2015: The test that awaits Northern Corridor projects

Birds of a feather flock together and since June 2013, Rwanda, Uganda and Kenya have been flying as one, not only as members of the East African Community (EAC) but also as countries of the Northern Corridor that links East Africa and Central Africa to the Port of Mombasa in Kenya. Since June 2013 when the first meeting was held in Entebbe, Uganda, the bloc’s Heads of State have met eight times, with five of the meetings in 2014, the latest being on December 11, in Nairobi, Kenya. Although the Northern Corridor partnership started off as a tripartite of Rwanda, Uganda and Kenya, it has since expanded to include a fourth member, South Sudan, and it’s a partnership that is being closely watched inside and out of the region. The combined dreams of the four Northern Corridor partners form a total of 13 development projects including several long term multi-billion dollar infrastructural initiatives that they hope will improve connectivity, especially for the landlocked members. Railway project The 2000km Standard Gauge Railway (SGR) that’s supposed to connect Rwanda and Uganda to the Kenyan port of Mombasa is arguably the most outstanding of those projects. Currently, the long road from Kigali to Malaba through Kampala is a rough one that disenchants travelers and makes transportation costly and the trickledown effect is felt by the final consumer. However, the partners think the solution is the railway line which, once completed (in 2018), will run at a speed of 80 kilometres per hour significantly easing transportation. When the Chinese Premier Lee Keqiang visited the region this year, he pledged that his country would provide 90 per cent of the total project budget of $13.4 billion that would start with the 610 kilometres stretch from the Coast of Mombasa to Nairobi. The rail would be extended from Nairobi to Kampala and later Kigali and it was agreed that works would start in October 2014. Indeed, in October, the four Northern Corridor partners launched the works using a dummy rail during the seventh summit that was held in Kampala and attended by all the four leaders of Rwanda, Uganda, Kenya and South Sudan. Conflicts emerge With the Chinese government pledging huge support to the railway project, it was only expected that Chinese firms would be given the priority to do the job. However, what wasn’t expected was a bitter feud that would emerge between two Chinese firms in frame for the job; China Civil Engineering Construction Corporation (CCECC) and China Harbour Engineering Company (CHEC). The two are currently involved in a bitter feud that has forced authorities in Uganda to halt the project and order a probe after claims of alleged corruption in the procurement process. Before the idea of a SGR was floated, Uganda had reached an agreement in 2012 with CCECC to upgrade an old existing railway line at a cost of $1.75 billion. However, the plan was shelved to focus resources to the new SGR idea and CCECC’s was given the mandate to undertake the project at a fee of $8.5 billion. But later, Uganda’s Minister for Infrastructure John Byabagambi cancelled CCECC’s contract, saying that its old agreement to upgrade the existing railway didn’t include rights to construct the new SGR project. The contract was then awarded to another Chinese firm, CHEC which would reportedly do the job at $11.4 billion, which was $3 billion more than CCECC’s proposed fee of $8.5 billion. In response, CCECC sued the Ugandan minister for breach of contract and won the case effectively causing a messy situation. Meanwhile, details also emerged painting CHEC as a shady company that was blacklisted by World Bank in 2009 following shoddy works elsewhere. The claims of being a shady firm have been worsened by other voices in Uganda alleging that CHEC has been backed by top Ugandan officials to get the deal at an inflated price to benefit their individual interests. However, on December 17, the Ugandan Minister of Infrastructure, Byabagambi came out with new startling revelations and defended his decision to cancel CCECC’s contract. “We have evidence that WB is blacklisting Chinese firms in order to prevent them from dominating contracts in African countries,” claimed the Ugandan minister. The minister also revealed that the Ugandan end of the railway project is expected to cost the government at least $13.8 billion and not $8.5 billion or $11.5 billion initially reported. But the Ugandan Ministry of Finance and experts have expressed concern that Uganda can’t afford that kind of money. Rwanda optimistic These developments in Uganda regarding the SGR are likely to worry Rwanda which is expected to cost share the project’s funding needs. With the cost of the project rapidly rising, it’s not clear how Rwanda will respond to the new changes. “We hope that those issues will be addressed in time and won’t affect the completion date of the project,” Monique Mukaruliza, Rwanda’s coordinator of the Northern Corridor Integration Projects, told The New Times last week. The Kampala-Kigali segment of the railway whose feasibility studies are expected to be completed by July 2015 at a cost of $1.2 billion. At the 8th summit in Nairobi held December 11, no mention of these issues was made but they will clearly shape the project’s progress in 2015, and as Mukaruliza said, all the partners can hope for is that the feud is resolved soonest. Contract management experts say that if Uganda decides to maintain CHEC for the job then CCECC must be compensated to bow out of the deal, but who will fund the compensation? Given that the feuding firms are Chinese, the Chinese government could intervene and seek a non costly solution. Regarding allegations that the World Bank is deliberately blacklisting Chinese firms to tarnish their image in Africa, if true, experts say the efforts won’t pay off because no Western firms are willing to provide funding at relaxed conditions as the Chinese firms which have their government backing. Other projects According to Mukaruliza, the main challenge in 2014 has been delays in completion of feasibility studies for infrastructure projects, hence delays in sourcing projects funds. “In 2015 most of the studies will be concluded,” said Mukaruliza. Feasibility studies are important because they give the partners an idea of how much they need to implement the projects but the partners also know that they don’t have this kind of money. Therefore, 2015 is likely to be focused on fundraising and courting investors to bankroll the projects. In 2014, the partners met and passed resolutions but 2015 will be harder as time of implementation begins in earnest. The bureaucratic delays in partner states are likely to affect the scheduled progress of the projects and how partners deal with these developments will determine how soon they deliver results. Also, if partners want to attract investors, they need to assure them that their investments will be safe from local interest groups that might want to cash in from the big money projects.

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2015: The test that awaits Northern Corridor projects