Away from the news about the Uganda-Rwanda border and
suspicious bullion van robberies, the issue of government’s plan to build a
multi-billion-shilling specialized hospital has caused heat under some
collars.
Government has contracted a consortium Finasi/Roko
Construction to build the $380m(sh1.4trillion) International Specialised
Hospital of Uganda. Under the deal the government will pay for the hospital
over six years starting from when it is commissioned and will issue promissory
notes to the contractors – as the name suggests, promising to pay them in the
future.
Sections of the media reported this news as if government
was borrowing money to give the contractors to build the hospital. Also lost in
translation was the fact that the land on which the hospital stands belongs to
the government.
"What is true is that the government is building the hospital on credit. The hospital belongs to government. As does the land....
However, this project signals the alternative financing
government is going to have to rely on in coming years to bridge the country’s
huge deficits in infrastructure and even human resource.
We shall require 17,000 Mw of new power generation capacity
in the next ten years. At the current rate of this would cost us $51b, or twice
the size of the economy to finance.
Uganda National Road Authority (UNRA) has set itself the
target of paving 1,000 km of road a year, which would cost at least a billion
dollars annually. And even then they will be making little inroads into our
road infrastructure deficit. The average middle income country has at least 88
km of paved road per 1000 square kilometers of surface area; Uganda with its
5000 km of paved road has about 20 km of paved road per 1000 square kilometers
of surface area. Simple arithmetic would suggest we would need at least 21,000
km of paved road at a cost of at least $21b.
And these numbers are reflected in everything from railway
lines to housing and everything in between.
Even in our human resource capacity there is a lot of work
to be done. Currently we have about seven doctors per 100,000 Ugandans, far
below the World Health Organisation (WHO) recommended 17.
It takes about sh70m to train a doctor, to bridge
the gap Uganda would have to more than double its 4,000 doctors, which would
not only be about training but also build facilities to exponentially increase
medical training.
"Unfortunately for us, not only are we behind the curve but also the demands for infrastructure --- both physical and soft, are rising every day and becoming ever more urgent....
However, our own internally generated resources are not
keeping up and will not for a long time.
Folding our hands and waiting for the heavens to fall on our
heads is not an option and hence the need for alternative funding mechanisms as
has been demonstrated with specialized hospital at Lubowa.
A similar model has been employed for the Jinja Express
Highway for which the government is now procuring contractors. The winning
bidder will be expected to source their own financing for the construction and
government will top up resources from the planned toll gates to pay for the
construction.
The thermal power plants in Namanve and eastern Uganda were
built with a variation of the same financing model, where the owners built them
and government pays for them for the budget over the duration of the
concessions.
In Kalangala government is paying for a road built by a
private contractor and the services of the ferry from Bukakata to Kalangala.
In the case of the Bujagali power dam the construction is
being paid from the power tariff, which is spread over the 30-year life span of
the concession.
It has been mooted but being fought viciously, that
government should contract a company to manage its huge fleet of cars. As it is
now government buys brand new vehicles and writes them off after five
years. The inefficiency of this is seen
when you consider that private citizens and companies buy ten-year-old cars and
drive them for another ten years.
A rationalization of the government fleet and its management
some have suggested, would save the country millions of dollars a year, which
savings can be directed to more effective uses than wheezing fat cats around
the country.
As has been mentioned earlier thanks to the lost 1970s and 1980s our infrastructure has not kept pace with the population growth. While population doubled between independence and 1986, the economy had contracted by almost half during the same period. It’s clear we are playing catch and not doing it very well...
Since we cannot pay our way out of our pocket and our
borrowing options are narrowing – our debt stock currently stands at just under
the 50 percent recommended for developing nations, the use of more esoteric
financial models will become the norm going into the future.
Invariably a lot of this financing will come from abroad, as
we have done a less than stellar job mobilizing our own resources. It is
therefore imperative that we continue to strive towards improving the
environment for business to thrive in our country.
Foreign investment and financing is being courted by
everyone and they are willing to settle for a lesser return on investment which
is certain, than high return in a risky environment, which explains why South
Africa with all its challenges is still the top destination for foreign direct
investment on the continent, despite its relatively lower return on investment.
It’s not very long ago – almost 30 years ago, that some of
us were ready to go to war because government was privatising the shells of
once profitable companies. A few years down the road that single policy
initiative has boosted production, created jobs and jump started tax
collections to the point that now we want to go back to the state enterprises.
C’est la vie!
