigade. But, it appears, the courts agree that CCECC already won the deal without offering any of them.

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