Chinese Loan to Finance US$8bn Standard Gauge Railway Top story

4455 Views Kampala, Uganda

In short
The Standard Gauge Railway SGR, will be entirely funded by a loan from the Chinese Government. Already, the government has already picked a contractor, China Habour Engineering Company Limited CHEC, which according to President Museveni will have the responsibility of sourcing the loan.

Uganda has unveiled a plan for the construction of the standard Gauge Railway, part of the Northern Corridor integration projects that begin from Mombasa through Nairobi, to Kampala, Kigali and Juba.

Rwandan President Paul Kagame and South Sudan's President Salva Kiir joined Ugandan President Yoweri Museveni in launching the Malaba - Kampala section of the railway at a rather pompous ceremony at the Commonwealth Munyonyo on Wednesday.

The Standard Gauge Railway (SGR), will be entirely funded by a loan from the Chinese Government. The government has already picked a contractor, China Habour Engineering Company Limited (CHEC), which according to President Museveni will have the responsibility of sourcing the loan.

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A CHEC official who talked to URN on the sidelines of the launch noted that they were yet to finalize the loan agreement with one of the Chinese banks. He however did not provide details on how much was being sourced. He also said that no finance agreements had been signed.

But according to documents seen by URN from the Northern Corridor Summit, the total cost of the SGR project will be US$8billion. At this cost, this will be the single largest and expensive project that the government will undertake. The Presidents of Rwanda, Uganda, South Sudan and Kenya in 2012 agreed to have a railway linking the countries in order to boost trade.

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The SGR will have both a passenger and cargo section, with speeds of up-to 120 kilometers per hour.

The existing railway, according to Engineer John Byabagambi, the State Minister for Works, is slow with movement limited to below 50kilometers per hour.  The old railway is currently run by Rift Valley Railways (RVR) and is only used to transport cargo from Mombasa to Kampala.

Byabagambi also said that CHEC had been awarded the northern section of the railway. This section stretches from Tororo to Gulu and then connects to Nimule, the Uganda - South Sudan border. It will also connect Gulu to Pakwach. It will also link Tororo to Kampala through Jinja.

The western section of the route which will connect Kampala to Kasese and Kampala to Mirama Hills - on the Rwanda border - will be awarded to another contractor. Byabagambi also said that at least 15,000 jobs will be created during the process of construction.

There are concerns mostly led by Ministry of Finance officials who argue that borrowing for this project will more than double Uganda's debt, currently estimated to be US$7bn.

The signing of the agreement with CHEC has not been short of controversy after another Chinese company, China Civil Engineering and Construction Company (CCECC) which did the feasibility at UGX50bn had its contract terminated.