Uganda has set a high bar on local content for the Chinese contractor picked to build its standard gauge railway as it seeks dividends for industries and workers from the $2.3 billion investment.
The government official in charge of the project that will be financed by the China Export Import bank said the government expected nearly a third of the project sum — $700 million — to be used to spur the local economy, especially the building materials sector.
The government also targets to have one foreigner for every 10 technical staff working on the railway.
“We are going to have all the cement for the project procured locally. We have met them (steel rollers) and they are ready to supply the steel,” project coordinator Kasingye Kyamugambi said.
Among the companies that will benefit from the affirmative action are Hima Cement, Roofings Uganda, Steel and Tube, and Madhavani Steel.
African countries have tried in vain to enforce local content provisions on Chinese infrastructure builders with the firms often saying locally produced materials are not of the quality required to ensure safety of roads, bridges, railways or buildings.
Mr Kyamugambi, however, said the government was working with industry to produce the materials to the specification of China Habour Engineering Company, the contractor.
“The key challenge is to get the manufactures to re-align their production lines to meet the needs of the project, ultimately, our aim is to keep at least $700 million (of the entire project cost) in the country,” he said.
Mr Kyamugambi said the 273-kilometre SGR from Malaba along the Kenya border to the capital Kampala was an opportunity to show the government was walking the talk on Buy Uganda Build Uganda policy.
“We have already been in discussions with Hima Cement and the other manufacturers to assess their capacity. We believe they have the right quality and can give us the quantities necessary,” said Mr Kyamugambi.
Financing and implementation of the SGR is yet to be confirmed with China wanting Uganda and Kenya to negotiate for the project as a joint venture because its viability is hinged on Kenya completing the line from Kisumu to the border town of Malaba.
The China Communications Construction Company Ltd which built the SGR from Mombasa to Nairobi in Kenya said about 40 per cent of the $3.27 billion contract ($1.3 billion) was awarded to local firms.
The beneficiaries included 2,946 local security personnel and 1,234 suppliers during its two and half years of construction. It also said 46,000 local workers were deployed.
Most of the workers were not technical because of skill gaps and the company ended up taking hundreds of youth to China for training on rail related courses.
The company, however, did not benefit as many Kenyan firms as was expected, first because of concerns over quality and secondly a dispute that arose over taxation of services rendered to what was essentially a public project.
The company still bought 300,000 tonnes of cement from Bamburi Cement, a subsidiary of Lafarge, the only company that had upgraded its system to produce the heavy duty type that was required.
The firm said it also bought simple machinery, chemicals and services in Kenya with only advanced equipment such as locomotives, operating equipment, SCE (signal, communication and electricity being imported.
In Uganda only Japan which is building East Africa’s first cable bridge at Jinja, has procured steel locally from the time the project began.
The funders and contractors of the Isimba and Karuma electricity dams insisted initially on importing the steel from China after raising quality concerns but have since adopted the local content policy.