The Ugandan government is at a crossroads with the Chinese over contractual obligations.
In early June, Uganda’s Prime Minister, Robinah Nabbanja, publicly criticised Chinese companies for failing to honour their contractual obligations to rehabilitate roads in Kampala.
“How did you come up with these contractors? You don’t have any capacity you are showing on roads. You are making our government look funny. We cannot go on like this,” Nabbanja questioned representatives of China Railway 18 G during a tour of Kampala roads.
Before this, Nabbanja had met the Chinese contractors in her office, expressing discontent with their performance. In another instance, China Railway 18 Bureau Group Co Ltd sought additional time in November 2022 to complete seven World Bank-funded roads in Kitgum District.
The work, originally expected to last 18 months, has faced delays. Kitgum municipality is among eight new municipalities benefiting from a $350 million World Bank-funded project initiated in 2019.
Chinese firms in Uganda often quote the lowest bids, consistently emerging as the best-evaluated bidders. The minister complained that Chinese contractors extract free raw materials for the projects. They don’t pay taxes. And they have money to bribe.
“That is why they always emerge as the best bidders. The Chinese are only competing with the UPDF Engineering Brigade, which is currently winning most contracts.
But even then, the Chinese have an upper hand because of corruption,” said Eng. Kiiza David, a former employee of Krishna Construction Company.
China Railway 18 Bureau Group Co Ltd is not the only Chinese firm in trouble with Ugandan authorities. The African Development Bank (AfDB) recently sanctioned China Henan International Corporation Group (CHICO) for fraudulent activities related to the procurement of the Rukungiri-Kihihi-Ishasha/Kanungu road.
CHICO was supposed to upgrade the road to bituminous standards but breached procurement laws and failed to disclose the use of a commission agent. Consequently, the firm was banned for a year. This prohibition affects CHICO’s ongoing projects in other African nations, including Tanzania and Kenya.
In January 2023, Uganda terminated its contract with China Harbour and Engineering Company Ltd (CHEC) to build a railway to the Kenyan border, favouring a Turkish company, Yapi Merkezi, instead.
CHEC and Uganda signed an engineering, procurement, and construction contract in 2015 to develop the 273-kilometre Standard Gauge Railway (SGR) project for $2.2 billion. The cancellation resulted from China’s unwillingness to fund the railway as previously agreed.
Parliamentary investigations by Ugandan legislators indicate a bleak future for Uganda-China relations. The Parliamentary Committee on Commissions, Statutory Authorities, and State Enterprises (COSASE) discovered that the $200 million Entebbe airport upgrade award breached Uganda’s Public Procurement and Disposal of Public Assets Act. Officials from China Communications Construction Company (CCCC) were unable to explain to COSASE how they won the contract.
Local media in Uganda has reported letters from President Yoweri Museveni to various officials in his government allocating construction work to Chinese firms, bypassing the procurement process.
Additionally, the Isimba Dam project was commissioned with over 300 defects, and China International Water and Electric Corporation (CWE) was previously disqualified from bidding for the Karuma hydropower station project due to bribery and document falsification.
Despite these challenges, Uganda continues to engage with Chinese contractors due to its significant infrastructure investment needs. According to Ogwang and Vanclay (2021), Uganda must invest at least $1.4 billion annually in its infrastructure to reach upper-middle-income status by 2040.
Uganda relies heavily on foreign capital, with development partners funding 42 percent and 47.5 percent of the Uganda Works and Transport budget in the 2018-19 and 2019-20 financial years, respectively.
China has been the second-largest source of loans for Uganda in the East African Community, responsible for 33.9 percent of China’s $7.3 billion loans to the region between 2015 and 2022. China has also been Uganda’s largest direct foreign investor since 2009, with Chinese investments in 2023 reaching $55.7 million.
Some key Chinese-funded infrastructure projects in Uganda include the $350 million Kampala-Entebbe Expressway (KEE), the $1.7 billion Karuma Hydropower Dam, the $568 million Isimba Hydropower Project, and the $200 million upgrade of Entebbe International Airport.
Despite withdrawing support from Western financial institutions, China remains a crucial financial backer for Uganda’s East African Crude Oil Pipeline (EACOP). In 2022, China-Uganda trade amounted to $1.13 billion, a 6.6 percent year-on-year growth.
China’s involvement in Africa’s infrastructure is extensive, with the Boston University Global Development Policy Center estimating 1,243 loans worth $170.08 billion given to 49 African governments and seven regional institutions between 2000 and 2022.
These investments are part of China’s Belt and Road Initiative (BRI), launched in 2013 to invest in infrastructure linking Asia, Europe, Africa, Oceania, and Latin America.
