Friday, October 17, 2014

IT'S DÉJÀ VU WITH THE STANDARD GAUGE RAILWAY PROJECT



In our rush to bridge our infrastructure gap we need to get used to stories like the Standard Gauge Railway (SGR) project and shenanigans surrounding it.

Last year we were embroiled in the Karuma dam circus. High ranking officials in government disregarded the Public Procurement & Disposal of Public Assets (PPDA), the Inspector General of Government (IGG), the courts, the cabinet and even presidential directives to try and force through their favoured candidate for the $1.2b project.

The Mukono-Katosi road saga had us shaking our heads in befuddlement as all the rules of project procurement, and more, were flaunted so that a shadowy company could win the deal.

And there will be no respite for the weary Ugandan public, by now desensitised to the scale of eating going on in the corridors of government.

This time it is the 850 km SGR project which has been costed at $8b (about sh21 trillion). Using basic arithmetic skills this project smells from the word go. At the tendered cost the railway will cost $9.4m a kilometre to construct. The international average is around $2m a kilometre.

Kenya is building a building a 609 km railway from Mombasa to Nairobi for $3.7b, a figure that has already got the conspiracy theorists wagging their tongues about corruption. On average the Kenyan project comes in at $6.1m a kilometre.


If this deal goes through Uganda will have the dubious distinction of having not only the most expensive – price per kilometre, road in the world – the Kampala-Entebbe expressway, but also the most expensive railway in the world.


But to put this into greater perspective Ethiopia is building a standard gauge railway from Addis Ababa to Djibouti, a 743km stretch of much hilly land than you will find in eastern and northern Uganda. The Ethiopians are build a double track – so essentially nearly twice as long as our single track, and plan that it will be run on electricity – making it more expensive because of the overhead power lines that have to build alongside the railway. 

And how much will this set back the Ethiopians? $4.9m per kilometre!

We are rewriting the laws of math. Clearly it is only in Uganda where you can pay twice the amount for half the work done.

As if that is not enough you should hear how politicians and government officials are bending themselves out of shape to force the deal through.

Officials are being threatened with defying the President, their loyalty to the NRM and allegiance to the country are being questioned and sickeningly large carrots are being dangled before them.

If this deal goes through Uganda will have the dubious distinction of having not only the most expensive – price per kilometre, road in the world – the Kampala-Entebbe expressway but also the most expensive railway in the world.

This is going to be the biggest investment in the history of our nation, not only since independence. It is a crucial project, a much needed project. And if done well can have a game changing effect on the economy. In the US for every dollar of railway line there is $2 ripple effect through the economy.

So its significance is not in doubt. In fact we shouldn’t even worry about the debt that would be contracted to finance it,  because once the railway is operational and employed optimally the debt will be a small thing to handle for the treasury.

But when you over inflate – No, hyper inflate such projects two things happen that cannot only compromise the project’s feasibility but also threaten the very economy we are trying to build.
To begin with if the set up costs are too high no credible operator will want to operate the concession, because the initial costs will eat into his margin. Then government will shoulder the loan which will be a subsidy to the business owner. 

Related to that, the monies used to pad these contract costs means a few people are gorging themselves on public money at the expense of the majority who are suffering for lack of good schools, hospitals, roads, electricity and other important infrastructure. These make the difference between climbing up the social ladder or remaining in perpetual poverty.

We hear that government is corrupt but like any other pestilence corruption feeds off itself growing and growing until one day being corrupt will be the new normal. Or is it already?

 

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