The government of Uganda has terminated its 2.2 billion dollar deal with the Chinese company China Harbour and Engineering Company Ltd (CHEC) to build a railway line from the Ugandan capital Kampala to the border with Kenya. Uganda is now considering a Turkish company to build the railway.
According to reports, CHEC was supposed to help Uganda in financing the 273-kilometre railway, but is failing to do so. Perez Wamburu, project coordinator of the Standard Gauge Railway (SGR), said that Uganda hasn’t heard anything from CHEC for two years and that Uganda didn’t receive any funding for the project.
Wamburu said Kampala has now signed a memorandum of understanding (MoU) with Turkish firm Yapi Merkezi. Yapi Merkezi has made impressive progress in building neighbouring Tanzania’s rail line, encouraging the Ugandan government to cancel its contract with a Chinese company and offer it to the Turkish firm.
According to Kampala, the financing model for the project will also change, with Yapi Merkezi, which is building Tanzania’s SGR, expected to tap into its network to bring Export Credit Agencies (ECAs) on board that will finance and breathe life into the moribund project.
The Project Coordinator disclosed that Uganda’s Attorney General Kiryowa Kiwanuka was prompted to review the contract with CHEC after it became apparent that China Exim Bank – Kampala’s main infrastructure projects financier of the last decade – had grown cold feet on bankrolling the SGR.
He said “We read between the lines when China’s Ambassador to Uganda said that after the Covid-19 pandemic, China has become more cautious about financing big infrastructure projects in Africa. We all know that Covid didn’t leave economies of the world the same”.
Delineating on the development, Wamburu averred that Uganda was forced to rethink its options and cast its net wider for other financiers after its request for financing to the China Exim Bank went unanswered for nearly one year – a departure from the usual practice when the Chinese responded to Kampala’s proposals within weeks.
The SGR could become an important asset for Uganda since it will connect the landlocked country with the Indian Ocean. It’s aimed to link up with the Kenyan standard gauge railway, which runs all the way to the port city of Mombasa. Kenya has built 730 kilometres of railroad, financed with Chinese loans. However, the railway running to the Ugandan border hasn’t been built yet.
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