Railway scandal: How the project slipped off

The controversy surrounding the procurement of the company to construct the monumental Standard Gauge Railway has put Uganda one year behind Kenya.

And the dispute is not about to end. As State minister for Works John Byabagambi was announcing the termination of the Memorandum of Understanding with China Civil Engineering Construction Corporation (CCECC) and giving a nod to its rival, China Harbour Engineering Corporation (CHEC), CCECC’s was preparing to go to court.

“We have only heard of the developments in the press. We are waiting for the government to come out with a report after the talks with this development and we shall go back to the drawing board,” Kabiito Karamagi, CCECC’s lawyer said on Friday.

This is likely going to draw another long court process that might see the regional conceived project that is supposed to cost at least Shs3.9 trillion, drag on for long.

There are fears that the project will be bogged down by this poor and corrupt procurement process that has previously derailed other crucial infrastructural projects like Karuma Hydro Power project.

Mr Byabagambi says the termination of the MoU came after the heads of state from Kenya, Uganda and Rwanda decided that a new standard gauge railway be built, not rehabilitating and upgrading the already existing lines, which he said was the core of the terminated MoU.

“In January 2012 the GoU entered in MoU with CCECC to rehabilitate the existing line of the railway. It was every clear and I think everyone of sound mind can understand what is meant by rehabilitating an existing line. You cannot rehabilitate what does not exist,” he said.

But on June 20, 2012, Alex Kakooza on behalf of Permanent Secretary Ministry works, Eng. Charles Muganzi, wrote to Secretary to Treasury requesting for certificate of financial implications to build a standard gauge railway. This letter contradicts Byabagambi’s position.
“The estimated cost to design Kampala-Malaba (251Kms) is shs7.8bn which is within the Medium Term Expenditure Framework of shs10.86bn,” letter reads in part.

Another letter written by the Mr Muganzi on April 19 2013 copied to Chief Engineer Uganda Railways Corporation and director of transport ministry of works telling them that CCECC had submitted its feasibility and pre-feasibility study for the Tororo-Gulu-Pakwach to construct a standard gauge railway. These letters contradict, contrary to what Byabagambi.

Mr Omar Yasini, a member of the CCECC negotiation team dismisses Mr Byabagambi: “Right from the time the president invited us, it was building a new standard gauge railway, not rehabilitation. How could we have failed to build a standard gauge railway when we have eight similar projects running in Africa, with the biggest in Nigeria worth $8.2 billion?”

The minister cancelled the MoU despite warnings from the Solicitor General, Attorney General and a High Court ruling delivered by Justice Lydia Mugambe on July 23, 2014 that warned against termination.

The insistence of Mr Byabagambi to have the MoU terminated might also see the company awarded billions of taxpayers money in compensation because it had already spent billions for a feasibility study on the eastern route that has now been awarded to another company.

On May 23, Eng James Byandala, the Minister of Works and Transport, wrote to the Attorney General, Mr Peter Nyombi, asking for advice and the government chief legal advisor advised against termination of the MoU with government.

“The MoU in issue was approved for the signature by this office and this office has previously advised against its termination for reasons, among others, that termination will be too costly to government,” Mr Nyombi responded.

But Mr Byabagambi says the Attorney General has since changed his position. “This time I have not defied the Attorney General. I had to go and sit with him and told him all these facts even those I have not mentioned and he said he did not have these facts.

Otherwise, this would have ended long time ago,” he said, “I have got the clearance from the Solicitor General to terminate the MoU and it was effected on the 22 August. As we talk now, we don’t have any MoU with CCECC,”

Origin of problems
The problems started on June 8, 2014, when Mr Byabagambi wrote to CCECC terminating the MoU that was signed in 2012. The company was invited by President Museveni in 2010 and directed that it works with UPDF but surprisingly, the Ministry of Defence later signed an MoU with CHEC for the same project.

In June 2013, the three heads of state of Uganda, Kenya and Rwanda at their meeting in Entebbe resolved that they construct a new line of SGR from Mombasa to Kigali with a link to Juba; and Mr Byabagambi was appointed as chair of the cluster of the SGR.

According to a tripartite agreement between Uganda, Kenya and Rwanda, the Railway from Mombasa to Katuna-via Kasese should be upgraded quickly to standard gauge but the controversies on the Ugandan side might delay the project.

CCECC was the first company to be invited to do the project in 2010 before CHECL signed an MoU with the Ministry of Defence.
Documents seen by the Sunday Monitor show that CCECC quoted $1.250 billion as the cost of the project but the government was giving it to another company at $1.7 billion making it higher by $450 million. As the deadlock continues, ministry of Works is trying to swap and give CCECC western route- Kampala-Bihanga-Mirama Hills, the route that connects to Rwanda.

But the company has refused the western route on grounds that the priority of the government was the eastern route.
To them, giving them the western route would mean giving them a job which would take long to start. It’s also said the western route is hilly and more costly.

The company says it has spent more than Sh7 billion on the feasibility study of the Malaba-Kampala and Tororo-Pakwach-Gulu-Nimule route but wonders why Eng. Byabagambi has awarded the western route.

Due diligence done on two companies
China Civil Engineering Construction Corporation activities: The Company was founded on June 1, 1979 upon the approval by the State Council of China. It is currently building a double track standard gauge railway from Lagos to Kano, in Nigeria. It has similar projects in Ethiopia/Djibouti, Tanzania/Zambia.

According to the due diligence done by a technical committee of six government officials led by Augustine Obyero-Mugisa, it belongs to a special class of Chinese railway main contractors. “CCECC belongs to a special class of Chinese record for the largest single international contract by signing the Nigerian Railway Modernisation Project contract of value $8.3bn,” the report reads. Seven CCECC’s seven affiliates including China Exim Bank were visited by the team.

Technical capability
CCECC has undertaken various railway engineering projects in China and around the world. Its ongoing overseas projects are of a total value $28.4bn and the total route-strength about 8,154km. The business activities of CCECC have expanded to over 40 countries.

China Harbour Engineering Company (CHEC): The due diligence team led by Brig. Sabiiti Mutebile visited two ongoing projects - construction of Deep Sea Port at Krib in Cameroon($568m) and two speed railway projects totalling 89km in China. CHEC is a subsidiary of China Communications and Construction Company (CCCC), which is constructing Entebbe Express Highway from Busega to Entebbe. The report says CHEC has a short experience of five years of railway construction and it’s limited to China but it’s started quite well.

CCECC’s statement on the deal

In 2010 we are invited by the President, in his letter he said:
You are aware of our government’s commitment to contributing towards setting up a regional railway network. Our government is thus formally expressing its interest in revitalising, reconstructing and developing a modern railway network in the East and Central African Region.

In 2008 the Heads of State from Kenya and Uganda made a decision to construct a modern high capacity Standard Gauge Railway (SGR) in Nairobi Kenya. The heads of state meeting the minister normally refers to is when Rwanda joined Kenya and Uganda to construct the SGR up to Kigali.

On the contrary, by 2011 the minister for Works had received a proposal from CCECC about the construction of a new SGR lines.
Much as it is true that our MOU is about rehabilitation and upgrading, the team of nine engineers of CCECC that was invited by the Ministry of Works and had a post site inspection meeting with Ministry of Works.

It was held at the headquarters of URC on May 17, 2012.
It was agreed that we upgrade the railway line from Kampala-Malaba, Tororo-Pakwach and construct a new line from Gulu- Nimule since it does not exist.

It was however agreed in that meeting that since the existing railway tracks are in a very poor state, it was absolutely necessary to build new railway lines which was our recommendation in the first place.

Nowhere and anytime did we ever discuss anything about the rehabilitation of existing railway lines like the minister has been saying.

We implore the minister to produce minutes which indicate all the meetings we had of which minute we signed by both parties clearly indicates that what we discussed were completely new SGR railway lines.

In the above named meeting (which was the post inspect meeting) the meeting minutes say that.
The meeting AGREED that the overall objective of the project is to construct NEW Standard Gauge Railway line along the Kampala-Malaba route (circa 250km), the Tororo-Pakwach route (circa 500km) and the Gulu-Nimule route (circa 100km) BUT NOT to rehabilitate the existing Kampala-Malaba and Tororo-Pakwach Meter Gauge railway lines.

What point did he realise that CCECC was dealing with different projects with rehabilitation of existing railway lines not the construction of the New SGR lines, why did he send a team of seven officials including Mugisha Obyero, Brig.Sabiiti and Eng Kyamugambi to China for due diligence of CCECC in December 2013.

Why did he send the Standard Gauge Railway steering committee in December [to] carry out the due diligence on CCECC? And in the due diligence report that was made by that team it clearly states on Page 11

On the basis of the experience demonstrated in the table above and the qualifications of FSDI (CCECC’s design subsidiary) and CCECC’s suppliers, the team is satisfied that CCECC has the required technical capacity and capability to successfully execute the Uganda SGR projects.

And page 14 of the report says
4.6 d) CCECC has since 2002 held the highest Chinese qualification(Super Grade) for the design and construction of railway projects, and is the only Chinese international contractor holding the qualification.

And the feasibility report the comparisons he’s making between our pre-feasibility study and detail report from GAUFF is clearly demonstration his bad faith when dealing with CCECC. We expected an engineer to know the difference between a pre-feasibility study and a detailed design report.

A pre-feasibility study is only meant to capture preliminary information to enable the two parties understand the concept of the project they intend to undertake thereafter a detailed study is sanctioned.

Even by April we have submitted our feasibility study about SGR
In conclusion, CCECC will continue fight for justice until this is achieved.

signing the mou

His word. State Minister of Works John Byabagambi last week said they are “fully prepared” for legal battle with anyone after the government entered into a new contract with another Chinese firm to start feasibility studies and later construction of the Standard Gauge Railway (SGR) line.

Addressing journalists at the Works ministry headquarters, Mr Byabagambi said the decision to sign a Memorandum of Understanding with China Harbour Engineering Company (CHEC) on Tuesday was cleared by the Finance ministry, Attorney General and Solicitor General.
“We have finished negotiations with CHEC and conducting feasibility studies should be commencing next week,” he said.

The development came after a High Court ruling by Judge Lydia Mugambe who described the decision by the minister, to cancel a similar understanding with China Civil Engineering Construction Corporation (CCECC) over the same project, as irrational.

“I find the minister’s unilateral decision to be irrational, high-handed, arbitrary, unreasonable, clothed in procedural impropriety, ultra vires, and not in public interest,” Ms Mugambe ruled, and further directed the ministry to restart negotiations with CCECC.

What Byabagambi told media

The MoU between CCECC and GOU was for rehabilitation. During their studies for rehabilitation, they travelled along the old line from Gulu to Kampala to identify the weak points on the line and they came and compiled their report.
But it was during that same time that we were reminded that the heads of state had migrated from rehabilitation of the existing railway line to an entirely new project. These Chinese came and said they can also do the SGR.

So whatever they had studied was dressed into the SGR with a new cover but they forgot that we didn’t have any agreement with CCECC on the SGR.

As a minister in charge of the SGR there is no way I could accept this; in any case I had to first get the technical and financial approvals acceptable to the GoU.

Our MoU also states that it was not binding and anyone can pull out. The MoU also states that any dispute between the two parties shall be solved amicably which means there was no need to go to Court and it was also signed that it can be terminated by either party by giving the party a three months’ notice.

The MoU also states that either part shall bear its own costs arising out of connected or incidental to the implementation of the project. So if CCECC says they used about Shs7 billion. I’m not concerned.

So I saw people being sympathetic to a company which got a feasibility study of the existing project and covered it into the SGR studies. When they came here to do business they came either to lose or gain.
And they came in to invest in their money knowing very well that whatever studies they do, will go under evaluation process and we have done.

In our studies and the specifications of railway in line with the protocol, the railway has been designed to last more than 100 years and most components usually have 40 years of lifespan.

We found inadequacies in the technical and engineering components they did. They were based on Google mapping, not aerial surveys and not typographic surveys are done or options or type of locomotives were considered. In their study there is no where they mention the rolling stock and locomotives.

Geological and geotechnical assessments were not done. Source materials for construction were not explored. Foundations especially for large structures were not done. Conceptual drawings have not been provided other than the Google maps which anyone can access from iPhone.