Firm got Shs62b to repair railway, failed to deliver

The century-old Kampala-Malaba metre gauge railway (MGR) looks destined to be derailed barely days after African Development Bank (AfDB) ring-fenced $301 million (Shs1.1 trillion) for its overhaul.

This as the House committee on Government Assurance moves to establish why a consortium tasked to rehabilitate the MGR’s northern line from Tororo to Gulu pulled the plug on the undertaking.

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Sogea-Satom (Vinci Construction) and ETF (Eurovia), who until April served as contractor on the project, pegged the termination of works to inconsistencies in payment after receiving €16m (about Shs62b) for the infrastructural project valued at €39.337m (about Shs152b, excluding taxes).

Mr Joseph Gonzaga Ssewungu, the stand-in Government Assurance committee chair, told Saturday Monitor that his suspicions were sparked by the fact that—since issuing the final notice of termination in April—the consortium has “not given any proof [of] why they left the contract.”

Sogea on the spot

The Kalungu West lawmaker added that the issuance of three notices of termination was dubious, especially since the consortium “got €16m from the government of the €39.337m for the [project].”

His demand that the consortium shows proof of how the €16m they received was spent was met with blank stares from the Sogea-Satom representatives. This was during an interface with the committee last Thursday.

“According to the documents that we have now, there seems to be a lot of conspiracy [both] the government side and [that] of the contractors. Because after receiving the advance payment, on ground there is no work,” Mr William Chemonges, the Kween lawmaker, charged, adding that there was “no work … on the ground” after the consortium received “an advance payment” of €16m.

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Officials from the Finance ministry, Uganda Railway Corporation (URC) and Sogea-Satom have consequently been summoned to the parliamentary committee. The lawmakers are not only intent on having the contract cancelled but also the contractor barred from any dealings with the government after refunding the €16m down payment.

“This contract must be cancelled and then we recover the money that has been put to this so that we go ahead and get a new company that is capable of executing the work,” Mr Gerald Ibanda Rwemulikya, the Ntoroko County legislator, said.

Protest notes

Sogea-Satom’s top brass, however, insists that it issued several protest notes to the Works and Transport ministry over delays and inconsistencies. These, the company adds, were occasioned by the government making a number of alterations to, among others, the project’s designs. The contractor also cited a significant increase in the scope of work and failure to formalise the same through addendums.

Sogea-Satom also cited undervaluation of the work the contractor undertook as well as  insufficient contract financing and delayed payments. It says all of this created a perfect storm that forced a project that was initially expected to take 36 months to span four years and counting.

It referenced two protest notes sent to the Ministry of Finance and URC—who were represented onsite by Tecnica Y Proyesctos, SA (TYPSA)—to indicate its predicament following failure by the government to make necessary financial adjustments.

“By October 2021, the contractor was forced to partially halt track laying operations due to lack of sufficient design details,” one protest note reads in part, adding: “After this, in November 2021, the contractor was forced to suspend work within its entitlements under the contract as recourse to defaulted payments.”

Sogea-Satom further revealed thus: “By April, with the lack of design situation remaining the same, the contract authority was in full default again, and therefore, the contractor implemented a full suspension of work.”

Stalled

As per documents, the contractor furnished the House committee, the civil works for the rehabilitation of the stretch from Tororo to Gulu were meant to commence on February 4, 2020. They were supposed to be completed on February 9, 2023.

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The parliamentary inquest comes hot on the heels of renewed interest to rehabilitate the 265km MGR. During the third biannual meeting of private sector chief executive officers on Tuesday, President Museveni revealed that government is “working on the old railway from Kampala to Malaba, Mbale, Lira, all the way to Pakwach.” He added that the revamped MGR will ease the cost of doing business.

This came days after AfDB committed $301 million (Shs1.1 trillion) in loans and grants via its “concessional lending window” for the “immediate rehabilitation of 265km of MGR tracks between Malaba and Mukono, including the line to Jinja Pier and Port Bell on L. Victoria.”

In a statement, AfDB said the money extended to the government would also cater to “training and skills development for the railway workforce” and also “integrate nature-based solutions” such as “tree planting to enhance climate resilience of the tracks.”

SGR or MGR?

The AfDB believes the MGR will directly benefit nearly 1.2 million people by bolstering regional trade. It is thought the MGR will link the hinterland to Kenya’s coastal city of Mombasa. Kenya’s failure to secure a loan to extend the standard gauge railway (SGR) from Naivasha to Malaba via Kisumu looked to have put plans to make the Northern Corridor lucrative.

President Museveni told chief executive officers on Tuesday that he still harbours plans to erect the SGR line.

“We’re going to build a brand new [SGR line] from Kampala to Kasese. Later on, we will [extend it] from Kampala to the border of Kenya and then to South Sudan,” he said, adding, “We want [to lower the] cost of transport [and] improve our competitiveness.”

Previously, state actors have made clear that rehabilitation of the MGR takes precedence over the SGR. Uganda needs $2.17b (Shs8.1t) to erect the first section of the SGR from Malaba to Kampala. It has, however, failed to get financiers primarily because of running a deficit budget.

Experts hold that conventional wisdom suggests the SGR has to be prioritised over the century-old MGR. A fully rehabilitated MGR system cannot carry more than 3.6 million tonnes per annum and yet currently there is more than 18 million tonnes of cargo on the Malaba-Kampala route. It is projected to swell to about 30 million tonnes by 2028.

Making a splash

Originally, Kenya intended to take the SGR line to Kisumu port as part of a plan to have some countries in the hinterland evacuate their goods via Lake Victoria. On Tuesday, Mr Museveni said the plans of piggybacking on water transport shouldn’t be discounted.

“We have a free highway of water, Therefore, somebody can move cargo on water,” he said, adding: “Use water from Kisumu across Lake Victoria to a place called Nsungezi in Mbarara.”

In August, Mr Fred Byamukama—the junior Works and Transport minister—revealed that the government had secured Shs1.144t to revamp 1,266km of the country’s MGR.

Mr Byamukama said the government was to inject Shs744b into the revamp, with a further Shs400b coming by way of a loan from the European Union and the Spanish government.