Plans to build an eight-lane $1.1 billion (about Shs4 trillion) expressway linking Kampala to Jinja have run into disarray amid furious lobbying by interested parties and allegations of bribery.
President Museveni has directed the Inspector General of Government, Ms Irene Mulyagonja, to investigate allegations that interested parties paid as much as $10m (Shs37b) in bribes to improve their chances of winning the tender for the road deal. The directive was made in last week's Cabinet meeting but details were only confirmed at the weekend.
In a brief telephone interview, Justice Mulyagonja said she had not seen the directive to investigate the matter. But three well-placed sources familiar with the project confirmed the directive.
It is the latest twist in a project that is now several months behind schedule after behind-the-scenes lobbying by interested parties. The protracted manoeuvres date back to August last year when the Uganda National Roads Authority (Unra) invited bidders to express interest in building the highway earmarked as a flagship public-private partnership (PPP) project.
Under the PPP model, the contractor finances, builds, operates and maintains the road for a set period while recovering their money and profit, for instance through tolls paid by motorists.
The first part of controversy came after a senior State House official directed Works minister Monica Azuba to review interest in the project by China Railway 17th Bureau Group Company (CR17th). This was before Unra commenced the first pre-qualification stage, on September 3.
Ms Azuba responded 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, it was discovered that two of its subsidiaries, China Railway Construction Corporation and China Railway Construction Investment Group Ltd., had participated in the evaluation but were disqualified on three grounds; failure to show that they were able to raise third-party commercial debt of $1b (Shs3.6 trillion), 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.
Through its subsidiaries, CR17th had offered to finance and construct the expressway project in three years "if all other preparation works are done in time". Their proposal followed the traditional procurements where a project owner, in this case Unra, pays a contractor to build a road for them. The sweetener from the Chinese firm was its ability to raise the money as a loan, which would be paid back when the road was commissioned.
However, government officials are increasingly wary of the Chinese company's model of financing construction of the 95km highway, and prefer that the project be advanced as a PPP, as initially conceived, which lock in the contractor/ operator for longer, recovering their money while maintaining the road.
Officials quietly point at the 51.4km Kampala-Entebbe Expressway, which was built by a Chinese company, China Communications Construction Company (CCCC) at a cost of 476m (about Shs1.7trillion)
Although repayments of a Shs1.2 trillion borrowed for the project are now due to China Exim bank, the road is yet to bring back a penny in tolls and the relatively low traffic on the road has raised questions about its ability to finance itself.
Unra officials are quietly toying with road toll mathematics that does not add up to repay back the loan. In the meantime, government has to pay back from the Consolidated Fund.
On September 10, Ms Azuba wrote to the chairperson of CR17th Africa business, Mr He Ping, notifying him that procurement for the Kampala-Jinja Expressway had taken off and had been approved by government as PPP. She 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 projects.
Unra officials say the planning estimate for the project is around Shs3.7 trillion ($1b). The preferred private investor will have to mobilise $600m (Shs2.2 trillion) through a mix equity and debt.
The African Development Bank, European Union and the French overseas development agency AfD--committed $400m (Shs1.4 trillion) as "viability gap funding" for the project following earlier discussions with the Ugandan government.
The viability gap funding, an economic instrument used in PPPs projects, is grant to support projects that are economically justified but may not financially viable.
Back door lobbying
Rather than close the door on their interest, President Museveni in August invited the Chinese company for private discussions on the project and subsequently, in September directed Works minister Monica Azuba to meet with the company officials.
The Chinese company told the President that it had the money - $1.1b (about Shs4 trillion) - and was ready to build the road and "recoup their money through toll gate collection fees."
The Chinese company's proposition immediately stoked fears about Uganda's debt portfolio, which is already nearing to critical level--the 50 per cent cap set by the IMF for developing countries. Uganda total public debt stock currently stands at Shs47 trillion, according to Bank of Uganda.
After the meeting with the Chinese company, Mr Museveni met with top technocrats from ministry of Finance and Unra over the matter.
The President told the technocrats, who are opposed to the Chinese company's proposition, to allow the company to bring their proposal for comparison with the ongoing PPP tendering process, and a report presented to him.
Sources familiar with the matter told Daily Monitor that the technocrats led by Ms Azuba eventually met the Chinese company about their offer but were startled after the company officials came empty handed.
Shortly after the meeting the Chinese company wrote to government, informally withdrawing their interest in the project, citing intimidation from top government officials opposed to their financing model.
Late in October, the President told a Cabinet meeting that the Chinese have been intimidated, a matter he promised to look into upon return from Sochi for Russia-Africa summit.
Our sources, however, say the Chinese company is peddling the "intimidation" claims to cover up its failure to present a concrete financial and business plan to finance the road project.
The Chinese state-owned company has been vigorously lobbying through Parliament and State House for the deal to construct the road since mid-last year when its affiliates were disqualified during the pre-qualification stages of the ongoing procurement.
Unra officials referred this newspaper to the Works minister on grounds that the presidential directive was given to her. Ms Azuba was not readily available for comment by press time as she reported to be held up in yesterday's Cabinet meeting.