Wednesday June 8 2016

Returns not matching govt investments - World Bank

Infrastructure investment. A section of the

Infrastructure investment. A section of the Kampala Expressway. increased public investment, just like commodity booms, can set a stage for a debt crisis. File photo 

By Mark Keith Muhumuza


Today, Mr Matia Kasaija, the Finance minister, is expected to deliver the Budget Speech for 2016/17, highlighting the continued focus on infrastructure projects in the works and energy sectors.

This focus, according to the World Bank, is showing signs that the country is not getting the returns from what has been invested.

Releasing the Uganda Economic Update, 7th edition, Ms Christina Malmberg Calvo, the World Bank country manager Uganda, revealed that the investments made in infrastructure are not translating into increased economic activity.

“Over the past decade, for every Shilling invested in the development of Uganda’s infrastructure, less than a shilling (only seven-tenths of a shilling) of economic activity has been generated. That is not good, and it will not translate into a transformed middle-income country anytime soon,” she said at the release of the report on Monday.

The scathing report titled “From budgets to smart returns: Unleashing the power of public investment management,” faults the government for the poor execution of infrastructure projects, right from inception to delivery of the project.

Sectors in focus

Uganda’s roads and energy sectors are expected to be awarded a combined 30 per cent of the Shs26.3 trillion Budget.

This is a trend that started in 2008/2009 financial year as the government revealed the need to stimulate the economy by having better infrastructure.
And indeed, the World Bank credits the government for attempting to plug the infrastructure deficit.

However, Ms Calvo points out that since this was meant to boost agricultural productivity and regional integration, the expected returns have been far from visible, a factor blamed on project initiation, tendering, implementation and maintenance among others.

“Endemic delays in implementation, cost overruns and corruption mean that sometimes projects come in at twice the original report. For example, a road project worth $100m could end up being delivered at $200m.

“This means that although the planning and budgeting process is doing a fair job in identifying the right projects that should transform the country and allocate resources to them, they are not efficiently implemented to deliver the expected benefits,” the report reads.

Recently, the Uganda National Roads Authority (UNRA) raised a red flag over cost overruns on a 9kms stretch between Busega and Kajjansi for the Kampala-Entebbe expressway, where the contractor will require Shs229 billion to complete.

The authority has also been embroiled in several corruption scandals that even led to a probe.

It is this corruption that Ms Cissy Kagaba, the executive director Anti-Corruption Coalition Uganda, says is responsible for the low returns on the infrastructure projects.

“We take of corruption in the country but I think it is about cracking the whip. We cannot continuously talk of capacity building all the time yet we inject a lot of money in the roads sector and it continues to be stolen,” she said.

She further faulted the government for coming with projects that are mostly as a result of political appeasements.

The expectation for these projects is that they would deliver increased economic activity and boost Uganda’s growth prospects.
Since 2010 though, Uganda’s growth has slowed even with the push to invest in infrastructure.

In 2009, Uganda was growing faster than Kenya, Rwanda and Tanzania, according to the report.
Since 2010 though, it has lost out on the top spot and at the moment, it is growing the slowest in among the three countries.

Delayed release of funds
The execution of public investment has been riddled with delayed releases of funds because implementation tends to delay over the lack of clear plans and awarding of contracts before issues like compensation are handled.

According to the report, only 36 per cent of the budgeted amount for the energy sector were released for actual implementation between 2008/2009 and 2014/2015.

The roads and works sector also only received 66 per cent of the budgeted amount during the same period.

For the public administration and the justice, law and order sectors have been receiving more than the budgeted amounts over the same period.

Mr Kenneth Mugambe, the director budget in the ministry of finance, admitted that most projects in the country start when they are not ready.

“We need to understand why absorption is low in Uganda. We also rank very, very low on the project implementation index. Many projects in the country also start when they are not ready. You cannot start a project before you have completed compensation,” he added.

Red flags have been raised on the limited coordination on several government projects like the Standard Gauge Railway, Kampala Light Rail project and the Kampala – Jinja Expressway, which are all interlinked.
Mr Mugambe noted that Uganda’s problem at the moment is beyond the availability of resources.

Mr Micheal Odongo, executive director, Uganda Road Fund, also pointed out that Uganda continues to experience limited returns on public investments because of the long turnaround times of projects.

“For our case, the capacity to turn around projects I think is one of the biggest problems. If a project can take five years to complete, the returns of the same project also have to be moved ahead,” he noted.

Proposed reforms
The World Bank proposes reforms in public investment management, if the country is to reap the benefits of increased infrastructure investment.

Dr Rachel Sebudde, the chief economist at the Uganda World Bank Country office, proposes that there be immediate action to strengthen government institutions involved in coming up, implementing and supervise government projects.

Former Finance minister Maria Kiwanuka says: “We need to have a proper cost-benefit analysis of projects and be able to monitor performance benchmarks. Economists should be given a leeway over engineers to carry out this role on whether the project makes economic sense.”

The numbers

36 per cent
The percentage of budgeted funds that was actually realeased for implementation of energy projects between 2008/2009 and 2014/15.

66 per cent
The percentage of budgeted funds that was actually realeased for implementation of roads and works projects between 2008/2009 and 2014/15.