Uganda Reserves $8 Billion in Rail Plans for Chinese Bidders

A train passes by near Kampala. Photographer Michele Sibiloni/AFP/Getty Images Close

A train passes by near Kampala. Photographer Michele Sibiloni/AFP/Getty Images

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A train passes by near Kampala. Photographer Michele Sibiloni/AFP/Getty Images

Uganda plans to invite six Chinese companies next month to compete for as much as $8 billion worth of contracts to expand the country’s railway network and help improve trade routes with four bordering nations.

Uganda signed an agreement with the Chinese government giving companies from the Asian nation exclusive rights to lead the project, Ugandan Works Minister John Byabagambi said by phone yesterday from the capital, Kampala. He declined to identify the companies that will participate in the bidding.

“Bidding documents will be ready by July 10 and we are inviting only Chinese companies,” Byabagambi said. “We shall sign engineering, procurement and construction contracts with the winners.”

East African nations are boosting state spending, seeking private investment and borrowing on international markets to build transportation links that will reduce the cost of trade.

Kenya last year started building a railway from the port city of Mombasa to the capital, Nairobi, that will be extended to the Rwandan capital of Kigali, through Uganda. It will be complete by March 2018 and cost $13 billion, according to Byabagambi. Funding is being sourced from China and Russia.

Tanzanian President Jakaya Kikwete said in April that his government, along with Rwanda and Burundi’s, are looking for transaction advisers to secure financing for a $4.1 billion cross-border railway project. Kenya, Tanzania, Uganda, Rwanda and Burundi make up the East African Community trading bloc.

Border Routes

The first phase of Uganda’s planned railway construction covers 1,000 kilometers (621 miles), stretching from the country’s border with Kenya to Rwanda and a town near the border with the Democratic Republic of Congo, Byabagambi said. Work on an extension to the northern town of Gulu and onward to South Sudan will take place later, he said.

The new standard gauge railway will help speed up cargo shipments and carry heavier loads than the existing lines in the landlocked nation, said Byabagambi.

Uganda prefers awarding infrastructure-development projects to Chinese companies because they can be repaid with future revenue, including from oil sales, and through cash or “in-kind” payments, Kyetume Kasanga, a spokesman for Prime Minister Amama Mbabazi, said last year. Businesses from other parts of the world often require advance payment, he said.

The country aims to produce its first crude from deposits being developed by London-based Tullow Oil Plc (TLW), China’s Cnooc Ltd. (883) and Total SA (FP) based in France, on a commercial basis by 2017.

To contact the reporter on this story: Fred Ojambo in Kampala at fojambo@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net Sarah McGregor, Ana Monteiro, Karl Maier

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