The Finance ministry is proposing that the Uganda-Congo roads be developed under a public-private partnership (PPP) with a company, a Special Purpose Vehicle, to mobilise 60 per cent of the total project costs.
A memo presented by the ministry to Cabinet, a copy seen by this newspaper, details that the government plans to make a subsidy contribution to the Special Purpose Vehicle will be led by local construction company Dott Services for “purposes of making the road projects viable and buying down the cost of capital and hence reducing the user tariffs.”
The Special Purpose Vehicle will then procure the debt financing and recovery of the project investment through a road toll tariff that will be agreed upon by the DR Congo government and the company .
The Minister of Finance, Mr Matia Kasaija, told Daily Monitor last Friday that his duty was to secure financing “and the rest is for the Ministry of Works.”
“I was not present when that memo was presented; it was my colleague who presented it, but for the technical details please contact [ministry of] Works,” Mr Kasaija said.
The Minister of Works and Transport, Gen Katumba Wamala, told Daily Monitor separately that: “This is a bilateral project and for us as Uganda, our contribution is to provide 20 per cent of financing.”
Asked why Dott Services, with a controversial record, was offered such a lucrative deal, he said: “All the other modalities, including contracting, were done by the DRC government.”
The Uganda -DR Congo road project is estimated to cost $334m (Shs1.2 trillion).
The government’s announcement late last month that it intends to construct 223kilometres of roads inside neighbouring DR Congo continues to reverberate, especially in light of the scanty information, including financing details and safety nets for the country.
This comes at a time when the economy has been battered by the Covid-19 pandemic and urgently requires a Shs6 trillion supplementary to plug a budget deficit.
Last week, MPs passed the Finance ministry’s supplementary budget request of Shs6 trillion, which included Shs200b as Uganda’s contribution to the roads project.
Mr Amos Lugoloobi, the chairperson of the parliamentary budget committee, which approved the loan detailed that the Works ministry requested for Shs200b following negotiations between Uganda and DRC to implement strategic infrastructure projects.
“Under the negotiations, [government] has proposed to provide 20 per cent of the project cost to construct and maintain road network connecting the two countries in order to boost trade between the two countries, ease business, and improve people to people connectivity and security,” the committee stated.
During last Tuesday’s parliamentary proceedings, Mr Lugoloobi admitted that the Executive had not presented all the relevant details.
Bugiri County MP Asuman Basalirwa said there is need to “cushion the country from compromises or bad negotiators,” which is difficult in the circumstance “when only the Executive knows the terms of the project MoU between the two governments.”
Mr Elijah Okupa, the Kasilo County MP, wondered whether the cost government was undertaking to bear would be offset from the huge reparation bill awaiting Uganda after it lost the case at Hague-based International Court of Justice filed by DR Congo for acts of armed aggression.
His Erute South counterpart, Mr Jonathan Odur, drew comparisons with the late 1990s when the UPDF marched into eastern DR Congo which the Executive justified only for Kinshasha to drag Uganda to the world court.
In 1997, Uganda and Rwanda forged a military alliance that oversaw the removal of DR Congo’s Mobutu Sese Seko, and later installed Laurent Kabila as his successor.
However, Uganda and Rwanda propped up different militia groups, which led to clashes between the two armies between 1999 to 2001 in Kisangani over the control of strategic locations and mineral wealth.
The government first made public the decision to construct the roads on September 28 on grounds of spurring economic interconnectivity and improve the ease of doing business between Uganda, and eastern DR Congo.
The Finance memo details that the total project costs shall be approved by both governments after the proposed Special Purpose Vehicle has submitted the requisite pre-construction studies, and after they have been approved.
Subject to agreeing on the toll fees, the memo states that the Special Purpose Vehicle will also have to submit to the DR Congo government “appropriate comfort letters from reputable international financial institutions as a condition to fulfil implementation” of the project.
While the DR Congo government “shall warrant and undertake to comply with the lender’s normal requirements and render necessary assistance to the Special Purpose Vehicle to achieve financial closure, the memo indicates that both Uganda and DR Congo undertook to obtain and provide approvals required for the fulfilment of their respective obligations in accordance with the lender’s requirements and the project development agreement.”
A spokesperson for Dott Services declined to comment on the matter.
In the same vein, both countries agreed and approved the use of private financing of infrastructure as the mode of raising the Shs1.2 trillion for financing the roads.
The memo notes: “The contributions of both the government of Uganda and DRC are geared towards buying down the cost of capital being mobilised by Dott Services and hence making the eventual tariff affordable to the road users of which the Ugandan transboundary trackers are beneficiaries.”
Amid criticism towards Uganda constructing roads in DRC when it has a deficit of paved roads at home, President Museveni, during the Independence Day celebrations, lashed out at the critics of the deal.
“So we are going to do those roads because from Congo I think we are earning $500m (Shs1.8 trillion) a year. How can you even speak; ‘why are you building the road?’ If my neighbours allowed me, I am getting a lot of advantages but he still has some internal issues. That road helps us . The people of eastern Congo need it but we also need it,” he said.
The President said the impassable roads in DR Congo are encumbering business between the two countries, adding that when the roads are constructed, Uganda will be able to sell its electricity to DR Congo.
In 2018, available trade statistics show that Uganda’s exports which mainly include cement, iron and steel, beverages, among others, to eastern Congo fetched an estimated $533m (Shs2 trillion) in 2018, with formal trade accounting for a paltry $221m (Shs825b) while informal trade stood at a whopping $312m (Shs1.1 trillion).
The Congo roads project include constructing and upgrading of the 80km road stretching from Kasese—Mpondwe-Kasindi border section to Beni city in the restive North Kivu province on the fringes of the Ituri forest.
The second road is 54km from Beni to Butembo town, which is a commercial epicentre, also in North Kivu, and 89km road stretching from the Kisoro border point of Bunagana to Goma, capital of the North Kivu province.
The three roads are part the 1,181km road network interlinking the two countries which President Museveni and his Congolese counterpart Felix Tshikedi agreed to work on during first Uganda-DR Congo joint business forum in November last year.
The poor road network in Congo has for while been a cause for concern among all sides.
In October last year, 37 Ugandan truck drivers were detained for weeks by authorities in the DR Congo northern province of Haut-Uele near South Sudan border, and their Ugandan employers told to repair at least 700km roads as a condition for their release for overusing the roads.
DR CONGO CASE WITH UGANDA AT THE HAGUE
Government has for the last years been on a charm-offensive to Kinshasha in light of proceedings at the Hague-based International Court of Justice (ICJ).
The DR Congo sued Uganda at the world court in 1999 over acts of armed aggression that it said violated the United Nations Charter and the Charter of the Organisation of African Unity, the predecessor of the African Union.
Uganda, however, lost the case in 2005, when its legal team erred when they submitted to the court as its evidence a report of a commission of inquiry chaired by Justice David Porter, which had implicated senior government officials.
The said report confirmed plunder of DR Congo’s resources between 1998 and 2001, but absolved implicated top Uganda government and military officials, including President Museveni’s brother Salim Saleh whom a 2001 UN panel of experts named adversely in its report on illegal exploitation of Congo’s wealth.
Subsequently, the court told the two governments to negotiate on the amount of reparation, a process which dragged on from 2015 and seemingly failed.
Attorney General William Byaruhanga told the parliamentary legal committee in January that although they were trying to negotiate, DR Congo had proposed $23b (Shs85 trillion) as the reparations while Uganda was offering $150m (Shs558 billion).
It remains to be seen whether the paving of the roads across the border mean anything in light of the court proceedings.
According to the budget committee report for the loan request, the Attorney General’s office on September 18 cleared the Inter-Governmental Agreement between Uganda and DR Congo for implementation of the roads, and the Project(s) Development agreement between DRC’s ministry of Infrastructure and Public Works, Uganda’s ministry of Works, and Dott Services.
The committee, however, recommended that all relevant project agreements be presented and discussed by Parliament before implementation commences.
If this investment were to atone for the past sins of the regime in the war-wracked neighbouring state, its perhaps a good bargain.