29 June 2016

Uganda: Govt to Complete Signing of Railway Loan in October

Uganda is likely to sign a loan agreement for the construction of the standard gauge railway (SGR) by October 2016, officials have said.

Kasingye Kyamugambi, the project coordinator of SGR in Uganda, told reporters last week: "The loan processing is in advanced stages and will be finalized in October."

Government is expected to get money from China's Exim bank for the Uganda section of the SGR, which is expected to cost $3.2bn. The line will be constructed by China Harbour Engineering Company Limited (CHEC). Uganda's section will move from Malaba to Kampala and then connect to Rwanda through Mirama hills.

The line will also connect to the DRC through Kasese and Arua districts. Early last year, a Chinese delegation visited Uganda and said they would only release the money after they had conducted a joint feasibility study with Uganda.

In December, while at a summit in South Africa, where African leaders met Chinese president Xi Jinping, President Museveni said China should consider releasing the SGR money as soon as possible.

"Our urgent need that we would like the Chinese government to look at is the building of the regional SGR," Museveni said.

Kyamugambi said they had done the engineering designs and the project was on track. He pointed out that they had already surveyed and paid for some land in Tororo where the line will pass and land in other districts such as Jinja was being surveyed for purchase.

In the 2014/15 budget, Uganda, like Tanzania and Kenya, introduced a 1.5 per cent infrastructure levy on some imports into EAC to finance railway infrastructure development. In the 2015/16 budget, the government allocated Shs 113bn to help in the preparation of feasibility studies and land compensation for the SGR.

In the 2016/17 national budget, an additional Shs 118bn was allocated for the project. Kyamugambi said this was part of the money they used in purchasing the land for the project. At least Shs 9bn has been spent on land purchases in Tororo, he said.

In Kenya, the Mombasa-Nairobi line construction has already started while plans are underway for the start of the Nairobi-Malaba section. The Uganda line has had issues with claims of inflated costs, where some government officials had put the cost at $8bn in 2013, causing unnecessary delays. This figure was later slashed to the current estimate of $3.2bn after a parliamentary committee investigation.

In 2014, Keith Muhakanizi, the secretary to the treasury, warned that taking on a loan for the railway in a lumpsum would strain the country's ability to manage its public debt. Kyamugambi said government had decided to do the construction of the railway line in phases. It will start with the Malaba-Kampala section.

The SGR will be 95 per cent cargo while five per cent will be passengers. Traders have always complained about transportation costs using road. According to some traders, a 20ft container cost them close to $4,000 from Mombasa to Kampala, sometimes more than it cost them to get it from China to Mombasa on sea. The railway is expected to cut this cost by more than a half.

Meanwhile, Kyamugambi said plans were underway for a light rail for greater Kampala metropolitan. This would be an electric rail and would be used for passengers working in Kampala and surrounding areas.


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