Tuesday October 10 2017

Why are roadworks very costly in Uganda?

New road. The Kampala-Entebbe Expressway. File

New road. The Kampala-Entebbe Expressway. File photo 

By Frederic Musisi

The Parliamentary Committee on National Economy, late in May approved a loan request by the ministry of Finance to borrow $210m (approximately Shs752b) from the Saudi Arabia based Islamic Development Bank (IDB) for construction of the Rwekunye-Apac-Lira-Puranga-Acholibur road.
The road, stretching about 252.5km through five districts of Masindi, Apac, Lira, Pader and Kitgum to the Uganda-South Sudan border, has been on government’s to-do list for several years with special mention in budget speeches for the previous four years.

The first feasibility study for the road was done in 2009.
“Development of this corridor is aimed at supporting trade movements”, according to the loan approval document, by connecting landlocked South Sudan to the Northern Corridor—the Kampala-Malaba-Nairobi-Mombasa route.

According to the Uganda National Roads Authority (UNRA), the $210m will facilitate construction of the section, about 191km from Rwekunye in Masindi off the Kampala-Gulu highway to Puranga Sub-county located at the Pader-Lira boundary, while government will foot the construction bill for the remaining section, about 55km, from Puranga to Acholibur at the border with Kitgum which borders South Sudan to the north.

This brings the total cost of the road project, an ordinary carriage way, to approximately $313m (Shs1.1 trillion). Actual civil works will consume the biggest share of this money, about $240m (Shs860b) among other elements, Shs53b ($15m) for management support and Shs114b ($40m) to cater unforeseen physical and price variations.

Procurement for a contractor for the project is ongoing but at the cost of Shs1 trillion, this can be said to be one of the most expensive ordinary roads in the country and comparatively the second most expensive after the China funded 51.4 km Kampala-Entebbe Expressway costing a whopping $474m (Shs1.7t). Even the Greenfield 77km Kampala-Jinja Expressway is estimated to cost Shs800b.

UNRA’s media relations manager Allan Ssempebwa, in defence of the costs, said the road is yet to be tendered so “until then” $313m is just a planning estimate.
“When we eventually put the project for tendering that cost may come down but not go up because in most cases we take the lowest bidder,” Mr Ssempebwa argued.

Uganda’s road costs
The sharp rise in road construction costs has for long been a subject of debate, especially after President Museveni, nearly 10 years ago, outlined infrastructure development (dams, roads and railway) as his government’s priority.
Consequently, UNRA was born in 2008 with a specific mandate of developing and maintaining the national road network, and advising on general roads policy.

That notwithstanding, ministry of Works’ records seen by this newspaper dating back 10 years, indicate that constructing a kilometre of road cost a massive $850,000 (about Shs1.5b in the exchange at the time) from an average $300,000 (approximately Shs510 million) in 2000.

For example, in 2000 each kilometre of the 76km Nebbi-Arua road cost $333,000 and $234,000 per kilometre for the 54km Pakwach-Nebbi road. Seven years later, road construction prices in Uganda had shot through the roof ranging between $650,000 and $800,000 according to the records.

Two years to UNRA’s birth, the most expensive contract awarded was the 43km-Kampala-Zirobwe road at $880,000 (approximately Shs1.6b in the exchange rate of the time) per kilometre hinged to the high quality that was required to meet the standard axle loads, since the road is an urban highway.

Officials at that time attributed this trend largely to increase in prices of fuel (petroleum) lubricants used on most road projects; the price of a barrel having jumped from $26 in 2000 to $70 in 2007 and a barrel of bitumen (tarmac) from approximately Shs250,000 in 2000 to Shs850,000 in 2007. Numerous records also show consultants and engineers quoting conflicting prices for the same projects.

But Makerere University dean of School of Engineering, Dr Umaru Bagampadde, in a 2011 study: “An investigation into escalation of paved road construction unit rates in Uganda” argued that the sudden “increase in prices during 2006 can be attributed to fast tracked and accelerated projects in preparation for Commonwealth Heads of Government Meeting (CHOGM).

Works. Construction of the Hoima-Butaba Road.

Works. Construction of the Hoima-Butaba Road. Photo by Rachel Mabala

The study suggests that between 2000 and 2007, rates for the various determinants of a unit cost per kilometre were fairly low except for the year 2006.
“The fairly high prices in 2008 could have been as a result of a few projects that were implemented then and therefore, very few international construction companies tendered resulting in inadequate competition,” the study reads in part.

The rise in road prices, the study indicates, could as well be attributed to the increasing worldwide demand for construction materials such as cement, bitumen, steel, concrete; rising prices of crude oil and other energy supply.
“Therefore, different contractors attach different weights to this risk and hence variations in prices of other construction costs since they largely depend on fuel.”

Other key driving factors outlined in the study include, front loading expenses which results in major variations in activity costs, and employment of expatriate workers on sites. This means workers’ salaries are incorporated in bid rates automatically resulting in variations in tender rates. These facts are not farfetched because road construction in Uganda is tenanted by a wide-range of foreign companies, with Chinese firms running the show lately.

The entry of Chinese firms into the Ugandan market was previously said to be a contributing factor in bringing the billing rates per kilometre down to $800,000 (Shs2.1 billion) compared with the past when the work was dominated by European and American firms. At some point it was said these were billing $1.2m (Shs3.1billion) on a kilometre.

But for Uganda, the other factor that fuelled obscene road costs from the time of UNRA’s birth to when the body was restructured in 2015, was the syndicated collusion by top management, officials in ministries of Works, Finance and Lands, contractors and contracted supervisors, and other bigwigs connected in the system.

This revelation was laid bare by the Justice Catherine Bamugemereire-led commission of inquiry that document that of the Shs9 trillion allocated to UNRA between 2009 and 2015, at least Shs4 trillion was “misappropriated” in dubious deals.
The monies were used to construct only 1,500km of roads in the same period yet according to rates published by the African Development Bank (AfDB) this could have constructed 5,147km of roads in African markets and beyond.

The costs keep going up
At the time President Museveni constituted the commission of inquiry into mismanagement at UNRA, the roads authority was healing from the mother of all scandals—the botched tender on the 74km Mukono-Katosi-Nyenga road—on which an estimated Shs12b was pillaged by a list of officials.
At the end of the day the project that initially cost Shs165b was retendered to a new contractor with an increment of Shs100b.

UNRA’s head of corporate strategy management Charles Kizito, in an interview, explained that road costs are varied basing on a number of factors considered right from planning to procurement. The unit cost of road construction per kilometre is the sum of the subunit costs of the road construction activities. The main activities considered are mainly earth works (surveying, clearing, grading and piling), finish grading and surfacing.

“At planning level you consider a road from point A (starting) to point Z (finishing) where you consider whether you are upgrading an already existing route to tarmac or undertaking a completely new route basing on economic and technical studies, Mr Kizito said. He said this is the first phase where aspects like the terrain (rocky or swampy) and access to construction materials are evaluated.
“In areas where a contractor will have to fetch materials from far that is factored in the final road price,” he said. “Where a contractor will create a diversion it is something implied in the cost of the road.”

The second variant of prices for the roads, Mr Kizito said, are the “contractor’s assessment where they quote their prices factoring in all the risks based on the efficiency of the employer to pay, macroeconomics like taxation and likeliness to terminate their contract” leading to the engineering estimates.
The engineering estimates feed into the real technical designs, leading to the tendering of the project, Mr Kizito revealed “where we look at the prices quoted by the bidders.”

“The risks are usually higher on new routes,” Mr Kizito said. “The prices also vary depending on class of the road being constructed; the classes are different so are the prices. For example on some we use asphalt for finishing and at times just do normal sealing.”
“But as the project progresses the decisions we take (as government) also count on the total cost of the road. For example, if you agree on a contract of say Shs100b payable within three years but due to budgetary constraints stretch the payment to five years, you pay more and that is where most road costs escalate.

Money issues are really beyond our control,” Mr Kizito said.
The Works and Transport sector is the top prioritised sectors and has for the last six financial years been receiving the largest share of Shs4.5 trillion of the budget in line with the National Development Plan 2, with UNRA taking the biggest share – Shs3.4 trillion.

Finance minister Matia Kasaija, in justification, said there is urgent need for the “10 critical oil roads” in midwestern Uganda in the oil belt to fast-track oil activities to enable commercial production start by 2020.

The government has already run to China’s EXIM Bank for a credit line of $554m (Shs2 trillion) to facilitate construction of the oil roads. In addition government plans to withdraw $33m (Shs119b) from the oil revenues fund for the same.
Among the oil roads is the 111km Hoima-Butiaba-Wanseko road whose project costs, the chairperson of the parliamentary committee on Physical Infrastructure, Mr Denis Sabiiti, said “cause alarm.” The road was previously tagged to a cost of Shs450b.

“They claimed that because the road will be used by heavy trucks used by the oil companies [it] will have three layers away from the normal but clearly that argument is very simplistic,” Mr Sabiiti, also MP for Rubanda West, argued. “So does it mean all other roads connecting to the Hoima-Butiaba will be upgraded to three layers? High road costs are fueled by corruption and it is something you cannot just fight; it takes time.”

Earlier in March, the Parliamentary Budget Committee raised concerns that the unit cost of construction per kilometre for the project is Shs5.9b, which is far above the average cost.
Every financial year, UNRA proposes unit cost of road construction. In the last financial year, the proposed unit cost for road construction was Shs2.9b from Shs3b in the previous financial. The roads body argues that market rates determine the actual unit cost through competitive bidding.