International

Uganda cut SGR cost by $120 million

 

 

Flagged off. President Uhuru Kenyatta (with flag) launches the cargo freight services of the Standard Gauge Railway at Port Reitz Station in Mombasa last year. Construction of Uganda’s SGR is yet to start. NMG PHOTO

 

IN SUMMARY

Uganda and Kenya first agreed to construct the SGR in 2008 but the arrangements were only concretised in 2012.Kenya is currently constructing the 120km line from Nairobi to Naivasha at a cost of $1.7b (Shs6 trillion) to be followed by the 266km line from Naivasha to Kisumu port at a cost of $3.6b (Shs13 trillion), and later embark on the 107km line connecting from Kisumu to Malaba which is expected to cost $1.7b (Shs6 trillion).

 

KAMPALA

The government and the Chinese contractor, China Harbour Engineering Company (CHEC), for the Standard Gauge Railway (SGR) have reduced the project cost from Shs8.5 trillion, Ugandan currency ($2.3b) to Shs8.1 trillion ($2.17b).

The reduction by about five per cent or Shs450b ($120m), according to sources familiar with the matter, followed months of protracted discussions and infighting by government officials over management of the lucrative project whose expected date of takeoff remains unknown.

The new SGR project coordinator, Mr Perez Wamburu, told Daily Monitor
yesterday that the $120m was mutually agreed upon, and an addendum to the earlier Engineering, Procurement and Construction (EPC) contract will be forwarded this week to the Solicitor General for perusal.

“After discussing with the contractor for some time, the reduction of $120m is what was agreeable. Everything else in the earlier tender remains the same,” Mr Wamburu said.

The cost of Uganda’s first phase of SGR, the (eastern) line running from Malaba to Kampala, about 273km, has been a subject of intense debate since late 2016, and gained momentum early this year after reports emerged of the cost being inflated.

A review ordered by President Museveni indicated that the cost was inflated by more Shs700b.

The government signed the SGR contract with CHEC in March 2015, with China’s EXIM Bank guaranteeing financing at two per cent interest.

However, it remains unclear when the construction will kick off.

Works and Transport minister Monica Azuba last Friday urged the public to “appreciate the magnitude and complexity” of the project which have caused current delays and anxiety but said the “project remains on course.”

Ms Azuba said the multibillion-dollar railway project is being implemented as a regional project—from Mombasa in Kenya—so Uganda’s side is hinged on how fast Kenya completes the remaining sections to the Malaba border point.

“We are not abandoning not even delaying: the delay is coming from harmonisation with our neighbouring state,” Ms Azuba said.

“Initially, we were working with the 2020 timeline to extent the railway from Mombasa to Kampala but at the time being we are not certain,” she added.

Ms Azuba also said in the meantime, government will refurbish the existing metre gauge railway to keep serving local needs and demands—transporting bulk cargo both from Kenya, and within Uganda.

Ms Azuba said the costs have been readjusted and “a harmonised position has since been reached” and an addendum to the earlier Engineering, Procurement and Construction contract signed earlier with the Chinese contactor, China Harbor and Engineering Co Ltd, will be signed soon.

Background

Uganda and Kenya first agreed to construct the SGR in 2008 but the arrangements were only concretised in 2012.Kenya is currently constructing the 120km line from Nairobi to Naivasha at a cost of $1.7b (Shs6 trillion) to be followed by the 266km line from Naivasha to Kisumu port at a cost of $3.6b (Shs13 trillion), and later embark on the 107km line connecting from Kisumu to Malaba which is expected to cost $1.7b (Shs6 trillion).

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