Financing

Project Coordinated by: 
Uganda

As part of the implementation of the Northern Corridor Integration Projects (NCIP), the 8th Summit of the Heads of State directed  Regional Ministers of Finance from the Republic of Uganda, Kenya, Rwanda and South Sudan to jointly source for financing of the NCIP and periodically report to the NCIP Summits.

Key among these NCI projects is the Standard Gauge Railway (SGR) project. Other projects include the ICT Infrastructure, Oil Refinery Development, Refined Petroleum Products Pipeline, Human Resource Capacity Building, Immigration, Tourism, Trade, Labour and Services (ITTLS), Single Customs Territory and Land Cluster.

Highlights/Achievements  of the Finance Cluster

  1. In executing the above task, the Ministers responsible for Finance engaged the AfDB/Africa50 to structure the SGR project and prepare a business plan which would assist the Ministers responsible for Finance in mobilization of the requisite Financing for the SGR project. At the 9th Summit in Kigali, Rwanda, Africa50 presented the Business plan to the Ministers responsible for Finance and Infrastructure where comments were made.
  2.  According to the business plan, the cost of the SGR line is estimated at USD 14.8 Billion (which represents 15% of the governments of Uganda, Kenya and Rwanda aggregate national budget for 4 years) excluding land and electrification. Uganda as a link country to Rwanda and South Sudan is to shoulder up to 50% of this cost. This cost estimate also excludes the financing requirements for the spurs to Packwach - Goli in the north; and the Muko in the South West. In view of the cost, the Africa 50 put forward three key recommendations among others that were adopted by both the Ministers of Finance and those responsible for Infrastructure as follows:
  • Ministries responsible for Transport should develop and effectively implement transport policies, which will increase the market share for railway to a minimum of 30% traffic off the road;
  • Ministries responsible for Mining should simultaneously initiate development of mines along the route, which will use the rail and thus increase the market share of the rail; and
  • Considering the magnitude of financing required for this project, private sector participation should be encouraged as much as possible in order to reduce the financial burden on the Governments;
  • The Regional Governments of Uganda, Kenya, Rwanda and South Sudan have jointly approached the Republic of China for Funding the development of the SGR project.
  • To kick start the development of the Malaba-Kampala-Kigali, Juba line and the spurs to Goli, Muko and Kasese, the Government of Uganda has secured a grant of RMB 100 million which is equivalent to USD 16 million to enable Government conduct all the requiste feasibility and technical studies.
  • An EPC (Engineering, Procurement and Construction)/Turnkey contract was signed between CHECC, a Chinese Company and the Ministry of Works and Transport on behalf of Government to commence the development of the Eastern and Northern Routes of the SGR project at a contract sum of USD 3.2 billion allowable within the fiscal space for the country.
  • The Ministry of Finance, Uganda has also written a letter of intent to borrow to the President of Exim Bank of China; as it awaits finalization of feasibility studies from the Contract in order to do a full application for the requisite funding.
  • Additionally, the Government of Uganda has programmed UGX 110 bn within the the MTEF, starting with FY 2015/16, out of the Infrastructure levy of 1.5% on imports in order to kick start compensation for land acquisition, Environmental Impact Assessments and funding for the nucleus Implementation Unit for efficient, and coherent implementation of the SGR project.
  • The Republic of Rwanda is working with the Government of Uganda to jointly undertake feasibility studies for the Kampala-Mirama Hills-Kigali line.
  • The Republic of Rwanda  has already finalized negotiations for EPC contracts for Mirama Hills- Kigali and these are ready for signature before the next summit.
  • The Republic of South Sudan has also signed EPC contracts for the Nimule-Juba line.
  • The Republic of Kenya already secured financing for Mombasa- Nairobi line from Exim Bank of China and about 60 percent of civil works has already been done,while detailed feasibility studies for Nairobi-Kampala are on-going.
  •  Progress on other Northern Corridor Integration projects (NCIP)
  • The Finance Ministers have also received the technical studies on the refined products pipeline. IFC has consequently been engaged to assess the financing options and prepare the business case for this project with a view of promoting it as a PPP. 
  • In regard to other Energy related projects, the respective Ministries of Finance have received several requests, particularly covering Transmission, Crude Oil Pipeline and  a number of funding options are being considered.
  • Conclusion and  Strategic path on the Way forward:
  • This is to observe that all these projects require substantial amounts of money and therefore implementing the Summit Directive of mobilizing resources by the Ministers responsible for Finance requires that we take into consideration the individual Partner State’s debt sustainability issues and capacity to generate local revenue. In this regard therefore, given that these projects cannot be financed simultaneously, there is need to sequence the projects as follows:
  • a.    Standard Gauge Railway
    b.    Power Generation and Transmission.
    c.    Oil refinery
    d.    Crude Oil pipeline
    e.    Acquisition of Infrastructure corridors
    f.    Refined Petroleum Products Pipeline. As already mentioned, this project should be packaged for financing as a PPP so as to mitigate the huge investment outlays for Government.

    17.    In regard to other NCIPs such as Commodities exchange, ICT, Capacity Building, Political Federation, among others it was recommended that these should be financed from within individual country allocations.