While hopes are high that financing for the crude pipeline will be found because it is being driven by the oil companies—CNOOC, Total E&P and Tullow—finding finance for the refinery isn’t as optimistic.
Initially, following a bidding process, government had picked a Russian consortium led by RT Global Resources to be the lead investor in the project. However, talks between the consortium and government collapsed after the group apparently made additional demands a month to the signing of the deal.
Government announced it would enter negotiations with the alternate bidder, a consortium led by South Korea’s SK Engineering & Construction Co. but talks with this group too seem to have faltered leaving government with no option but to look for another investor.
“Government is officially back to square one,” an official told The Independent when asked about the status of the negotiations over the refinery.
Criticism is also growing over the billions being funneled into the infrastructure projects. Several experts have warned that the government is either locking up to much money in infrastructure projects or paying it out to foreign contractors. Either or both moves, critics say, end up starving the economy which is in dire need of a financial stimulus package.
Recently, Cornelia Sabiti, the executive director Public Procurement and Disposal of Public Assets Authority (PPDA), raised concerns that the infrastructure projects were mostly going to foreign companies.
She said at least Shs11.2 trillion worth of infrastructure projects is held by foreign companies leaving a paltry Shs911 billion for the locals.
Economists, including Fred Muhumuza, who previously advised the Finance Minister and is now teaching at the School of Economics at Makerere University, are also speaking up against the concentration on infrastructure.
Muhumuza told The Independent that to compound the problem, both the refinery and the SGR, “are white elephants”.
“A standard guage railway is a monster,” he said, “It needs both volumes and distance. We have neither.”
He said that the Chinese do not mind seeing us making a mistake by seeking to construct it, but they will ask serious questions on whether they will recover their money, the reason they are reluctant about these projects.
“I also do not see Kenya coming to Malaba,” he said.
On the refinery, he said; “nobody wants to invest money in that thing, it doesn’t have commercial value.” However, government has conducted its own studies, which show that given the regional demand of fuel products in the region, a refinery is commercially viable.
For Muhumuza, the biggest problem with all these projects is the speed at which they are being pushed. “You are trying to invest in roads, railways, power and refinery at the same time and as a result, you are spending all your small resources and leaving no money in the economy,” he said, “that is a problem?”