Uganda: Why Kampala-Jinja Expressway Has Delayed

16 September 2019

For many motorists, the Kampala-Entebbe Expressway is a driver's paradise. It is breath-taking to meander across the swamp-fringed green landscape and the well-manicured lawn at Lake Victoria Serena Golf Resort & Spa and see the sun poke the shores of the lake.

But there are fears that this infrastructure project, which cost a staggering Shs1.7 trillion, is fraught with fleeting success. As Uganda drains its coffers to repay the loan, it will take a toll on the taxpayer who continues to be shackled by piling debt.

Initially, government planned to repay the debt through road-toll gate collections. In May 2019, Parliament passed the Roads Bill that provides for motorists to pay fees to use specific roads in the country but the President is yet to assent to the Bill. The 51.4km thoroughfare, the country's first toll road, was commissioned last year in June by the China government former vice premier, Mr Wang Yang, amid fanfare and high expectations.

Fifteen months later, the road has been open to motorists but the tolling system is not operational.

Unra speaks out

The Uganda National Roads Authority (Unra) spokesperson, Mr Mark Ssali, attributes this to, initially, absence of a tolling legal framework and the ongoing procurement of a contractor to collect toll fees.

But even then, traffic on the road, free as it is, is lukewarm, casting doubt on its internal rate of return vis-à-vis its astronomical cost.

The low traffic volumes have been attributed to several factors, key among them; the road was conceived as part of the plans to decongest Kampala City and to take up traffic from the ailing Kampala-Entebbe Road.

However, the road starts at Busega in Kampala, and yet the largest traffic congestion is at Clock Tower.

Secondly, most vehicles contributing to the traffic gridlock do not necessarily reach Entebbe or Kajjansi where motorists can join the expressway. Public transport operators such as taxis do not use it at all.

Similarly, a large section of the expressway is 'access controlled' so it cannot be easily joined from anywhere, rendering it useless for most motorists who opt to stick to the old road despite the messy traffic volume.

Construction of the four lane road by China Communication Construction Company (CCCC) cost $479m (Shs1.7 trillion). Another $4.9m (Shs18b) tender for supervision was handed to Beijing Expressway Supervision Co Ltd.

Of the $479m, $350m (Shs1.2 trillion was the loan from Chinese state Export-Import (Exim) Bank and the rest from government, excluding more than $40m (Shs145 billion) which was spent on acquisition of land for the proposed right of way.

It has been noted that the cost for the Kampala-Entebbe Expressway translates into $9.3m (Shs33 billion) which is unprecedented and costlier than other projects in most developing countries).

In a 2015 Value for Money audit, the Auditor General, Mr John Muwanga, concluded that the "project costs could have been much lower if UNRA had procured the contractor through competitive bidding."

The Unra in their defence opined that they opted for direct procurement, which was in accordance with the Loan Agreement conditions where Exim Bank dictated that the contractor should be CCCC.

Mr Muwanga, in a separate audit, however, established that "this was found not to be the case" because the Design-Build Works Contract Agreement (conditional) was signed between Unra and CCCC on October 26, 2010; while the Preferential Buyer Credit Loan Agreement signed between government and Exim Bank was signed in May 2011.

"No document was availed to the effect that the contractor was specified by the Exim Bank of China. A project of such magnitude and complexity should have been competitively bid in order to get the best offer for its construction," the report noted.

Mr Muwanga advised the authority to avoid 'single source' procurements for such expensive projects in future.

He further revealed that the $9.3m per kilometre quoted by CCCC in Uganda is twice the cost of Ethiopia's six-lane Addis-Adama Expressway, built by the same Chinese company, and yet with more features such as link roads and underpasses.

In 2016, during the parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) hearings on mismanagement of select enterprises, UNRA officials admitted that CCCC's tender was an "unsolicited bid" which did not conform to the procurement laws.

UNRA officials further revealed that CCCC was introduced to the roads authority by the then Secretary to the Treasury, the late Chris Kassami in 2005.

"When the tender to build the Kampala-Entebbbe Expressway was opened, CCCC was single sourced. It undertook the feasibility study and design, and eventually became the contractor," UNRA officials revealed.

How government and CCCC reached the final costing for the road remains unknown but as a result of the direct sourcing, it posted perhaps the costliest figure in the region.

The spectre of the Kampala-Entebbe Expressway could return to haunt the country as UNRA seeks to find a firm to construct the Kampala-Jinja Expressway.

The UNRA officials are reluctant to discuss the revenue projections of the tolling system, which is meant to raise most of the funds to repay the loan.

However, officials who are well versed with the tolling system claim that the arithmetic does not add up, which means that most of the loan will be paid back to China from the state coffers over a 13-year period.

The government, in the loan agreement, committed to start paying back the loan from July 2019 to January 2032. The plan is pay back $26.8m (Shs98 billion) annually split into two instalments.

Plans to build the road date back to the early 2000s but government commenced discussions with the Chinese government to finance its construction in 2009, and subsequently the tender for design and building was handed to CCCC in 2010.

Repaying the loan

Finance minister Matia Kasaija says the repayment of the loan commenced in the first quarter of this financial year.

"It is a lot of money to pay back, so the earlier we start the better, but we also committed to start in 2019," he says.

While downplaying the claim that the road is a white elephant, Mr Kasaija admits that the road has been beset by problems.

"I think in planning for the project and how it would function a lot of things were not synchronised. For example, we just woke up to realise there is no law on tolling, but we are handling most of the things and it is a big lesson," he says.

"It was an oversight problem, maybe because we were doing the tolling thing for the first time but we will do better next time. The problem is inefficiency within government, but we shall definitely collect the money," he adds.

Recurring mistakes

Most of the large infrastructure projects in Uganda have been impeded by procurement flaws, inflated costs, protracted legal battles and have been tainted by well-heeled commission agents. Often the President has been sucked in to arbitrate these disputes.

The proposed Kampala-Jinja Expressway could be next in line.

The greenfield toll road project, which was meant to be developed through a public-private partnership (PPP) is tagged to a cost of $1b (Shs3.4 trillion). The PPPs under normal circumstances, according to the commercial lawyer with Kampala Associated Advocates, Mr Jet Tumwebaze, is a financing model for especially infrastructure projects to bring on board either capital or technical know-how, or both.

The Unra and the PPP unit in the Finance ministry are currently in a procurement stages of a private developer for the 95km thoroughfare, which is planned to start at Lugogo in Nakawa Division and stretch up to the newly launched cable stayed bridge in Jinja District.

Eight consortia were selected during the pre-qualification stage last September. From the evaluations, four consortia were shortlisted in December and the next stage was meant to be the submission of proposal documents.

The four firms that reached this stage include China Communications Construction Company Ltd and China First Highway Engineering Company Ltd, KJ Connect (with Vinci Concessions as the lead member), Strabag/ICITAS/EGIS/AIIM/STOA, and CCKS consortium. But this procurement process could be scuppered if another Chinese firm engaged in intense lobbying gets the deal

It is emerging that the China Railway 17th Bureau Group Company (CR17th), was invited by President Museveni for private talks on Tuesday this week on the prospects of being single-sourced to undertake the construction.

CR17th put the spanner in works mid-last year after two of its subsidiary firms were disqualified in the earlier prequalification stages.

The company petitioned the ministry of Works to "be invited" to participate in the ongoing procurement, but did not submit an application for pre-qualification under its name.

Two companies -- CCECC and CRCIG -- had earlier on participated but it was discovered later that they are subsidiaries of CR17th, which according to procurement details, were disqualified on three grounds including failure to show that they were able to raise a third party commercial debt for their five projects amounting to $1b (Shs3.6 trillion) they submitted.

They also failed to show evidence that they had raised a third party commercial debt on any project outside China, and whether they had a minimum of five projects in which they had been responsible in either operation or management of facilities.

Show of interest

Mr Kasaija confirms to Daily Monitor that the Chinese company has an interest in the Kampala-Jinja Expressway.

He says after the Tuesday meeting, government is assessing the possible implications of circumventing the ongoing procurement to hand the company the tender.

"Funding has been identified. If all goes well in the next months, we should be starting," Mr Kasaija says.

"We are studying; what if we give the Chinese the contract, what are the implications?" he asks.

However, technocrats in the ministries of Works and Finance claim that they are yet to be briefed about the outcomes of the President's meeting with the Chinese company. In its earlier expression of interest, CR17th promised to finance and construct the Kampala-Jinja Expressway in a record three years "if all other preparation works are done on time." The company did not reveal where its funding for the road would come from.

Initially, the estimate for the Kampala-Jinja Expressway is Shs3.6 trillion ($1b) pooled through PPP: where the preferred private investor will have to mobilise $600m (Shs2.2 trillion) through a mix of equity and debt.

If Mr Kasaija's statements are anything to go by, it means that the ongoing procurement will be derailed as government would turn down a $400m (Shs1.4 trillion) "viability gap funding" committed by the African Development Bank (AfDB), European Union (EU) and the French overseas development agency AfD, under the PPP deal.

The viability gap funding, an economic instrument used in PPPs projects, is a grant to support projects that are economically justified but may not financially be viable.

The grant helps cover the private investor from likely losses over a period of time. According to the project feasibility study, the road's economic viability lies between the Kampala and Namagunga stretch in Mukono District; the viability gap funding was thus an incentive to the private player.

Besides risks of getting a bad deal in a new financing arrangement -- a direct loan and direct procurement of a contractor, setting back ongoing procurement will deal severe reputational risks for PPP financing in the country.

Mr Tumwebaze says: "That is why it is proper that procurement is conducted well so that it is not afflicted by apparitions that have bedeviled all multi-billion tenders previously."

One official privy to the matter, who preferred anonymity, says: "While the monetary science of a toll road is having large traffic, building one doesn't guarantee using it; when you opt for expensive Chinese financing like Museveni is being deceived, you are in for even bigger problems."

"It would be prudent for the country not to repeat the mistakes done in the Kampala-Entebbe Expressway [deal]," he adds.

Dealing with traffic jam

Traffic. The old Kampala-Jinja road is famous for its messy traffic. However, anyone travelling to Jinja can opt to use the 95km Gayaza-Kalagi-Bukoloto-Njeru Road or brave the thick traffic to Mukono, and take the 74km Katosi-Kyetune-Nyenga road to Jinja.

Research: A 2010 World Bank-funded assessment on adoption of the botched Bus Rapid Transit (BRT) detailed that Jinja Road currently has the highest demand for public transport with approximately 120,000 passengers, daily. Demand was second highest on Entebbe Road with at least 105,000 passengers.

"Forecast demand levels for the do-nothing scenario in the year 2013 reveal that passenger transport will be highest on Jinja road with 175,000 passengers per day representing 45 per cent on (countrywide) demand levels," the assessment by UK consultancy, Integrated Transport Planning, indicated.

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