News

REVEALED: Why Uganda dropped Chinese firm from railway deal, Kampala now eyes Turkish builder

Uganda is considering a deal with a Turkish company after terminating its contract with a Chinese firm to build a railway to the Kenyan border, according to a senior official.

In 2015, the Uganda signed an engineering, procurement and construction contract with China Harbour and Engineering Company Ltdç (CHEC) to develop the Standard Gauge Railway (SGR) project, which will use the international standard rather than a narrower gauge sometimes used in the region.

The 273-kilometer (170-mile) railway line, estimated to cost $2.2 billion, would link the capital Kampala and Uganda’s border with Kenya, where it is planned to link up with Kenya’s own standard gauge rail that runs to the Indian Ocean seaport of Mombasa.

Uganda is, however, frustrated with China’s unwillingness to provide funding for the project and is now courting Türkiye’s Yapı Merkezi to take up the job, a senior official in the ministry of works and transport project told Reuters.

He spoke on condition of anonymity because he was not authorized to speak on the subject.

“One of the obligations under the contract with the Chinese was that they were supposed to help Uganda source financing which has really not come true,” the official said.

He said Uganda had written to the Chinese firm in December canceling the contract and that the Chinese had so far not indicated any objection to the decision.

Wang Wenbin, China’s Foreign Ministry spokesperson, said China and Uganda had in the past jointly cooperated in railways, hydropower stations, highways, oil and gas development, and infrastructure construction.

“China and Uganda are comprehensive cooperative partners, and practical cooperation between the two countries is at the forefront of China-Africa cooperation,” he told a news conference in Beijing.

The source at Uganda’s transport ministry said they had turned their focus to Türkiye’s Yapı Merkezi.

“So now the discussions are with Yapi Merkezi, which has shown interest … there’s no contract with them yet, but there’s an MoU and things are moving fast.”

SGR Project Coordinator Engineer Perez Wamburu said Kampala signed a memorandum of understanding (MoU) with Yapı Merkezi and that the company is expected to submit a response to a request for a construction proposal within weeks, paving the way for procurement.

Yapı Merkezi told Anadolu Agency (AA) that it is a private company and not mandated to disclose details of the agreement with the Ugandan government.

The project will be funded by loans and Uganda said with Yapı Merkezi on board, the financing model will also change. It expects to tap into its network to bring Export Credit Agencies (ECAs) on board that will finance the venture.

Uganda President Yoweri Museveni directed officials to open up SGR financing to global financial capitals, with London and UK Export Finance the first call in September 2021, sources familiar with the project told AA.

Wamburu said Uganda’s Attorney General Kiryowa Kiwanuka was prompted to review the contract with the CHEC after it became apparent that the China Exim Bank was reluctant to bankroll the project.

China’s ambassador to Uganda said that after the coronavirus pandemic, Beijing has become more cautious about financing big infrastructure projects in Africa. “We all know that COVID-19 didn’t leave economies of the world the same,” he said.

Uganda was particularly impressed with the job Yapı Merkezi had done in neighboring Tanzania, he said, adding a Ugandan team had recently traveled to Tanzania to see the work.

In Tanzania, Yapı Merkezi is helping to build a 1,219-kilometer standard gauge railway line that the country is developing as part of efforts to boost trade with Uganda and other neighboring countries.

Türkiye’s presence in Uganda is also growing with contractors carrying out major development initiatives in the public and private high-tech infrastructure.

Polat Yol Yapı won a civil works contract to upgrade the 92-kilometer Muyembe-Nakapiripirit road, which will link Uganda to Kenya, South Sudan and Ethiopia.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

To Top