Uganda: Museveni Directs On Shs4 Trillion Jinja Expressway Tender

25 September 2019

President Museveni has interrupted the tendering process for the proposed Kampala-Jinja Expressway (KJE) as a public-private partnership (PPP) and invited the Chinese company, China Railway 17th Bureau Group Company (CR17th), to start discussions on the project.

The President, in a September 18 letter to Works minister Monica Azuba, said CR17th has the money - $1.1b (about Shs4 trillion) - and is ready to build the road and "recoup their money through tolls."

"Therefore, I invite that company to make their presentations and proposals," Mr Museveni wrote.

The President's latest directive, following a September 10 "private meeting" with the Chinese company officials, means the earlier plan of developing the road as a PPP, and the ongoing tendering process for private partner have to be shelved.

In the letter, the President reiterated his earlier directive limiting external borrowing to only railway construction, electricity generation, irrigation schemes, some aspects of education and health sectors, and strategic roads such as the tourism and oil roads.

"Accordingly, I reject the idea of borrowing for the Kampala-Jinja Expressway," he wrote.

He added that if CR17th has the money, "why, then should we borrow for this road? Moreover, roads are not the major cost reducers compared to railway and electricity".

Lobbying

The Chinese state-owned company has been vigorously lobbying through Parliament and State House for the deal to construct the 95km road since mid-last year when its affiliates were disqualified during the pre-qualification stages of the ongoing procurement.

According to documents, CR17th, is the parent company of China Railway Construction Corporation (CCECC) and China Railway Construction Investment Group LTD (CRCIG), which participated in the prequalification stage but did not go past the stage.

A senior State House official (names withheld) directed the Works minister to review CR17th's expression of interest for the project. This was before the Uganda National Roads Authority (Unra) commenced the first pre-qualification stage on September 3 last year.

Ms Azuba responded on August 28, recommending that CR17th "be invited" to participate in the ongoing procurement but the company did not submit an application for pre-qualification under its name.

Instead, its two subsidiary companies--CCECC and CRCIG--participated but after evaluation, it was discovered that CR17th is the parent company of CCECC and CRCIG.

The two companies, CCECC and CRCIG, according to the technical documents seen by this newspaper, were disqualified on three grounds; failure to show that they were able to raise third party commercial debt for their five projects amounting to $1b (Shs3.6 trillion) they submitted, failure to show they had raised third party commercial debt on any project outside China and failure to show that they had a minimum of five projects in which they had been responsible for either operation or management of facilities.

Procurement notice

On September 10, Ms Azuba wrote to the chairperson of CR17th Africa business, Mr He Ping, notifying him that procurement for KJE had taken off and had been approved by government as PPP.

Ms Azuba also told the Chinese company's executives that the project could not be developed under a different model but welcomed the company to participate in future project.

In its expression of interest, CR17th offered to finance and construct the KJE in three years "if all other preparation works are done in time".

Unra officials say the planning estimate for the KJE is Shs3.7 trillion ($1b), pooled through PPP; preferred private investor will have to mobilise $600m (Shs2.2 trillion) through a mix equity and debt.

CR17th, however, did not indicate where their funding for the road would come from, but the safest bet, according to insiders, is likely China's Export-Import (EXIM) Bank.

Also worth noting is that government is currently toiling with repayment of the Shs1.2 trillion loan from EXIM Bank for construction of the 51.4km Kampala-Entebbe Expressway whose tolling economics at the moment does not make sense contrary to what government and Mr Museveni were sold. Ms Azuba was not available for comment on the next course of action.

Estimate

Numbers. Unra officials say the planning estimate for the KJE is Shs3.7 trillion ($1b), pooled through PPP; preferred private investor will have to mobilise $600m (Shs2.2 trillion) through a mix equity and debt.

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