22 April 2019

East Africa: Chinese Companies Register Rising Income From Uganda

Kampala — Chinese companies with construction projects in Uganda have in the last 20 years earned more money than any other foreign company grossing about $8.7b (Shs32.6 trillion) over the period.

According to data by the China Africa Research Initiative, annual revenues earned by Chinese companies with construction projects in Uganda grossed to $8.7b (Shs32.6 trillion) between 1998 and 2017 with an overwhelming upward trajectory since 1998.

For instance, since 1998, there has been an increment in revenues by $2.1b.

In 1998, Chinese companies made $14.9m, which was maintained in 1999, but later increased in 2000, rising to $19.1m.

While there was a slump in the following years, revenues bounced back in 2003 with $20.3m and have since then risen to $2.1b (Shs7.8 trillion) in 2017.

The increase in revenues could partly be explained by increased lobbying between the Uganda and Chinese governments.

China has been lobbied countries, especially those it gives aide, to contract Chinese companies. This has been a condition of some of the loans the Asian country gives to much of Africa.

China has since the early 90s risen to become Uganda's biggest source of foreign direct investment with data showing rising investments in manufacturing and infrastructure.

In 2016, Uganda Investment Authority (UIA) recorded China's planned investment at $333m and $111m in 2017.

In addition, the increased revenues could be explained by China's investment in loans across the communication, transport and power sector, all of which require construction.

Experts have noted that China has set out as a condition that countries it advances loans must contract its companies, many of which are owned or funded by the state.

Currently, some of the construction companies earning from Ugandan contracts include China Communications Construction Company, which is constructing the Kampala Entebbe Expressway. China Railway 17th Bureau Group is lobbying to construct the Kampala-Jinja Expressway.

Isimba dam, funded by the Chinese and Ugandan government was constructed by China International Water and Electric Corporation, Sinohydro Corporation Limited constructing Karuma dam, while Tian Tang, owns numerous factories and is developing the Mbale-Sino Industrial Park.

Dr Fred Muhumuza, an economist and Makerere University lecturer, told Daily Monitor at the weekend that whereas China lobbies for its companies and citizens to be contracted abroad Uganda has not done the same.

He also noted that this has deprived Ugandan companies an opportunity to build capacity.

"China seems to be realising its objective, for Uganda, we may make some money from grant and employment," he said arguing that Uganda ought to negotiate better to give its citizens an opportunity to grow their businesses.

Uganda, he said, has not negotiated adequately to benefit from Chinese investments.

For instance, Dr Muhumuza noted, government should ensure that 80 per cent of people employed on Chinese funded projects are Ugandans, which will help the country to build a better human resource capacity.

Depriving Ugandans

China, according to Dr Fred Muhumuza, seems to be realising its objective while Uganda has only focused on getting grant and short-term employment. The arrangement, he said, where China ensures that its conditions its companies into negotiating grants to Uganda, deprives Ugandans to build capacity building, which has relegated them to secondary roles. "Uganda ought to negotiate better to give its citizens an opportunity to grow their businesses," he said.

Uganda, he said, has not negotiated adequately to benefit from Chinese investments, noting that government should ensure that at least 80 per cent of none and technical jobs go to Ugandans to help the country build a better human resource.

"You can send engineers abroad to prepare them for high capacity projects," he said.

adding that raw materials should also be from Uganda.

While laws surrounding some of the concerns exist, there is reluctance in enforcement.

To benefit from Chinese investments, Uganda, he advised should desist from giving tax exemptions on profits made by these companies.

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