Government funds $400m worth of priority roads in Uganda
29 August 2013
With the national budget now estimated at sh12 trillion shillings this 2012/13 FY, one of the sectors that has benefited most from this growth is the roads and transport sector. Not only has the sector been garnering over a trillion over the past four FYs, it got sh2.3 trillion, by far the biggest budgetary allocation to the sector off the consolidated fund in Uganda’s history.
Due to the growth in internal revenues, the government has increased its stake in financing the roads development budget to 60%, with development partners now financing 40%. In the past years, it was the latter than contributed much towards national roads development. This 2013/ 14 financial year, the Government has underlined its growing stature as a key financier of roads development by taking over the construction of 500kms of roads formerly lined-up to be worked on under the new Contractor.
Facilitated financing (CFF) mechanism
Under CFF, a total of 1,900kms of the 20 roads central to Uganda's primary growth sectors of tourism, agriculture and oil & gas were to be upgraded from gravel to paved standards under a Public- Private Partnership (PPP) over the next three to five years.
By tendering-out the roads, the government expected to raise $2b when it enters a memorandum of understanding (MoU) with shortlisted firms to confirm their relationship in respect of financing and implementation of the works that kick-off this 2013/ 14 FY. The 500kms are valued at $400m, according to Dan Alinange, the Uganda National Roads Authority (UNRA) publicist.
"The other 1,400kms will be done under CFF," he says. "We are working out details of finalising MoU with prequalified companies to allow them negotiate with their financiers before submitting their bids." The shortlisting of the contractors are being conducted in accordance with the public procurement procedures contained in the Government’s Public Procurement and Disposal of Public Assets Act, 2003 and will be open to all bidders from eligible source countries.
Why internal financing is better
With roads now a key Government priority, considering it funds 60% of the roads budget and the development partners' share has fallen to 40% from 60% over the years, the state will save on interest when it finances works on the 500kms of roads it has taken over. Some of the roads include; Mukon- Katosi- Kyetume, Mpigi- Maddu- Sembabule, Villa Maria- Sembabule, Olwiyo- Gulu- Kitgum and Musiita- Lumino.
The African Development Bank (ADB) has also takenover the financing of the Kapchorwa- Suam road that was also to be worked on under CFF. The 500kms have been indicated in the 2013/ 14 FY budget that finance minister, Maria Kiwanuka read in July, indicating a growth in roads and transport sector financing from sh1.6 trillion in the last 2012/ 13 FY to sh2.3 trillion of the sh12 trillion 2013/ 14 FY budget.
The decision to take-over the financing of the roads is economic, says Eng. David Luyimbazi, the Uganda National Roads Authority (UNRA) director in-charge of planning. "It is cheaper for the government to finance roads when it has the money," he says. "This will save the taxpayer from paying interest on the borrowed funds and reduce Uganda’s debt burden." Henceforth, UNRA, in consultation with the finance ministry, is exploring which roads to those the government has taken over. "We are seeking guidance from the government on whether to replace those 500km or continue with the reduced scope (of the remaining 1, 400km)," says Luyimbazi.
Works state minister, Eng. John Byabagambi noted that with a sh744.7b allocated to the works and transport sector in the 2013/ 14 FY budget, more road projects will be undertaken. "Seven road projects were completed in the 2012/ 13 FY," he says. "The expectations are very high now. We will start five new projects this (2013/ 14) FY, especially those in the NRM manifesto." UNRA trims down bidders UNRA advertised requests for expression of interest in local and international media on July 12, 2012, attracting 46 international companies.
However, whilst Uganda boasts over 100 local contractors, none of them tendered in their interests, compared to 16 from China, India (9), Turkey (5), South Africa (3), USA (2), Spain (2) as well as one each from Egypt, France, Portugal, Israel, Ireland, Netherlands, Malaysia, Switzerland and the UK, according to UNRA. "Over 40 contractors bided for the tenders, but we scaled the number down to 20," says Alinange. "That is the number we are evaluating now. Procurement of contractors is on-going but we shall see which projects take-off this FY. It is a complex undertaking we haven't done before, so it will take time (to procure contractors)."
Tarmac network Uganda has a national road network totalling 21,000 managed by UNRA. The body corporate has upgraded 500km to tarmac and rehabilitated 1,000kms over the past four years. Today, Uganda’s paved and tarmac network totals 3,800km, up from 3000km by 2008. "In a year's time, we will have 4,000kms," says Alinange. "Over the next three years, we expect to have 5, 000kms of tarmac if all projects go as planned. This will go a long way in selling Uganda as a tourism and investments destination."
Byabagambi noted that Uganda's construction industry has turned competitive, with contractors eager to finish projects ahead of time. "We are taking on more projects and, right now, the absorption capacity for project funds is 120%," he says. "Contractors are now more efficient as everyone has to prove their worth by working ahead of schedule."
Original article written by Joel Ogwang