Government is facing financial challenges in regards to the upgrade and construction of the national oil roads in western Uganda even though the Uganda National Roads Authority (UNRA) on behalf of government, signed agreements with Chinese road construction companies without the approval of parliament, a decision Mps on Committee of National Economy said must never be taken again by any government entity.
“Government agencies should desist from making commitments on behalf of Government before seeking approval of Parliament; and in future, if any government official, ministry, department or agency commits government in such a manner, they should be held personally liable and should be dealt with in accordance with the law. In future, any loan presented before Parliament with this kind of provision shall not be approved,” Mps warn.
UNRA signed contracts with China Communications Construction Company Ltd, Chongqing International Construction Corporation (CICO) and China Wu yi Co. Ltd to construct the roads but it has not been an easy ride for UNRA due to lack of funds it committed to provide, as the manager of national roads in the country.
UNRA is in need of about US$456.4 million to finance the construction of the roads. But the loan is yet to be approved by parliament which would give a go-ahead for the Exim Bank of China to ready the money as government pushes with plans to produce first commercial oil by 2020-2023, much as sector analysists say this might not be possible with the recent pulling out of joint venture partners from the East African Crude Oil Pipeline (EACOP) project.
The roads in dire need of money include; Masindi-Kasanja/Park Junction, Tangi (Packwach) Juction-Paraa-Buliisa Road (159km), Wanseko-Bugungu Roads), Hoima-Butiaba-Wanseko (111 km ) and Buhimba-Bulamagi-Igayaza-Kakumiro ((93km). The three roads need US$, 18,888,518.4, us$179,538,545.59 and US$ 138,488,356.00 respectively.
Gov’t embarked on the construction of the roads after commercial crude oil reserves were discovered in 2006, amounting to 6.5 billion barrels of oil, of which 1.4-1.7 billion barrels are estimated to be recoverable. The deposits are mainly located on the East Bank of Lake Albert and in the Nile Delta north of Lake Albert.
The roads are meant to ease transportation of materials and other items for building of oil infrastructure as well as transportation of oil products for export.
It should be recalled that the request for the money was presented to parliament by the Minister of Finance, Planning and Economic Development on May 16, 2019 and accordingly referred to the Committee of National Economy for consideration.
The total estimated project costs for the three road projects is US$ 537 million, which will be financed through borrowing of US$ 456.4 million (85%) from China Exim Bank, while Government of Uganda will provide counterpart funding of about US$ 80.5 (15%)million.
The Contract Agreements for the above three road projects between Government of Uganda represented by Uganda National Roads Authority (UNRA) and the three contractors was to the effect that the contractors were to pre-finance and execute works for a period of 12 months from the commencement date and Government of Uganda would refund the contractors for works executed.
However, according to the report of parliament’s Committee of National Economy, the construction of the road is facing a number of challenges such as lack of funds, environment, procurement and land related matters. Land acquisition process has been delayed due to lack of adequate funds, progress of works on the three road projects slowed down due to cash flow constraints.
A total of US$ 90.44 million was expected to be paid to the contractors by the end of pre-financing period in July 2019 for works executed since April 2018. However, only US$ 27.72 million was released by the finance ministry in July 2019 and it has been paid to the respective contractors. There is need for more releases to enable UNRA pay the remaining balance of US$62.72 million to be able to meet the target of 2020.
To save UNRA from embarrassment, the Committee has recommended parliament to authorise government to borrow up to US$ 456,370,000 million from the EXIM Bank of China to finance the upgrade and construction of the roads in question.
Meanwhile, MPs on parliament’s Committee of National Economy have observed that much as oil roads are critical infrastructure projects in aiding delivery of the first oil in the year 2020-2023, available information indicates that the first oil cannot be achieved as anticipated by Government.
They add: “If the status quo is maintained, government will remain with a huge debt without producing the first oil. The Committee recommends that Government should fast-track the Final Investment Decision (FID) with oil companies to ensure that the first oil is delivered per Government timelines.”