By Spy Uganda
Kampala: The cost for the construction of the Masaka-Mutukula Road and surrounding projects is likely to increase by UGX 64 billion, on top of the UGX 751.186 billion already budgeted for the project.
This increase comes after the contractor, China Chingqing International Construction Corporation (CICO), requested the Government to cover the 8% insurance fees for the total project cost.
Allan Atugonza (Buliisa County) revealed this information on Thursday during the consideration of the addendum to the pre-financing agreement by the Committee of National Economy. MPs raised several questions about the latest changes, requiring responses from officials of the Ministry of Finance and the Uganda National Roads Authority (UNRA).
Atugonza explained, “In the initial bid documents, the contractor stated they would not charge for insurance. However, they later introduced an addendum, including a new road, and attempted to add UGX 54 billion for insurance on the Masaka-Mutukula Road and UGX 10 billion for the new road. We find it hard to approve the UGX 64 billion for insurance without proof that this money will be paid to an insurance company in China.”
His remarks followed an update by John Bosco Ikojo (Bukedea County), Chairperson of the Committee of National Economy, who noted that after the passing of the loan and the ground-breaking ceremony for the Masaka-Mutukula Road, the Committee received an addendum to the pre-financing agreement on March 24, 2024. This addendum introduced a new condition for insurance cover, which would be funded by Ugandan taxpayers.
During the addendum’s consideration, MPs raised several queries about the new conditions. Atugonza remarked, “We are being asked to pay 100% of the pre-financing of 60%, which seems odd. If we accept the insurance, the Government should only cover 60% of the insurance, not 100%, since we are already covering 40% of the cost. Why do we need to pay insurance on the entire contract cost?”
Jane Pacuto (Pakwach DWR) questioned why the insurance fees were not included when Parliament initially considered the pre-financing agreement in 2023. She also criticized the Chinese contractor for failing to provide evidence that the insurance cover was a condition agreed upon when obtaining funds from their lender in China.
“Initially, insurance was NIL. CICO later informed the Ministry of Finance that they had to comply with insurance requirements when sourcing financing. We need evidence from China that this insurance condition exists. Without it, this demand remains contentious,” Pacuto said.
Juvenile Muhumuza, Commissioner of Development Assistance & Regional Cooperation at the Ministry of Finance, defended the 8% insurance fee requested by the Chinese firm, arguing that it is lower compared to other commercial loans of this nature.
“The 8% fee is not high. Check the insurance fee for the Kitgum-Kidepo Road; it was higher. Historically, insurance fees charged by Sinosure are moderate,” Muhumuza stated.
He also defended the contractor’s request for insurance, noting that when borrowing commercially, insurance fees are standard practice worldwide.
Maurice Kibalya (Bugabula South) sought the Attorney General’s opinion on the new terms, noting, “We initially had no insurance fees. After implementation and ground-breaking, the contractor now demands insurance. Have we heard from the Attorney General?”
Ikojo responded, “Our communication to the Attorney General was on short notice. We informed the Attorney General yesterday, and he is currently looking into the details and will communicate with us.”
Minister of Finance Matia Kasaija concurred with the MPs to have the insurance fees tagged to the 60% construction cost borne by the contractor, assuring the Committee of the availability of the Government’s 40% share when required.
In December 2023, Parliament approved the Government’s request to enter into a pre-financing agreement with China Chingqing International Construction Corporation (CICO) to construct the Masaka-Mutukula Road at a cost of UGX 691.680 billion, to be paid within two years after completion.
The project includes the Masaka-Mutukula Road (89.5 km), rehabilitation of Nyendo-Villa Maria Road (11 km), upgrading of a 3.5 km access road to the Uganda People’s Defence Forces barracks in Masaka, and an additional 28.5 km for the Kikagati-Kafunzo Road. It remains unclear how the cost increased from UGX 691.680 billion to UGX 751.186 billion.
