Kigali, Kampala, Juba under pressure to raise SGR cash and complete project

Uganda, Rwanda and South Sudan are under pressure to meet their financing obligations for the standard gauge railway (SGR), following this week’s 14th Northern Corridor Projects summit in Nairobi. The pressure comes even as the two countries’ debt obligations continue to rise.

On Tuesday, Kenya’s President Uhuru Kenyatta played host to his Rwandan counterpart Paul Kagame, Yoweri Museveni of Uganda and South Sudans’ presidents’ special envoy, in their new momentum to revive their infrastructure drive agenda.

However, the funding question, especially for South Sudan, Uganda and Rwanda remains a challenge, with the three countries expected to turn to China.

For these three countries, raising a total of $15.5 billion to develop their respective SGR lines will be the toughest challenge as they seek to firm up their financing requests to Beijing.

The three countries with a debt load of more than $13 billion are now expected to suck in at least $5.3 billion in their first phase of the railway project, with financing agreements for both Rwanda and Uganda expected to be signed later this year.

“The summit directed the ministers concerned to conclude the financing agreement for the Naivasha to Kisumu, Kisumu to Malaba, and Malaba to Kampala sections by September 2018.

“The Heads of States further directed that the application for financing for the Kampala-Bihanga-Mirama-Kigali and the Tororo-Gulu-Numule/Gulu-Pakwach sections be expedited,” a communique on the summit said.

Feasibility studies

Uganda and South Sudan were also asked to fast track the bankable feasibility studies for the remaining Northern, Western and the Bihanga-Kasese-Mponde; and Nimule-Juba sections.

Uganda, which is expected to bear the highest cost in SGR construction, given its three phases, is expected to firm up its financing in September to enable it start the Malaba to Kampala line.

“We are still struggling with the basics. As a region, we have had hiccups in following up and monitoring the implementation of these projects. We are currently addressing the financing question so as to actualise the project,” said Uganda’s Minister of Foreign Affairs Sam Kutesa.

Uganda’s SGR network has the Eastern, Western and the Northern routes, covering more than 1,700km. The project is estimated to cost $12.8 billion.

Already the country has completed the feasibility and designs for the 273km line between Malaba and Kampala that is set to cost $2.3 billion.

In the working papers for the SGR projects under the Northern Corridor Initiative seen by The EastAfrican, Uganda has already undertaken the contract and preliminary engineering, bankable feasibility study and designs for the Eastern route (Malaba to Kampala) and the Western route (to the Democratic Republic of Congo and Rwanda).

Financing negotiations

In 2015, Kampala signed a commercial contract with China Harbor Engineering Company (CHEC) for the eastern route and has already undertaken the project appraisal.

The country is in the final stages of financing negotiations, with a deal expected to be inked in September when President Museveni will attend the Beijing Summit of the Forum on China-Africa Cooperation.

Rwanda on the other hand finished the preliminary engineering design of the new SGR line from Kampala to Kigali, via Mirama Hills in January.

The country, which in January also inked a deal with Tanzania for the construction of its Isaka-Kigali line, is said to have finished working on its financing deal and is expected to seek China’s help.

China’s President Xi Jinping is expected in Kigali on a two-day visit in July. China and Rwanda are expected to sign several agreements of which the railway project is expected to feature prominently.

Bilateral ties 
“The purpose is to strengthen the bilateral ties between the two countries. The visit will be an occasion to sign new agreements and launch new projects of mutual benefit to the two countries,” Rwandan Minister of State for Foreign Affairs Olivier Nduhungirehe said.

Kigali has been in financing talks with China’s Export-Import Bank for a $1.2 billion loan to fund the Rwandan section. A deal could be announced during the Chinese president’s visit.

Sources in Rwanda say while Kigali is keen on the project and has been proactive in promoting it, it cannot do much unless Uganda takes concrete steps.

Plans to fundraise for the SGR have partly been affected by Uganda changing goal posts on the financing mechanism.

While China had offered to finance the SGR connecting Kenya, Uganda and Rwanda, the project was halted after President Museveni changed plans giving priority to developing an SGR connection to South Sudan, which was not in the initial plan.

Even if Rwanda mobilises the funds, it cannot proceed with the project without the Ugandan side doing its part.

While Rwanda has actively engaged Tanzania over the Dar-es-Salaam-Isaka-Kigali/Keza-Musongati SGR, it maintains that it does not favour one route over the other because Kigali sees both the Northern and Central corridors as critical in cutting transport costs and facilitating trade to and from the ports of Mombasa and Dar-es-Salaam.

South Sudan is said to be preparing for a bankable feasibility study for the Nimule-Juba SGR line, and is expected to be complete by December this year. Thereafter, it will seek funding from the China Exim Bank.

“We have seen Kenya successfully implement its first two phases of the SGR Project. However, despite some member states making this progress, others like us are facing many challenges fundraising.

“However, we are going to do what it takes to meet our obligations under this infrastructure project,” said the Minister of Transport and Roads John Luk Jok, adding that Juba has completed the Engineering Procurement and Construction contract for the line, which has been signed and is now in the early stages of obtaining a commercial loan from the China Exim Bank.

The latest push comes after a two-year break that saw countries individually push for their own flagship projects. The latest meet followed Kenya’s successful implementation of its SGR, which is now almost halfway done.

“This two-year break now enables us to continue with the momentum we had started on bringing our region together and working on various projects jointly. We have made headway in bringing all stakeholders together and this moment provides us with an opportunity to review what has been done and what should be done,” said President Kagame.

The meeting also directed that the Northern Corridor integration projects summit be held every four months, with the next meeting expected in November in Kigali. The ministers were also directed to hold a bi monthly cluster meeting to effectively follow up on the summits directives.

Once complete, the SGR is expected to link the Port of Mombasa to the Ugandan and Rwandan capitals of Kampala and Kigali respectively, easing transportation of goods to South Sudan, and DRC. Kenya has completed the Mombasa-Nairobi line and embarked on the Nairobi-Naivasha section which it hopes to complete by June next year.

Kenya in 2016 signed a commercial contract with China Communications Construction Company, for the last two facets of its second phase of the SGR project between Naivasha and Kisumu and Kisumu to Malaba, which will include the construction of a modern port in Kisumu.

Nairobi is expected to sign the financing contract for these two sections in September.

In the last summit in 2016 in Kampala, Uganda and Kenya were pushing for policies that would have seen them own and maintain their respective SGR infrastructure, locomotives and rolling stocks to guarantee the safety of operations and adequate investment and maintenance.

However, this seems to have fallen through after the Kenyan contractor was given a 10-year window to operate and maintain the equipment.

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