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Railway body posts Shs35 billion loss

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Mr David Musoke Bulega, the acting managing director of the Uganda Railways Corporation (URC). Photo/Courtesy

The Uganda Railways Corporation (URC) has posted a staggering Shs35 billion loss. This signifies an increase of Sh2.956 billion from the losses of Shs32.222 billion posted in the previous financial year, a report of the Auditor General has revealed. The report, which covers the period ending June 2023 attributes the increase in losses at the government agency to among other factors gaps in operational efficiency.

“Analysis of financial information revealed that URC still needs to make significant improvements in Operating efficiency, profitability and its ability to sustain provision of services,” the report says in part.

The report indicates that some of the losses were suffered as a result of overpayments of staff, a situation that arose out of employment of wrong salary scales and pay grades. This resulted in overpayment by Shs1.1 billion

“A comparison of the base pay as per URC payroll registers with the base pay as per salary structure revealed that 43 staff were paid using wrong scales/notches, leading to an overpayment of Shs1,100,437,968 and underpayment of Shs127,483,584,” the report notes.

Mr David Musoke Bulega, the acting managing director of URC, concedes that the firm has been making losses. He, however, does not agree with the Auditor General’s deduction that this is down to inefficiency.

“The firm incurs losses because the operational costs are higher than what the entity is getting as revenue. The equipment we are using is very old and thus our maintenance costs are high,” Mr Bulega said. Matters, he added, are not helped by the fact that it has to operate on a small network.

“We had a long operational stretch which covered western Uganda and northern Uganda. Right now we are operating on only 265km of the railway line meaning that the costs are not well spread over a big network,” he told Sunday Monitor.

Not new

The tale of loss making has been going on at the URC for close to a decade now, a development which Mr Bageya Waiswa, the Permanent Secretary in the Ministry of Works, partially blamed on the Rift Valley Railways (RVR).

“The losses have been a long standing problem. The biggest problem was the concession which we gave to RVR. They just plundered the company until we took the bitter decision to terminate the concession even though they say that they want to take us to court,” Mr Waiswa said.

In 2006, RVR won the concession to operate Uganda’s railway network over a 25-year period. However, the government terminated the contract in October 2017, accusing RVR of breach of contract and causing a financial loss of $784.4m (about Shs3 trillion).

Non-remittances, theft

Meanwhile, the Auditor General further discovered that the institution in some instances overpaid its workers, had not remitted up to Shs4 billion in gratuity to its former employees over a four-year period, and had not remitted to Uganda Revenue Authority (URA) Pay As You Earn (PAYE) deductions that it made from employees’ emoluments.

“I compared the deductions from the payroll registers with the PAYE remittances/payments to URA and noted under-remittance amounting to Shs1,049,250,214,” the report reads in part. The report further revealed that an assortment of railway materials worth Shs26 billion that had been collected as a result of reconstruction work on the Tororo-Gulu meter gauge railway was stolen.

According to the report, one set of stolen materials was worth $3.7m, about Shs13.9 billion, and another worth €12.2m, about Shs12.2 billion. Mr Bageya Waiswa told Sunday Monitor that the matter of stolen materials has since been handed to the Police.

“That is a police case. We entrusted some personnel to guard the materials, so we want them to be asked what happened. If they slept on the job, they must answer for it,” Mr Waiswa said.

The materials are said to have been stolen after work on the Tororo-Gulu line ground to a halt. This followed a pay-related dispute between Sogea Satom Construction Company Limited on one hand and URC and Government of Uganda on the other hand.

The dispute arose following failure by the government to honour its obligations under a co-financing agreement it entered into with the European Union (EU) to fund rehabilitation work on the 375km railway line.

Under the agreement, the EU, via the 11th European Development Fund, was meant to provide €21.5m (approximately Shs86 billion) out of the required €34.6m (approximately Shs116.6 billion).

The rest of the money, €13.1m (approximately Shs52 billion), was meant to be provided by the government of Uganda, an obligation that the government failed to fulfil. This nudged the contractor into terminating the contract.

The Auditor General’s report for the period ending June 2022 indicated that the government was under the provisions of the contract agreement meant to pay damages amounting to 10 percent of the project sum in case of such a development.

“Article 65.3 (of the contract) states that in the event of such termination, the contracting authority shall pay the contractor for any loss or damage the contractor may have suffered. The maximum amount shall be 10 percent of the contract price,” the Auditor General’s report stated.

The penalties amounted to Shs3,933,775 (approximately Shs16 billion). It was however not clear whether this amount was factored into the total losses posted by URC in the period ending June 2023.

New contractor

Mr Bulega told Sunday Monitor that work on the Tororo-Gulu railway has since resumed with a new contractor, China Road and Bridge Corporation (CRBC), taking on rehabilitation work of the line that had been expected to reduce the cost of transport and improve freight services between Uganda and South Sudan and parts of the Democratic Republic of the Congo. This was after it was commissioned in March 2020. “After Sogea-Sotoam pulled out because of funding issues, we got another contractor, China Road and Bridge Corporation (CRBC). CRBC has so far covered the stretch from Tororo to Kumi. That is more than 60km of the railway network,” Mr Bulega said.

Meanwhile, the Auditor General discovered that URC is heavily understaffed, with only 404 out of the 729 approved positions filled.

However, 18 of the employees were discovered to have been appointed to positions that were not in the approved structure of the entity.

The report further revealed that some of the employment files of the staff did not have minutes from the Board or management relating to those appointments, which pointed to the possibility that staff were either appointed or handed contracts and contract renewals without following proper procedures.

Under funding

The report also revealed that the government has for the umpteenth time not provided adequate funding to the Corporation that has been struggling to remain afloat over the last decade. Whereas the government had approved the Corporation’s budget for the period ending June 2023, the report says, its remittance to the institution was short by 38.2 percent.

“The Corporation had an approved GoU budget of Shs240.87 billion inclusive of donor funds, however, only Shs92.08 billion was received during the year resulting in a shortfall of Shs148.79 billin representing a 38.2 percent performance,” the report says. Matters were apparently not helped by the fact that it did not do well in terms of revenue collections.