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Construction firms shunning road contracts over UGX500 billion arrears

State minister for works, Hon. Musa Ecweru (L) and UNRA chief, Allen Kagina, before the Committee on Physical Infrastructure

State minister for works, Musa Ecweru (L) and UNRA chief, Allen Kagina, before the Committee on Physical Infrastructure (PHOTO/Courtesy)

Construction firms are fast losing interest in contracts with the Uganda National Roads Authority (UNRA), the Executive Director, Allen Kagina, has revealed.

In a meeting with MPs on the Committee on Physical Infrastructure, on Wednesday, 11 May 2022, Kagina said the local contractors had been hit hardest by budget cuts to the sector which has constrained UNRA from meeting its payment obligations.

Presenting a paper to the committee on the impact of poor cash flow on the implementation of NDP III projects, Kagina said the authority has a deficit of Shs573.3 billion, with Shs414.15 billion needed for development projects and Shs159.17 billion for maintenance projects.

She observed that accumulated debt attracts interest that is considered nugatory expenditure and attributed the deficit to a decision by the government to suppress institutional budgets by 40 percent in the current Financial Year 2021/2022.

“Interest charges that accumulate at 15 percent per annum, are projected to grow to Shs462 million per day by 30 June 2022 because of the debt we have,” Kagina noted.

She said that the decision by the government stemmed from poor revenue performance and the effects of COVID-19.

“The communication came in July 2021 when UNRA had already signed contracts that would not be revoked and were at advanced stages of procurements, whose cancellation would cause diverse effects to the entity and the nation,” said Kagina.

“We recommend that government releases 100 percent of the annual budget to mitigate the negative impact of the budget suppression on the road network. If not possible, then a major review should be done to stop all new procurements and prioritize maintenance activities,” Kagina advised.

The President of the Uganda National Association of Building and Civil Engineering Contractors (UNABCEC), Eng. Jameson Olonya presented concerns of contractors to the committee.

He premised on delayed payments to contractors on government projects, where UNRA has accumulated arrears of over Shs500 billion since January 2021.

He added that other agencies like the Ministry of Works and Transport, the Ministry of Water and Environment, the Ministry of Lands, the Ministry of Health, the Ministry of Education and Sports, and various district Local Governments have also delayed payments to local contractors.

Eng. Olonya cited overwhelming tax penalties due to delays in remitting Value Added Tax which has forced contractors’ accounts to be seized, as well as loss of confidence in them by commercial banks financing their work.

“Local contractors have been hindered from performing ongoing works and other obligations. By not paying them, the government is frustrating the growth of its own national providers, which is contrary to objectives of Vision 2040 and NDP III,” said Olonya.

Yusuf Nsibambi (FDC, Mawokota County South) disagreed with Kagina’s secondary proposal to halt procurements for road construction.

“You cannot review to stop work. Money has to be sought for this sector. There is no development without funding this particular sector and paying outstanding debts,” Nsibambi noted.

He added that it was uncalled for to suppress budgets passed by Parliament, saying MPs ought to be involved in such decisions.

Hon. Gerald Rwemulikya (Indep., Ntoroko District) wondered why key sectors like works and transport were being suppressed, however much a good move it was, due to previous poor performance of the economy due to COVID-19.

“Government talks about promoting local content but is this how we are going to do it? There are call-off orders for works in my area but contractors do not go on the ground because they have no funding,” said Rwemulikya.

Hon. Nathan Byanyima (NRM, Bukanga North County) raised a red flag in the manner in which some local contractors do their work, noting that many have done shoddy jobs.

“I used to fight for the local contractors but I can say you are not good people. As soon as they receive the money, there is no work done. Some of them put murram stacks for 20 kilometers and then abandon the road,” he said.

Hon. Maurice Kibalya (NRM, Bugabula County South) recommended that UNRA should cancel contracts given to local contractors who abuse the terms of work.

He also suggested the intervention of the President.

“Let us make a resolution to schedule an appointment to meet the constitutional Minister of Finance who is President Yoweri Museveni. Let us take him through the cries of the people and let him read these documents,” Kibalya said.

Hon. Mariam Naigaga (NRM, Namutumba District) seconded Kibalya’s suggestion to interface with the President and develop ways to better budget allocation to the works and transport sector.

“The money that was suppressed due to COVID-19 has been taken to the Parish Development Model without the approval of Parliament. We need to meet the President and explain to him how much we are losing as a country,” said Naigaga.

State Minister for Works. Hon. Musa Ecweru, told the committee that the President expressed discomfort with budget cuts in the sector, noting obstacles in the chain of work.

“The President has directed the Ministry of Works and Transport, Ministry of Finance, and UNRA to come up with a local content policy that will strengthen the capacity of local contractors; but we are going to weed out the bad ones who are looting the country,” the Minister said.

He added that the blacklisted companies will be made public and “will not be given any new assignments anywhere in the country.”

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