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Uganda

Museveni changes horses on mega rail project

A Turkish company takes the baton after corruption and political intrigue held back the grand plan for a rail link to Kenya

Uganda's Standard Gauge Railway (SGR) project to construct a 273 kilometre line from Kenya's border town of Malaba to Kampala has been dogged by over-priced contracts, incompetent officials, and financing woes.

Mooted as a move to revamp the century-old metre gauge railway, Uganda Railways Corporation (URC) officials procured four locomotives from South African manufacturer, Grindrond Rail in 2021, overquoted at Ush48 billion ($12.6 million).

President Yoweri Museveni sacked the entire URC board and managing director, ordering their prosecution when it was revealed that the trains could not be used on Uganda's rail network, amid reports of the illegal sale of URC land.

Launched nearly eight years ago, the first section of the country's SGR network also faced financing delays. The initial contractor, China Harbour Engineering Company, failed to convince Beijing to finance the project over doubts about its viability following the uncertainty surrounding Kenya's SGR extension to the Ugandan border.

Kampala terminated the contract in November 2022 and has now turned to Turkish firm Yapi Merkezi, which is already constructing part of Tanzanian's SGR network, with potential financiers including the UK Export Fund (UKEF AC Vol 60 No 18, Bridge over troubled finance).

Now, the government is negotiating with several Export Credit Agencies (ECAs) for finance. Much of the finance for Tanzania's SGR  comes from Denmark's and Sweden's ECAs. 

Neighbouring Kenya's SGR lost $28.8m in the 2021/22 financial year. Yet President William Ruto's government, keen to boost the country's haulage and trucking sector, wants to drop the policy compelling big companies use the Mombasa-Nairobi SGR. Ex-President Uhuru Kenyatta pushed the policy as a means to guarantee business to repay the $3.7bn loan taken to finance the Chinese-built project (Dispatches, 29/11/21, Finance costs threaten the Nairobi-Mombasa express).

Kenya's National Bureau of Statistics shows that in the first half of 2022, $610m of the SGR's $750m revenue came from cargo. Passenger revenue were just $160m in the same period, showing the SGR depends on freight.

President Ruto insists that the initial system that directly fed the SGR with cargo directed to the Nairobi Inland Container depot and the Naivasha dry port was implemented to benefit a few individuals. He has reverted cargo clearing services to the port of Mombasa winning new friends there and in Kenya's substantial road haulage sector.



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