Thursday, September 13, 2012


Last week the $2.2b Karuma dam tender process was suspended by the government’s procurement authority and a court injunction slapped on the deal, throwing the crucial 600MW project into jeopardy.

A, trail of intrigue, outright disregard for procedure and insubordination against the President has brought to a standstill the deal, which should have been consummated by March and seen construction start by now.

This is the single largest investment in Uganda's history.

In the late 1960s a dam was proposed at the Murchison Falls, further downstream from Karuma, a plan that was scuttled by concerns about environmental damage and not followed through in during the Idi Amin era.

In 1988 government tried to revive the project but again came up against environmental concerns and shelved it yet again.

With the power deficit becoming even more urgent in the in the late 1990s, the alternate site of Karuma falls was mooted.

However its development was again frustrated by the World Bank conditionality that only one dam could be developed at a time. At that time government had committed to developing Bujagali dam.

The Bank argued that developing the two sites simultaneously would put too much of a financial burden on the country and besides there wasn’t enough demand locally to support the dams.

Karuma took a back seat to Bujagalai and eventually failed to take off because of the global financial crisis and its attendant credit crunch.

Three years ago government decided to resurrect the project using internally generated resources. This was prompted by the recognition that even when the entire 250 MW at Bujagali came on line it would only a matter of months before rising demand snapped it up and the country returns to “loadsheding”.

Fast forward to last year when government invited bids for the project and received just under 40 bids, a number that was trimmed to 28 before a final five companies were prequalified.


A six month time table from issue of the bid document in September 2012 to the taking over of the site by the winning bidder in March 2012, was announced to all the bidders.

The energy ministry closed the bidding at the end of November to pave the way for the evaluation of the technical proposals, which determines whether the bidders have the capacity in terms of experience and technical knowhow, to carry out the project.

It’s at this point that things started going awry.

The next stage was for the energy ministry to notify all bidders of the results of the technical report and announce when the financial bids would be opened, which would determine who the winning bidder would be, often times the least cost bidder but government is not bound to choose the cheapest bid.

However there was no word to the bidders from the energy ministry months into the New Year and all enquiries were rebuffed by a wall of indifference.

It did not help that disturbing rumours made it onto the grapevine that indicated that the delays were to facilitate a scheme to ram through a company favoured by ministry officials.

Meanwhile the bidders waited for any information about the tender as the day the contractor was supposed to take over the sight according to original timetable, March 28th came and went.

A whistleblower within the energy ministry then unleashed a dossier that revealed that the alleged favoured bidder China International Water & Electric (CWE) had misrepresented its competencies – grounds for immediate disqualification.

The dossier got to the president prompting him to write to energy minister Irene Muloni in July, pointing out the inability of CWE to technically carry out the project.

“These facts should have been clear in the documents but apparently they were not and it took the whistle blowers to discover this and inform us,” Museveni wrote.

While disputing claims that CWE had built China’s 22,500 MW Three Gorges Dam and pointing out that the Meroe Dam in Sudan in which they claim to have played a part in building, has serious design problems Museveni wrote,

“Therefore in my last letter I directed you to ensure that the more credible Chinese companies, like the one that built the Three Gorges Dam agree to guarantee the quality of the Karuma dam.

If that is not done as soon as possible, I will be forced to oppose the whole poorly done effort,” Museveni said.

It seems the ministry officials did not advise the president that a guarantee of the nature he proposed would be flouting procurement procedure.

But it got worse.

In reaction to the President ministry officials went ahead to facilitate the much needed guarantee from Three Gorges Corporation.

In a letter to Daniel Wang the general manger of CWE on 17th August, Attorney General  Peter Nyombi made reference to a meeting between himself, the president, Muloni, state minister Simon D’ujanga, permanent secretary Kabagame Kalisa and officials of CWE and Three Gorges Corporation in which it was agreed that the guarantee to the project would be supplied by China Three Gorges Corporation.

“The purpose of writing this letter is to request for the following;
The legal instruments of both China Three Gorges corporation and china International Water & electric corporation related to the registration of the two companies, especially those showing the relationship between the two companies; a description of the work  to be executed under the contract; a copy of technical  designs of the dam to be constructed and the terms and conditions that should be included in the contract,” Nyombi wrote.

A lawyer familiar with government procurement procedures said this was highly irregular since the tender process was still ongoing but clearly the government was already negotiating with one bidder.

“The process is ongoing how do you go to the president with one bidder … you are hijacking the process, this a fraudulent act, it is unethical, unlawful and irregular” the legal expert said.

“And the technical officers who were in that meeting they should take responsibility for drawing the president into such a scheme.”

Given that the financial bids were not yet opened what would happen if they were opened to find the bid was ten times higher than they want and yet government has already gone into agreement with the party, the lawyer asked.


To the other bidders, that the process was being rigged in CWE’s favour was beyond doubt at this point.

Salini Spa, a consortium led by French firm Vinci Construction and Chinese firm SinoHydro applied to the Public Procurement & Disposal of Public Assets Authority (PPDA) to suspend the process pending an administrative review.

PPDA boss Cornelia Sabiti granted the request lodged by Tumusiime, Kabega & Co on behalf of Salini Spa last week.

In addition the law firm filed for an injunction in the high court to stay the process until their application for a judicial review was heard at the beginning of October.

So the Karuma Dam deal has been put on halt now and it will not be surprising if it is cancelled and retendered all over again as experts say this process maybe irreparably damaged at this point.

Ministry officials apart from a tirade against “economic saboteurs” have remained tightlipped about the process and have been largely unavailable to comment on this story.


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