Uganda cancels $2.2bn SGR contract with Chinese firm, signs with Turkish company

Kenya’s SGR line. PHOTO | WACHIRA MWANGI | NMG

After eight years of non-execution, the Uganda government has terminated the contract of China Harbour Engineering Company (CHEC) to build the country’s first phase of standard gauge railway (SGR), a 273km line from Malaba to Kampala, The EastAfrican has learnt.

The line, starting from the Malaba border post between Uganda and Kenya, was expected to cost $2.2 billion, but the Chinese financiers did not fund the project after casting doubt on Kenya’s SGR reaching the border to link with Uganda’s and making the project viable.

The SGR Project Coordinator Eng Perez Wamburu says Kampala has now signed a memorandum of understanding (MoU) with Turkish firm Yapi Merkezi. The company is expected to submit a response to the government’s request for a construction proposal within the next few weeks, paving the way for procurement.

Kampala says the financing model for the project will also change, with Yapi Merkezi, which is building Tanzania’s SGR, expected to tap into its network to bring Export Credit Agencies (ECAs) on board that will finance and breathe life into the moribund project.

Read: Chinese firms ink deal to complete Tanzania’s SGR

The EastAfrican has seen proposals between Uganda government officials and potential financiers, who include the UK Export Fund (UKEF), which last September was mooted to be interested in bankrolling the SGR to the tune of £1.5 billion or $1.72 billion.

Frustrated by the lack of progress with China Exim Bank, President Yoweri Museveni last year directed his officials to open up the financing of the SGR to the world’s financial capitals, with London and UKEF as the first call in September 2022, sources familiar with the project said.

Read the rest of the article in The EastAfrican here