Uganda secures generous SGR finance terms as plans advance

September 19, 2016 in Business, Communications, Companies, Finance, Infrastructure, Investment, Transport by Editor

KAMPALA, SEPTEMBER19 – The Chinese government has offered to charge just 4pc interest on 65pc of the loan it is advancing for development of the 273km Kampala-Malaba leg of Uganda’s Standard Gauge Rail network while the commercial portion will attract interest at a rate LIBOR+ 3.5pc, www.256businesnews.com has just learned.

Uganda has started construction of the 273km stretch at a nominal cost of $2.3 billion. That translates into a unit cost of $8,424,908 per kilometer although it was not immediately clear if that figure includes the cost of rolling stock and energising the line because this publication is yet to get access to the full engineering designs for the project.

The funding contract is expected to be signed next month in Beijing. Sources further reveal that the Chinese have also used their leverage to link financing for the Naivasha-Malaba section on the Kenyan side to the Ugandan contract removing doubts over who would extend and finance the Kenyan SGR to Malaba. In plans that have been made public so far, Kenya had only committed to build its SGR only up to Naivasha with future plans to take it to Kisumu.

It us now understood that all sides are racing to conclude institutional and operational arrangements for the project before possible signature in December.

Under its overall plan, Uganda has a planned route length of 1724km at a cost of $12.8 billion. That somewhat reduces the average cost per kilometer to $7,424,593, suggesting a much better unit cost given that the route for the western section to Kasese passes through terrain that will require significant drilling and bridging.

The planned 1724km route includes all branch lines to Nimule on the border with South Sudan, Vurra on the DRC- Uganda border in Arua, Mirama Hills on the border with Rwanda and another interface with the DRC through either Mpondwe or Kamango in Bundibugyo. The connection through Mpondwe however, remains in doubt since the DRC government has previously expressed the intention to avoid a likely clash with environmentalists if the route traverses the ecologically sensitive Virunga conservation areas. Another consideration is extensive wetlands along the route which would push up the cost of construction.

Despite Rwanda’s recent decision to sign up for a southern route through Dar es Salaam and Uganda’s own belief that Tanzania offered a more natural cost effective SGR route for Rwanda, officials say they are now pushing ahead with building Uganda’s SGR network to the border with Rwanda because it forms part of the East Africa Rail Development Master Plan.