Govt negotiating loan to start SGR works, says URC

The SGR has since 2014 failed to kick off due to a number of factors . PHOTO/FILE

What you need to know:

  • The stretch is critical to the start of the SGR project from Kampala to Malaba.  

Uganda Railways Corporation (URC) has said government is negotiating for at least $2b (Shs7.4 trillion) to start works on the Standard Gauge Railway (SGR) project. 

Speaking in an interview last week, Mr Stanley Ssendegeya, the new URC managing director, told Daily Monitor  that government was negotiating with Exim Bank of China for financing, noting that the money might be available in a year or less. 

“In a year or less, the funding will be on board and we expect construction in about the first [or] second year [after the negotiations],” he said. 

This is a new development away from the previous position in which government had indicated it would revert to the old metre gauge railway, after Kenya had failed to secure funding required to complete its stretch of the line to Malaba. 

The stretch is critical to the start of the SGR project from Kampala to Malaba.   

The construction of the SGR had been expected to be financed through a loan from Exim Bank, which had been tied to the completion of the Kenyan stretch from Naivasha to Kisumu and then to Malaba.

By press time, it was not immediately clear whether Uganda was renegotiating the terms of funding, since access to any funding had previously been tied on how and when Kenya completes its stretch to Malaba. 

Uganda had recently earmarked $205m to restore the old railway line linking Kampala to Malaba on the Kenyan border.

The decision had been informed by delays to secure funding for the 273 kilometre Malaba-Kampala stretch. 

Last year, Finance Minister Matia Kasaija, said government had put SGR on hold to invest in revamping the old metre gauge railway.

Uganda had been waiting for Kenya to complete the SGR to Malabla, however, last week, Mr Ssendegeya said they would start on the SGR stretch from Kampala without waiting for Kenya. 

“We are not going to wait for Kenya to arrive at Malaba. We are going to work co-currently. As they [Kenya] build towards Malaba, we shall also be building from Kampala,” he said, noting there was also a possibility that the SGR line would be connected to “Kenya through Lake Victoria by doing Kampala-Tororo-Malaba”.

Mr Ssendegeya also said “we are going to construct the Standard Gauge Railway”, noting that although it is not yet complete, “there is a plan by government to bring SGR under URC”.  

The SGR is a project under the Ministry of Works but, according to Mr Ssendegeya, there are plans to incorporate its activities under URC, which recently regained direct control of Uganda’s railway system after government cancelled a 20-year concession in which the network had been handed to a consortium of companies under Kenya’s Rift Valley Railways.

Uganda’s section of the SGR was launched in October 2014 after completion of the feasibility study and designs of the railway line. 

However, the project has since failed to take off due to lack of financing and Kenya’s failure to complete the line to Malaba.

The financing agreement for the Naivasha-Kisumu, Kisumu-Malaba, and Malaba-Kampala sections had been expected to be completed by September 2018 but collapsed last year. 

Progress in kenya 
Kenya completed the initial phase of the 487 kilometre SGR line from Mombasa to Nairobi at $3.8b, with 90 per cent of the funding coming through a loan from Exim Bank in 2014. 

Kenya also secured a further $1.5b from the same bank to extend the SGR network to Naivasha, 120 kilometres west of Nairobi. However, attempts to obtain another loan of $3.6b for the third phase from Naivasha to Kisumu collapsed in April. 

The completion of the SGR line on the Kenyan side is critical to Uganda, Rwanda and South Sudan. 

While financing of the project has been a major issue among  participating countries, the question of the viability of the railway has sparked debate.