What you need to know:
- In the East Africa region, Beijing’s scaling back on big-ticket project funding has created the notion that the Chinese are losing to European players such as Turkey’s Yapi Markezi, who are building Tanzania’s SGR, and now, Uganda’s.
- Sources close to the SGR project in Uganda say that President Museveni’s about-turn from the Chinese to other financiers came in 2021 after it emerged that the country could have mortgaged the Entebbe International Airport over a $200 million loan from China.
Uganda’s engagement with China has often seen officials from Kampala troop to Beijing for loans, resulting in a rising debt situation with the Asian giant over the last decade.
Ugandan projects whose funding has been negotiated with the Exim Bank include $2.2 billion for the SGR, $1.44 billion for the 600MW Karuma hydroelectric dam, $482 million for 183MW Isimba power dam, $350 million for the 51km Kampala-Entebbe Expressway and $200 million for Entebbe International Airport expansion.
Of these, only the SGR loan has not been disbursed, making Uganda one of the African “friends” hooked on Beijing’s loans after a borrowing binge.
Kenya has also been flagged after piling debt beyond its cap.
In 2021, China’s ambassador to Uganda Zhang Lizhong said his country was rethinking its infrastructure financing policy in Africa and scaling back its support to big projects in order to fund more on social development projects like water supply.
In the East Africa region, Beijing’s scaling back on big-ticket project funding has created the notion that the Chinese are losing to European players such as Turkey’s Yapi Markezi, who are building Tanzania’s SGR, and now, Uganda’s.
Sources close to the SGR project in Uganda say that President Museveni’s about-turn from the Chinese to other financiers came in 2021 after it emerged that the country could have mortgaged the Entebbe International Airport over a $200 million loan from China.
Works and Transport Minister Gen Katumba Wamala also told Parliament that Uganda was treading carefully with China after detecting danger in Beijing’s “indecent proposal” that the SGR $2.2 billion loan be paid using oil money.
“The financier, Exim Bank of China, was concerned about the repayment of the loan. We told them that the government will be the one to pay the loan, you do not decide where the payment of the loan will come from,” Gen Katumba told Parliament in 2021.
Sources say that as the waiting game with Exim Bank went on, President Museveni vowed to review the SGR plan during the Covid-19 pandemic, telling his Cabinet that, unlike trucks, an effective railway transport system would have reduced the level of exposure to the virus in Uganda.
In the meantime, as the President sought alternatives to resuscitate the SGR project, his government sourced new loans to rehabilitate all the sections of the old metre gauge railway in efforts to see it haul at least 60,000 of cargo per month.
The borrowing includes a $307 million sought from the African Development Bank (AfDB) in 2022, in addition to a €301.11 million ($325 million) loan from AfDB and €25.9 million ($28 million) from the Corporate Internationalisation Fund of Spain that Parliament approved in May 2021, to refurbish the line from Malaba to Kampala.
But transport experts say that even fully rehabilitated, the MGR still has inherent technical limitations that cannot enable it to carry more than 3.6 million tonnes per annum.
Yet cargo volumes between Malaba and Kampala are growing, currently standing at 18 million tonnes, set to reach 20 million tonnes in 2025 and 25 million tonnes in 2030, says Dr Richard Sendi, the SGR project head of planning and strategy.
Dr Sendi says that these cargo volumes landing at Malaba and growing each year give Kenya’s SGR viability if it links with Uganda’s, explaining why the new government in Nairobi has realised that there is no option to building the line up to Malaba.
“They are also looking for alternative financing,” he said.
With two SGR trains arriving at Naivasha daily, each carrying 56 containers, the numbers will continue to grow and overwhelm Kenya’s metre gauge railway that picks up the cargo via the link at Longonot, Uganda officials are optimistic that the country’s project has a lifeline.
Meanwhile, Tanzania seeing a slowdown of the Northern Corridor project, went on a fundraising spree to extent its SGR to the Great Lakes.
Their 1,637km line is being built in phases by contractors from Turkey and China. The first phase from Dar es Salaam to Morogoro (300km) is expected to start operating soon after successful test runs.