By Peninah Mbabazi
Published: 28th Jan 2016
The Standard Gauge Railway (SGR) project is so far one of the expensive ventures the East African Community (EAC) is undertaking. The SGR, therefore, can be a gateway for EAC to the rest of the world, in regard to global trade, investment opportunities and pro-poor development. The SGR for Uganda’s case is a blessing, for it will bring down trade journeys to only two days, from the current eight between Mombasa (Kenya) and Kampala (Uganda). The aggregate cut on cost of goods and services will also benefit the low income earners across EAC and this is welcome.
The construction of the Uganda Railway in 1896, was the first biggest construction project that the British government undertook in sub-Saharan Africa during the colonial days. The Uganda Railway, commonly known as the lunatic express, was established with an idea of having a railway from the coastline, towards more effective control over River Nile’s source in Uganda. And trade opportunities thereof. The "Lunatic Express" was completed in 1901 and the line linked the interiors of Uganda and Kenya with the Indian Ocean at Mombasa in Kenya.
To the extent that the current SGR project goes beyond the intentions of “Lunatic Express”, to mutually interlink EAC, is a move that should be supported by well-intentioned stakeholder. By the SGR linking Mombasa (Kenya) and other major EAC cities in Uganda, Rwanda, Tanzania and Juba brings to life the Northern Corridor which is the transport artery for EAC.
As such, the SGR will yield maximum benefits once the other critical projects under energy (e.g. hydro dams and wind power), roads and maritime, are completed in time. And designated cost. EAC Governments must, therefore, commit to full and on time implementation of such undertakings as the Lamu Port -South Sudan Ethiopia Transport Corridor (LAPSSET) project to enhance EAC integration. The LAPSSET, for instance, draws critical transport infrastructure and investment opportunities for accelerated Gross Domestic Product (GDP) growth. These can spur new technologies in agricultural production, manufacturing, services and attendant employment.
Not only does the SGR present its own obvious achievements but also consolidates other opportunities in the wider EAC projects. This can only happen to the extent that the SGR and attendant projects are implemented in a manner that fully ascribes to transparency, accountability, caution on debt sustainability parameters and reducing inequality across EAC. Through pro-people policy orientation, the incomes thereof can benefit majority citizens in rural economies across EAC, Sudan and Ethiopia.
By Adellah Agaba
Published: 19th Jan 2016
It’s time for the nation to take a moment and think about the fluctuating oil prices on the World Market and the implications of the same for Uganda. Oil production is set to begin in 2017 and this has generated anxiety and expectations which are already a threat to peace in the country, not only to humankind but to the environment, economy and ecology.
The discovery of oil and gas in any country worldwide causes impeccable excitement because it’s associated with greatness, power, success, economic growth, development and richness especially to the country and citizens at large. However, Studies worldwide have discovered that owning natural resources like Oil and Gas, diamonds or Gold does not necessitate economic development as is perceived by majority population. In most countries natural resources have been discovered but the quality of life is still alarming. Some countries that highly depend on Oil as a resource are economically troubled and this is a fact Uganda should not ignore as production gets closer.
The oil industry, with its history of booms and busts, is in its deepest downturn since the 1990s. Earnings are down for companies that have made record profits over the years, leading to early decommissioning and sharply cutting of investments in exploration and production stages. More than 200,000 oil workers have lost their jobs, and manufacturing of drilling and production equipment has fallen a trend that is yet to continue with the drop in oil prices which has drastically gone down and from the observations it will be long before oil returns to over $100 a barrel which is an indicator of tough times ahead. Companies like Royal Dutch and Chevron recently announced cuts on their payrolls as a saving mechanism and this shows the impact on smaller oil producers who must slash their dividends and sell assets because of the losses incurred.
Nigeria one of the largest oil-producer in Sub-Saharan Africa, with about 32 percent and 34.2 percent of Africa’s oil and gas reserves respectively, with the economy largely dependent on its hydro carbon, like many oil-producing countries, the nation has not been spared the agony the drop as one of the major oil exporters. Saudi Arabia, Norway, Russia and Algerian oil that once was sold in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices. Among these net exporters their GDP growth is dampening as export revenues are falling. This is because countries exporting oil are generally more dependent on the price of oil than countries importing the resource.
One wonders what will happen in Nigeria considering her recurring violent conflicts associated with the management of her oil resource. In early 1967 oil-related disputes motivated an insurrection by a major ethnic group in the Niger Delta. Less than a year after, the nation experienced a civil war (the Biafran war of 1967-70), which was not unconnected with disagreements over the sharing of oil revenues. Nigeria now faces growing fiscal challenges as oil accounts for more than 70% of the country’s revenue and in this case it would need $123 per barrel to balance its budget which is not the case with the plunge.
In Ghana with average production of 100,000 barrels a day, oil has become a major source of revenue for the Government with annual oil revenues rising from $709 million in 2013 to $780 million in 2014 and was projected to drop to $215 million in 2015 and could get worse due to the low oil prices. With Oil Prices now below $32 a barrel, and the fall being attributed to the increased supply of oil, there are many lessons for the yet to be oil producing country Uganda.
If the trend of the plunge continues, lower oil prices will weaken fiscal and external positions and reduce economic activity in a few oil-exporting countries and this will have an adverse effect on the developing countries like Uganda. With a decline in economic growth and development in oil producing countries: poverty, low quality of life, unemployment and devastating environmental damage are some of the foreseen consequences. This can also be explained basing on the level of competitiveness on the world markets and poor policies in countries on issues of revenue management and increased corruption scandals in institutions responsible for oil revenues.
It is not predictable when these prices will stabilise, but Uganda has to start preparing for this plunge before the resource becomes a curse for the nation. This drop will also compel most oil companies to cut their budgets for exploration and production of this finite resource.
However, one can choose to look at the drop in a different light as a means of calming down often inflated expectations by African governments over the future oil and gas wealth and unrealistic expectations by local authorities which are often said to be a key road block to progressing projects in the sector.
Whichever way you look at it, this plunge is an alarm that can’t be ignored by the Government of Uganda.
The writer is the Communications Officer with Uganda Debt Network
By Julius Kapwepwe Mishambi
Published: 13th January 2016
1) China Railway Corporation and Globalisation
Compared to countries in Europe, America and elsewhere, China has globally demonstrated affordable, yet reliable, railway infrastructural technology. Turkish high speed railway network commissioned in July 2014 and similar undertakings within China attest to this. China already scooped mega lucrative projects like the $14.2 billion double-track 1,435mm East African Community Standard Gauge Railway (SGR) system: Mombasa port through Kenya, Uganda, Burundi, Rwanda and South Sudan, for 120 km/h as passengers and 80-100 km/h goods trains. Some sections by Chinese Harbour Engineering Company (CHEC) may be complete in 2018, with Uganda’s initial cost of $3.3billion.
Others include Ethiopia and high speed railway projects in Myanmar, U.S (Los Angeles to Las Vegas), Russia, Montenegro and United Kingdom. Here, Chinese companies and financial-related institutions (e.g. Export and Imperial Bank of China-EXIM and BRICS Bank) are increasingly the favoured contractors, financiers, suppliers of equipment/ technology and human power (www.globalconstructionreview.com/news/china ).
2) China in Africa beyond railways
Beyond railways, Chinese firms are designing, developing and maintaining roads, aviation, ports, military installations and equipment. Others are hydropower dams, water transport and attendant infrastructure. The cost is, of course, borne by recipient nations or enterprises. Over 2,500 Chinese companies have already invested in Africa.
3) 6th Forum on China-Africa Cooperation (FOCAC) and take away
As 15 African Presidents joined the Chinese President Xi Jinping for the 6th Forum on China-Africa Cooperation (FOCAC) during December 2015 in South Africa, Chinese Railway Corporation engaged twenty countries, mainly from Eastern Europe, over high speed railway projects. The struggle to improve infrastructure globally to kick-start or enhance economic development is on. African infrastructural deficit alone stands at $90 billion annually. All these realities are amidst Chinese economic appetite to get back to a decade-old average economic growth rate of at least 8%.
The above partly informed the Chinese President’s announcing during 2015 FOCAC, a $60 billion package- due 2015-2018 across selected African nations. Most Chinese debt repayment has been based on commodity modalities linked to Africa’s extractive industry. From 2015 FOCAC, South Africa parted with $6.5 billion, EAC $2.7 billion ($1.5 billion to Kenya and even with an outstanding $1.3 billion Chinese debt; then $1.2 billion to Uganda). Ironically, South Africa and other nations that attracted biggest packages are the most indebted to China, while Kenya is leading in EAC.
4) More questions on Debt contraction, Transparency and Absorption capacities
Africa’s debt to China so far staggers at over $30 billion. Even with zero-interest on selected existing loans and concessional terms in some new cases, it points to further Africa’s dependency on China. So, are African resources being mortgaged, e.g. oil resources and discoveries in Kenya and Uganda? Where is Parliament; and other due process for stakeholders’ involvement- for wider transparency in such packages? How do we minimise low loan absorption issues as already presented by Auditor Generals?
5) Case of China and Standard Gauge Railway (SGR) in Uganda
SGR project in Uganda already suffered allegations of procurement malpractices and inflated cost, with a Parliamentary report and MPs ask court to block the project (e.g. Daily Monitor 6th July 2015, page 5). Such seems an African narrative involving Chinese companies. How do we rebuild citizens’ trust in public sector procurement and management? Or even debt that contributes to desired African economic outcomes? Amidst such, how do we position Uganda to benefit from China’s globally proven affordable railway construction and management technology?
6) Which way?
Now with resources from 2015 FOCAC to Uganda’s infrastructural projects, let’s support President Museveni particularly to deliver SGR. Its success cuts across traders, industrialists and agriculturalists. Uganda Revenue Authority will increase revenue collection by undercutting corruption scale at weigh-bridges on roads. Let’s meaningfully learn from Chinese global successes and also meet our EAC and African targets. Even at 80-100 km/h, railway remains the fastest means in goods haulage. Timely SGR project delivery contribute to Uganda’s Vision 2040 of transforming from low income of $686 (IMF, 2014) to $9,500 per capita by 2040; as well as EAC and the wider African development paradigm.
The writer is the Director of Programmes at Uganda Debt Network