Strengthen procurement structures to avert repeat of Entebbe-Kampala expressway fiasco

The Government of Uganda has engaged in a number of procurement and also entered into understandings that have been unfavorable and unconducive to Ugandans.

This has largely been due to the fact that Uganda has used the single source procurement method which has led to the over pricing of goods and services, delays in delivery, delivery contrary to what is prescribed in the contract and inflation in pricing, among others.

The Entebbe-Kampala Expressway for instance, one of the most expensive road projects in Africa was overpriced, delivered out of time and came at a huge overall cost to the taxpayer because of technicalities that were incorporated into the procurement process, advice from stakeholders was ignored and a number of laws flaunted.

A number of factors has been responsible for the delayed process of collecting toll fees from the Entebbe-Kampala Expressway, a Western model road, built by the Chinese, which include the failure by the Government and the funders, the Chinese Export-Import Bank to agree on the amounts to charge, this has been a major characteristic of this project. China has dictated all the terms right from the start.

On May 18, 2011, the Government of Uganda signed a $350m Preferential Buyer Credit Loan Agreement with the Export-Import Bank of China. The purpose of the loan was to fund the $476m Design, Build and Works Contract for the construction of the Entebbe-Kampala Expressway that was entered into by the Uganda National Roads Authority (UNRA) and China Communications Construction Company (CCCC), on October 26, 2010 under a Public Procurement Arrangement.

It is important to note that a number of provisions were not taken into consideration. The loan agreement contained a number of provisions which included the conditions and utilization of the facility. Under this, the goods, technologies and services purchased by using the proceeds of facility would be purchased from China preferentially and the technical standards to be used for the implementation of the Project should be preferentially relevant Chinese standards. This implicitly went against the provisions of the local content requirement.

Also, this agreement stated that in the event of a default, even in instances where the Government has no control of the default, the lender could withhold funding, but the Government would still pay the full figure agreed to initially. The loan also contained a provision where Government explicitly waives its rights to claim sovereign immunity for itself or over its property in any judgement by a court. This leaves the country at a huge risk of losing a vital infrastructure asset to the Chinese if they are unable to repay the loan.

The provision for arbitration is that it will take place in Beijing at CIETAC, a Chinese arbitral body. Given that the other party, Chinese Export-Import Bank, is a state-owned entity, there is a significant risk to Government that the Chinese arbitral body will rule in favor of the Chinese entity. The Agreement also provided a template legal opinion for the Ministry of Justice and Constitutional Affairs to sign. In the case of the Entebbe Kampala Expressway, the Attorney General signed a Legal Opinion on May 31, 2011 (13 days after the loan agreement was signed) justifying the exclusion of the PPDA Act in the procurement of the contract. The Attorney General’s opinion also stated that “the choice of Chinese Law as the governing Law under the Loan Agreement was a valid choice of Law.”

On December 18, 2018, the works and transport minister, Monica Azuba Ntege, announced the outcome of the pre-qualification evaluation process of the Jinja – Kampala Expressway Public Private Partnership project. This came on the heels of a public opening of requests for pre-qualification applications carried out on September 3, 2018 where eight consortia expressed interest in the development of the project.

The Jinja-Expressway Expressway project is funded by the African Development Bank (AfDB), French Development Agency (AFD) and European Union (EU). This project is expected to commence sometime in 2020. The entire project has so far been five years in the planning, feasibility studies have been undertaken and now the contract is ready to be awarded in early 2020.

We call on the Government to exercise restraint especially in as far as the Jinja-Kampala Expressway is concerned so as not to suffer the challenges that came with the Entebbe-Kampala Expressway.
We call on the Government to avoid single sourcing as a procurement method especially for road work projects in which a number of players would be involved.

We urge the Government to allow the relevant procurement authorities to do their work by allowing the legal procurement processes to follow due course. The Jinja-Kampala Expressway must continue to be procured competitively to make sure that the country gets value-for-money on this vital infrastructure asset.

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