Even as Uganda tries to secure a compromise between the two Chinese firms eager to build the country’s Northern Corridor standard gauge railway, the battle is now down to who builds a seemingly insignificant nine miles (14.4 km) of track running between the border town of Malaba and the interchange at Tororo.

Officials were not available for comment but the standard gauge railway (SGR) Steering Committee spent a busy week shuffling between the Ministries of Finance, Justice and Works as it tried to hammer out a MoU that would apportion the 670-kilometre Malaba-Tororo-Pakwach-Gulu Nimule section to the China Harbour and Engineering Corporation (CHEC). Also bundled in that contract is a proposed port at Bukasa on Lake Victoria, east of Kampala.

That would leave the 930-kilometre Tororo-Kampala-Kasese-Mpondwe/Bihanga Mirama Hills section which links with Rwanda, to the China Civil Engineering Construction Corporation (CCECC), but the latter is having none of that.

According to sources, at the heart of the contest is the fact that whoever takes the 670-kilometre section also gets to build the interchange facility at Tororo, whose worth according to experts is $100 million in contractor’s fees.

Besides CCECC’s feeling it is entitled because it holds a valid MoU, there is also the feeling that the northern line is higher in the merit order for implementation than the western line.

Attractive terrain

It has also emerged that the relatively flat terrain of northern Uganda is attractive to CHEC, whose total experience in rail construction is limited. CHEC is a sister company of China Roads and Bridges Corporation, which has been awarded the contract for the Mombasa-Nairobi SGR.

Sources say that CCECC is against the new allocation because it would be a reversal of the terms of the only legally binding MoU that Uganda entered into in May 2012. That MoU, which resulted in a feasibility study by the contractor, assigned the Kampala-Malaba-Tororo-Pakwach segment to CCECC.

According to CCECC’s agents, while the firm conducted a feasibility study and was in the process of translating it from Chinese into English, it learnt through press reports that Uganda had conducted due diligence on CHEC.

“They did not know whether to submit the study, since there was a risk that their work would be appropriated without any consideration of the costs incurred to that point,” said the source.

But in April 2013, CCECC decided to submit the feasibility study to Uganda Railways Corporation. Apart from a disagreement over the number of crossings along the line — CCECC recommended 27 while URC preferred 13 — there we no other issues.

That sparked off a three-way contest in which CCECC was up against CHEC and its parent China Civil Construction Corporation. Last November, President Yoweri Museveni got involved in the melee and met the feuding contractors and the SGR Steering Committee.

READ: Museveni to meet feuding rail contractors
He ordered them to conduct due diligence on CCECC as a way of arriving at a fair assessment of the competitors. He also ordered CHEC’s parent company — CCCC — out of the race.

According to correspondence available to this newspaper, the committee concluded due diligence on CCECC last December and produced a comprehensive 20-page report.

They gave the nod to CCECC and asked the government to review the feasibility studies that the firm had resubmitted in July 2013. They also recommended that the Ministry of Defence enter into a MoU with CCECC to take care of the capacity building requirement for any SGR contract.

In contrast, the team that conducted due diligence on CHEC submitted a three-page executive summary of a draft report on the exercise. The summary gave a sketch of the team’s tour and the discussions they engaged in about the technology choices relevant to the Uganda SGR.

CHEC’s bid is fronted by former US Secretary for African Affairs turned lobbyist Rosa Whitaker.

On January 22, she led a delegation of CHEC’s representatives and British civil contractor Mott Macdonald who was presented as a partner of CHEC. During that meeting, President Museveni made ambiguous remarks that appeared to support CHEC’s bid while at the same time calling for caution over the firm’s financial credentials.

Although the partnership with Mr MacDonald is intended to make up for CHEC’s lack of significant experience in building railways, it raises other questions over funding.

In meetings with officials of the China Exim Bank, steering committee officials were told that the bank only financed projects executed by Chinese companies.

If the involvement of a British firm in the equation complicated this funding stream, Uganda’s SGR project would be in trouble since according to the findings of the steering committee, the low IRR (internal rate of return) and NPV (net present value) of the standard gauge railway make it unattractive to commercial lenders.