Discussions to secure SGR loan still on - Govt

Negotiations between Uganda and China for the loan to finance construction of the much touted Standard Gauge Railway (SGR) are in advanced stages, the project coordinator, Perez Wamburu, has said.

The SGR project has stalled due to lack of financing commitments after financiers from China had indicated that they would, going forward, go slow on the project. 

However, last Thursday Mr Wamburu told Daily Monitor that earlier in May, government had submitted documents to Chinese Exim Bank clarifying on the three sticky issues, among which include Kenya’s commitment to the remaining two sections of the railway that connect to the Uganda border at Malaba, loan repayment plan and post construction operations. 

“SGR being a regional project, one issue remains outstanding on our loan application which is the timeline for interconnectivity with Kenya, which is being discussed at a high level,” he said, noting that discussions about the same were ongoing. 

Kenya is yet to commit to the two connections - the 266 kilometre line from Naivasha to Kisumu port at a cost of $3.6b (Shs13 trillion) and the 107 kilometre line estimated to cost $1.7b (Shs6 trillion) from Kisumu to Malaba. 

The two lines, especially the extension to Malaba are a precursor to Uganda starting its own 273 kilometre line stretching from Malaba to Kampala.

Kenya, which also has its own issues, has further complicated things, pushing financiers to slow down on the multimillion dollar project. 

For instance, Kenya’s stock of debt estimated to be at 65 per cent of gross domestic product had already raised questions around the country’s capacity to repay the loan, worsened by the current political shuffling, pitting President Uhuru Kenya and opposition politician Raila Odinga against deputy president William Ruto. 

However, Uganda remains optimistic that Kenya will commit on the remaining sections that stand between realising a project that was conceived in 2008 as a regional project starting from Mombasa through Kampala to Kigali. 

The Kampala-Kigali SGR section has since stalled in the face of uncertainties. 

Mr Wamburu said they continue to acquire the project right of way, with some 135 acres of land between the districts of Tororo and Mayuge so far acquired. 

At least Shs10.77b in compensation has so far been paid to 487 project affected persons in the last 2020/21 financial year.

Another Shs20b has since been released to cater for outstanding compensation arrears.

Mr Wamburu also indicated that overall some 2,400 acres of land for the railway corridor have been fully acquired, out of the required 4,700 acres required of the 273 kilometre line.

Uganda’s section of the SGR is expected to cost Shs8.1 trillion ($2.17b). 

Government had initially committed to paying back the loan mainly from the railway levy but Exim Bank rejected the proposal.  The plan is to pay back the loan mainly from the Consolidated Fund, on the premise of oil revenues when the country starts commercial oil production at the earliest in 2025.

Officials say construction will commence in the 2022/23 financial year.

Why government is committed to SGR

According to Mr Wamburu, the SGR will have a capacity to carry more than 20 million tonnes per annum, which is why government cannot take its eyes off the project.

Currently, 90 per cent of Ugandan bound cargo (exports and imports) is handled through Mombasa port at the Indian Ocean.

It takes a trailer truck an average of five to seven days to move from Mombasa to Kampala, a 20 feet [32-tonne] container costing about $3,000 (Shs12m). 

The alternative is the existing meter gauge railway which cannot move above 30km per hour, and whose concessionaire—Rift Valley Railways (RVR) was kicked out in 2017 rendering the railway operations flawed.