Cancel Shs800b power deal with blacklisted Chinese firm, Museveni directs

President Museveni interacts with a factory worker at Namanve Industrial Park in 2019. PHOTO/PPU

What you need to know:

  • In a March 15 letter, President Museveni questioned “why hasn’t the contractor started work for more than two years? Why would you accept such a critical government project to be delayed this long?”

A delayed and allegedly inflated deal between the government and a Chinese company to take electricity to industrial parks and free trade zones has irked the President following revelation that the company, now blacklisted by the World Bank, has not delivered any work three years after it was contracted.

In a March 15 letter, President Museveni questioned “why hasn’t the contractor started work for more than two years? Why would you accept such a critical government project to be delayed this long?”

His terse letter is copied to Finance Minister Matia Kasaija and Ms Ruth Nnankabira, the Energy and Mineral Development minister. The Senior Presidential Press Secretary, Ms Lindah Nabusayi, yesterday confirmed the authenticity of the letter in which Mr Museveni expressed his displeasure over the inordinately delayed works.

The President, in line with the government policy of promoting industrialisation, has lately repeated his demand that electricity be transmitted directly to industrial parks, bypassing distributors he accuses of cashing in on commissions and making power expensive for manufacturers.

The multi-million dollar deal, whose execution has remained wet in the wings, was signed on behalf of the government by the Uganda Electricity Transmission Company (UETCL) and China CAMC Engineering Company Limited (CAMCE) on October 15, 2019.

CAMCE was contracted to procure, design, supply, install and connect 7 substations, two of them in Kapeeka, and one each in Sukulu, Mbale, Wobulenzi, Nakasongola and Kaweweta Industrial Parks  as well as the  Wobulenzi-Kapeeka (220Kv) and the Kapeeka-Kaweweta-Nakasongola (132Kv)  high voltage Transmission lines.

Project clause

The project, then valued at $223m (Shs800b), contains a clause indicating an advance payment of an unspecified amount made to the contractor. 

In his letter, President Museveni queried allegations of cost inflation by some officials from the transmission body.

“I am made to understand that the project cost was inflated. China Energy (another Chinese company) is offering to do the same project with the same, or better specifications, discounted by more than 40 million dollars (Shs145b). This is not acceptable. How do government officials connive with contractors to inflate prices?” he wrote.

Shortly after the President’s letter, a whistleblower petitioned some members of Parliament’s Committee on Commissions, Statutory Authorities, and State Enterprises (Cosase), and presented key documents on the multibillion dollar deal.

The source, who sought anonymity for fear of being victimised, told this newspaper that the works have progressed at snail speed, and “even the completed works have a lot of snags that need rectification at government expense…”

“Did government conduct thorough due diligence before awarding such a contract?” said the source.

The lawmakers, who pledged to move the issue to the House, expressed dismay at the growing trend of shady deals, and limited due diligence by the government before committing public resources.

Rukiga County MP Roland Ndyomugenyi said “it is outrageous to find that a company is awarded a contract of more than $200m and capacity assessment  has not been done to ensure it has  the capacity to construct the substations”.

“The country, he said, “is at a loss because for almost three years the company has nothing on ground to show that they are going to do the work. We are going to investigate this matter so- [that] it is brought to a logical conclusion.”

His Mityana County South counterpart Richard Lumu questioned if an advance payment was made to the Chinese firm and, if so, what the money did.

“If an advance [payment] is done, that means you are starting [work] immediately but as per now, nothing has ever been done since 2019. So, Uganda is losing money that way,” he said.

Finance ministry officials we reached were unable to confirm whether the contractor was prepaid, one of the offers in the contract.

CAMCE responds

Mr Yan Guoliang, a project manager at CAMCE, who confirmed the works have not started, attributed the delay to government failure to provide the financing.

“The financing has taken some time, so the project has not yet started. [The] government is looking for financing.  It is government [to give us the money],” he said by telephone.

CAMCE was incorporated in China in 2001. According to information on its website, the firm’s businesses include industrial projects, agricultural projects, water engineering projects, power projects and communication projects.

Mr Yan said they still hold the contract, despite the President’s directive to minister Kasaija to cancel it, in preference of a new contractor, China Energy International Group Company Limited. He declined to speak to the executive debarment directive.

For an entire week, the UETCL through the principal public relations manager, Ms Pamela Byoruganda, did not answer our inquiries and on Wednesday, referred us to the parent Energy ministry as well as Finance.

Mr Matia Kasaija, the senior Finance minister, yesterday declined to speak to this newspaper on the matter.

Blacklisted by World Bank

The troubles with this project further escalated when, two years after the contract was signed, the contractor was slapped with sanctions by key international financial institutions.

A search with the World Bank procurement and projects website shows that the company was debarred this year after the Asian Development Bank issued sanctions for “violated ADBs integrity principles and guidelines”.

The ban runs until October 2026.

According to information gleaned from the website, the sanctions are imposed on entities found to have participated in coercive, collusive, corrupt, fraudulent or obstructive practices under the Bank’s sanctions system or adopted under the Agreement for Mutual Enforcement of Debarment Decisions.

This means CAMCE cannot partake in World Bank-financed contracts until 2026; that is if it is taken off the blacklist. Experts argued that Uganda working with such a company could jeopardise its international reputation and relationship with the World Bank.

Speaking to Daily Monitor  last week, Kyadondo East MP Nkunyingi Muwada, one of the petitioned MPs, attributed the delayed works to financing woes because some financiers have refused to bankroll CAMCE’s businesses on account of the current sanctions.

“Which financial institution is willing to finance a contractor who has been blacklisted by the biggest financial institutions like the World Bank and Asian Development bank?” Mr Nkunyingi said, adding: “The information we have is that even the Industrial and Commercial Bank of China (ICBC) withdraw from the project financing and the projects have been delayed.”

Mr Jim Mugunga, the Ministry of Finance spokesperson, said he needed time to crosscheck with the line minister for his actions. He had not got back to us by press time.