Uganda drops Chinese firm from US$2 bn railway deal

By Andy Brown and Reuters16 January 2023

In 2015 Uganda signed an engineering, procurement and construction contract with CHEC to develop the Standard Gauge Railway project

Uganda has terminated its contract with Chinese firm China Harbour and Engineering Company Ltd (CHEC) to build a railway to the Kenyan border and is now considering a deal with a Turkish company, a senior official told Reuters.

In 2015, the east-African country signed an engineering, procurement and construction contract with CHEC to develop the Standard Gauge Railway (SGR) project, which will use the international standard rather than a narrower gauge sometimes used in the region.

The 273km railway line, estimated to cost US$2.2 billion, would link the capital Kampala and Uganda’s border with Kenya, where it is planned to link up with Kenya’s own standard gauge rail that runs to the Indian Ocean seaport of Mombasa.

However, Uganda is frustrated with China’s unwillingness to provide funding for the project and is now courting Turkey’s Yapi Merkezi to take up the job, a senior official in the ministry of works and transport project told Reuters.

He spoke on condition of anonymity because he was not authorised to speak on the subject. “One of the obligations under the contract with the Chinese was that they were supposed to help Uganda source financing which has really not come true,” the official said.

He said Uganda had written to the Chinese firm in December cancelling the contract and that the Chinese had so far not indicated any objection to the decision. Officials of CHEC were not immediately reachable for comment.

Chinese foreign ministry spokesperson Wang Wenbin said China and Uganda had in the past jointly cooperated in railways, hydropower stations, highways, oil and gas development, and infrastructure construction.

“China and Uganda are comprehensive cooperative partners, and practical cooperation between the two countries is at the forefront of China-Africa cooperation,” he told a news conference in Beijing.

The source at Uganda’s transport ministry said they had turned their focus to Turkey’s Yapi Merkezi. “So now the discussions are with Yapi Merkezi which has shown interest ...there’s no contract with them yet, but there’s an MoU and things are moving fast.”

The Turkish firm confirmed to Reuters it had entered into a memorandum of understanding with the Ugandan government but that a final agreement has not been signed yet.

Uganda was particularly impressed with the job Yapi Merkezi had done in neighbouring Tanzania, he said, adding a Ugandan team had recently travelled to Tanzania to see the work.

In Tanzania, Yapi Merkezi is helping to build a 1,219km standard gauge railway line that the country is developing as part of efforts to boost trade with Uganda and other neighbouring countries.

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