Uganda scraps $2.2bn deal with Chinese firm, signs with Turkish company

The Uganda government has walked out of a contract with the China Harbour Engineering Company (CHEC), which eight years ago was tasked to build the African country’s first phase of standard gauge railway (SGR), a 273km line from Malaba to Kampala.

The line, starting from the Malaba border post straddling Uganda and Kenya, was expected to cost $2.2 billion, but the Chinese financiers did not fund the project.

The SGR Project Coordinator Eng Perez Wamburu says Kampala has now signed a memorandum of understanding (MoU) with Turkish firm Yapi Merkezi.

Kampala says the financing model for the project will also change, with Yapi Merkezi, which is building Tanzania’s SGR, expected to tap into its network to bring Export Credit Agencies (ECAs) on board that will finance and breathe life into the moribund project.

Wamburu revealed that Uganda’s Attorney General Kiryowa Kiwanuka was prompted to review the contract with CHEC after it became apparent that China Exim Bank – Kampala’s main infrastructure projects financier of the last decade – had grown cold feet on bankrolling the SGR. 

“We read between the lines when China’s Ambassador to Uganda said that after the Covid-19 pandemic, China has become more cautious about financing big infrastructure projects in Africa. We all know that Covid didn’t leave economies of the world the same,” he told TRT World.

He explained that Uganda was forced to rethink its options and cast its net wider for other financiers after its request for financing to the China Exim Bank went unanswered for nearly one year – a departure from the usual practice when the Chinese responded to Kampala’s proposals within weeks.

The Turkish Company, Yapi Merkezi, is executing the Morogoro- Makutupora Section of the SGR Railway project in Tanzania. The project is the second phase of East Africa’s fastest railway line connecting Dar-es-Salaam to Mwanza, known as the Central Corridor, which connects Uganda, Rwanda, the Democratic Republic of Congo and Tanzania and provides access to the Indian Ocean to all stakeholder countries.

Yapi Merkezi is constructing the project on a turn-key basis comprising all infrastructure and superstructure works, including technological parts such as electrification and signalling.

The railway is expected to make a major contribution to the overall economy of Tanzania, especially in the fields of trade and tourism.

Türkiye - African bilateral relations have been on increase over the years and have seen development in Africa ranging from economic, diplomatic ties and military cooperation which solidifies a win-win situation and thus seen in a positive light.