Uganda is hoping to secure a $8 billion loan from China to build a railway network to revamp the country’s transport infrastructure as it prepares to start oil production.

As in other areas of Sub-Saharan Africa, China has become a major investor in Uganda. It has mostly channelled funds into roads, hydro power dams, fibre optic cable networks and other infrastructure, usually offering cheap loans.

“This is a huge project and we’ll need cheap money and I don’t think we can get it from anywhere else,” Keith Muhakanizi, permanent secretary, ministry of finance, told Reuters last week. “We hope China will agree to fund the railway project ... negotiations will start soon.”

Uganda signed a memorandum of understanding with China Harbour Engineering Corporation (CHEC) in late August to start a feasibility study on the new project.

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Agreements
East African leaders and China formally signed agreements in May related to the construction of a new multi-billion dollar, standard gauge railway to run from the Kenyan port of Mombasa to Nairobi and on to neighbouring states, including Uganda.

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Uganda hopes China can fund the portion of the railway line from its border with Kenya to Kampala, and north to the border with South Sudan as well as the oil-rich West Nile region that borders Democratic Republic of Congo.

Uganda plans to start pumping its crude, estimated at 6.5 billion barrels in reserves in 2017, and requires railways to transport heavy drilling equipment.

In July last year, Uganda said it wanted China to take up and finance all major infrastructure projects in the country and that it would pay later with oil money.

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Lack of maintenance of tracks and trains on the existing line in Uganda has left a dilapidated railway network, and much of the freight from Mombasa is moved around by road.

China-Africa ties
Lawyers cautioned. Trade between China and Africa grew to $160 billion in 2011 from $10.6 billion in 2000, according to China’s state-run Xinhua news service, while Chinese investment in the continent stands at $20 billion, according to Standard Bank Group Ltd. (SBK)