Business

Shs2b to guarantee rural road construction projects - official

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By ISMAIL MUSA LADU

Posted  Thursday, August 28  2014 at  01:00

In Summary

Selected. Crane Bank will be in charge of the transactions.

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Kampala.

Local construction players, especially those who cannot compete with multinationals firms on account of weaker financial muscle now have an opportunity to do so, thanks to the availability of the Shs2 billion that will guarantee road construction projects undertaken in rural areas.
The Construction Guarantee Fund (CGF) is a trust provided by UK aid and the European Union through the CrossRoads programme, and is aimed at improving access to finances for contractors and consultants in the road sector.
“This fund is an opportunity for local contractors working on district roads. It will allow them to bid for those projects without getting worried about their financial ability to undertake such schemes,” the acting Managing Director of Crane Bank, Mr P K Gupta said at a news conference on Tuesday.
He continued: “Normally, contractors who undertake works are required to provide Bid bond guarantee, Performance Guarantee and advance payment guarantee from commercial banks. With this arrangement in place, that problem is now no more.”
According to the deputy team leader, CrossRoads, Mr Alex Mugoya, the guarantee will help improve rural roads, given that it will only be made available to those undertaking road construction projects at districts levels.
He said: “How many times have we seen women in labour pain struggling to reach the nearest health unit because of bad roads. And how many people do you think could have improved their household income in the rural areas only if they could have access to good roads?”
The CGF is managed by aBi Finance, which is the finance arm of aBi Ttrust. aBi Finance is implementing a scheme by providing 50 per cent default guarantee to the commercial banks for issuing bank guarantees.
Crane Bank will be in charge of the Shs2billion transactions on account of its regional reach. Crane Bank has 41 branches in the country covering all the regions and major towns in the country.
aBI Trust group chief executive officer Svend Kaare Jensen said: “Through management of the CGF, we intend to support Crane Bank and other financial institutions to finance the national road construction and maintenance sector, by easing access to bid and performance bonds as well as advance payment guarantees for small and medium sized national road contractors and consultants.”

Firm Eligibility
For the firm to qualify for funding, it should be involved in the road construction sector, the value of contract to be executed should not exceed Shs10 billion, have up to date URA tax clearance, and should have a clean CRB report. One per cent per quarter interest charge will be imposed on contractors that use the fund.

iladu@ug.nationmedia.com