9 August 2017

Uganda: Kampala Losing U.S.$300 Million Annually in Project Cash

Uganda loses an estimated $300 million annually due to inefficient infrastructure spending, especially in the power sector.

A report by the World Bank attributes the losses to underpricing and the inability to complete projects within cost and on schedule.

Underpricing is when contractors bid at prices lower than actual project cost to ensure they win tenders, forcing them to engage in deceptive practices such as submission of unwarranted variations and delivering lower standards to break even.

The inefficiencies have been cited for the country's wide infrastructure deficit which is estimated at $1.4 billion annually for the next five years.

Uganda has to deal with the inefficiencies in the infrastructure sector while also inviting the more efficient private sector to participate in government projects to plug its deficiencies, advises the World Bank.

"Although Public Private Partnerships can bring in financing, infrastructure deficits are ultimately caused by deficiencies in the governance and management of the sectors, through underpricing, inefficient operations and poor implementation," notes the Economic Update.

Uganda is currently experiencing the slowest economic growth it has posted in over two decades, at a rate of 2.6 per cent.

Construction of roads and other infrastructure investments is key in stirring economic growth. The country has been under-absorbing its development budget with only a third, 34 per cent, of money set aside for infrastructure projects spent last year.

It has however been over shooting its recurrent expenditure budget as it sought to fight drought and increased salaries to its not-teaching staff.

Uganda's road sector received a huge boost in June when the World Bank announced resumption of funding after an 18 months freeze attributed to environmental and social concerns including allegations of sexual misconduct by contractors working on the project.

Uganda is under pressure to improve its road network in order to exploit its oil deposits. Its oil sector is estimated to contribute up to four per cent of its GDP when exploitation begins.

World Bank advises Uganda to embrace partnerships with its public sector so as to raise funding for the capital investments given its current fiscal constraints.

Though Uganda has a PPP legal structure it has been lagging behind Kenya and South Africa in implementing partnerships, which are the other two African states with such a legal framework.

Uganda

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