Chinese financing decision for Uganda railway may come within days

April 24, 2019 in Business, Finance, Infrastructure, Investment, Transport by Editor

President Kenyatta and his counterpart, President Museveni are expected in Beijing to attend the three-day. forum.

April 24—The Uganda government will know by this weekend whether China is lending the bulk of an estimated $2.2 billion to build the proposed Standard Gauge Railway (SGR). Government views the SGR as a priority project for Vision 2040.

Sources say the financing decision will come on the sidelines of the 2019 Belt and Road Forum for International Cooperation which opens tomorrow in Beijing. Representatives from nearly 40 countries are attending. According to the World Bank the Belt and Road Initiative (BRI) is an ambitious Chinese multi-billion effort to improve regional cooperation and connectivity on a trans-continental scale.

Last week, Chinese State Councilor and Foreign Minister Wang Yi told a news conference since BRI was launched in 2013, 126 countries and 29 international organizations have signed BRI agreements with China.

For the past two and half years, Uganda’s SGR project has been in limbo for lack of finance, but state-owned China EximBank has already carried out a feasibility study. In the meantime some compensation payments have been made to guarantee right-of-way along the planned route.

The Ugandan government wants to link Malaba border town with Kampala 200 kilometres away and eventually provide a seamless connection with Kenya’s SGR which at present has reached Naivasha, 50 km northwest of Nairobi.

Both President Yoweri Museveni and Kenya’s President Uhuru Kenyatta are expected to attend the three-day talks in Beijing. The forum comes soon after the two presidents held discussions in Kenya and repeated their wish that the SGR eventually reaches Kampala.

However, China wants a written commitment from the Kenya government that their SGR line will be extended to the border or the Ugandan segment makes no economic sense.  The forum provides the Chinese authorities with the opportunity to hammer out a joint deal with the two leaders, possibly culminating in a letter of recommendation to China EximBank.

China EximBank is directly under the leadership of the State Council and is central to supporting China’s foreign trade, investment and international economic cooperation. It disburses Special loans designated by the State Council.

Kenya is asking the Chinese for $3.7 billion in a mix of a loan and a grant to continue construction to the lakeshore town of Kisumu.

According to a recent EIA report commissioned by China Communications Construction Company, the construction of the Naivasha-Kisumu phase will cost  $3.66 billion.

During an official visit to Kenya in March this year, Museveni took a ride on the Madaraka Express between Mombasa and Nairobi and said, “The SGR is key in cutting down transport costs, reducing pilferage and ensuring goods arrive faster to the hinterland. It will greatly reduce business costs.”

The theme for this year’s forum is ‘Belt and Road Cooperation, Shaping a Brighter Shared Future’, and the hosts have pulled out all the stops to showcase Chinese ingenuity, including aspects of the 5G technology available at the media centre.