The US$1.9 billion deal
It is not only Uhuru who has lost a deal because of Magufuli’s new closeness with Museveni. Before Magufuli into the picture, Uganda’s priority was to build a Standard Gauge Railway with Kenya and Rwanda stretching from Mombasa-Nairobi-Malaba-Kampala to Kigali.
But Magufuli negotiated Museveni into shunting the Kigali loop. The Malaba loop still gets mentioned a lot but there is new enthusiasm about Tanzania’s SGR, which will run 205kms from Dar es Salaam to Morogoro by 2019, and finally Port Mwanza on Lake Victoria with a ferry to link Uganda. Museveni’s switch was a major disappointment to Rwanda, insiders say.
With the two deals in the pocket and Museveni’s full trust, The Independent has been told of how Magufuli has even forayed into deals where Tanzania has nothing to gain. In one case, Magufuli almost got Museveni to cancel the $ 1.9 billion deal awarded to China Harbour Engineering Company Ltd (CHEC) to develop its Eastern Route 261Km SGR and the 476km Northern route with a 117km spur to Packwach.
The details had remained scanty until recently.
Insiders have revealed that matters came to a head when Museveni earlier signaled he might cancel the CHEC deal.
It turns out, the companies that won the contract to construct the Tanzania SGR routes came to Museveni tried to sway him to award the deal to them instead.
The firms that have won railway construction deals in Tanzania are Turkey’s Yapi Merkezi Insaat VE Sanayi As and Portugal’s Mota-Engil Engenharia.
The company agents and their local commission agents, who include cabinet officials, President Museveni’s assistants and in-laws, said that China’s CHEC deal was a rip-off.
The companies said they had offered Tanzania better terms and were ready to do the same for Uganda.
In fact, to award the contract, Magufuli had completely cut any Chinese out of the deal and blacklisted them. He told Museveni that according to the deal he had entered with Yapi and Mota-Engil, Tanzania would spend $ 5 million per kilometre of railway.
Kenya, on the other hand was to spend $7.3m per km and Uganda the same. This appeared to confirm that Uganda was being fleeced.
Armed with Magufuli’s intelligence, Museveni signaled his intent in a cabinet meeting.
“You go slow on that one (railway), there are some issues,” he told his ministers. They were stunned. What was at stake extended beyond the deal reached by government with Chinese company, CHEC, and the progress made by SGR; the company founded to fast track the $ 1.9 billion railway.
This was going to be the second time President Museveni would be changing his mind on the contractor for the SGR deal.
Previously, government had entered an MOU for SGR with another Chinese company called China Civil Engineering Construction (CCECC). The deal was for CCECC to upgrade the existing railway to SGR. CCECC had already secured the deal.
However, former U.S. Assistant US Trade Representative for Africa, Rosa Whitaker met Museveni in Washington and convinced the president to award the deal to CHEC. Whitaker got so involved to the extent that she travelled to Uganda and would sit in meetings with government officials as they procured the contractor. In the end, President Museveni directed then Works Minister, John Byabagambi and officials at SGR to deal with CHEC.
In retaliation, CCECC sued government and Justice Lydia Mugambe ruled against government and ordering that a new contract to build the SGR is entered.
But in a July 23, 2014 at his country home in Rwakitura, President Museveni ordered for the cancellation of the CCECC contract and also directed that a contract is entered with CHEC through direct procurement.
In January 2015, CCECC officials went with the president’s brother, Michael Nuwagira aka Toyota, and they apologised for taking government to court. Museveni then directed that government enters an MOU with them for the western route and the Light Rail Mass Transit System for Kampala.
Cancelling the CHEC deal would be a major setback for the SGR. Officials had tried to borrow money from other financiers but failed. It was only China, which was willing to give Uganda money but on condition that the deal went to a Chinese company. Uganda zeroed on CHEC and China’s Exim Bank was at the time finalizing the financing details. Cancelling the deal would, therefore, have meant forgetting about the SGR until Uganda got oil revenues. Cancelling the deal also stood to affect Kenya SGR loop from Nairobi to Malaba. That line, experts say, only makes economic sense if it comes to Uganda and without that agreement EXIM Bank would not give Kenya money either.