Despite his long standing support for a private sector-led economy, Uganda’s President Yoweri Museveni has opposed using private capital in the construction of infrastructure projects, contrary to what Kenya’s Uhuru Kenyatta had suggested.

At a dinner sponsored by the business community in Kampala on June 3, Museveni said he was unwilling to borrow money from financial institutions in East Africa for infrastructure projects currently being undertaken by the Northern Corridor member states because of high interest rates and “because these form the backbone of our economies,” Museveni said.

Uganda borrowed money from the world financial markets for the construction of the Bujagali hydropower project, and Museveni says this is the reason electricity from the 250MW dam costs $0.11 per kilowatt hour — an amount that is too high to support industrialisation.

On his part, President Kenyatta termed a statement that there was enough money in the region’s financial sector to fund the ongoing projects “the most exciting contribution.”

Kenyatta said that the region needs to help create an enabling environment for the private sector to finance these projects, instead of using limited public resources.

“We are not short of capital; yet every day, as governments, we struggle to raise capital, with the belief that the government must do every project,” he said.

Kenyatta pledged to use capital from the region’s pension funds and schemes.

Technocrats in Uganda appear to support President Kenyatta’s position. Deputy Secretary to the Treasury Patrick Ocailap told The EastAfrican that financial institutions in the region can lend at the same rate as China’s Exim Bank, from which Rwanda, Uganda and Kenya plan to get funding for the standard gauge railway.

Mr Ocailap added that the cost of money today has gone down compared with the time Uganda borrowed to fund Bujagali dam in 2007.

Uganda recently borrowed from China Exim Bank to finance the Karuma and Isimba hydropower projects at interest rates ranging between two and four per cent.

But President Museveni insists that allowing private equity to finance things like electricity would sabotage economies in the region; instead, he said he would allow profit-motivated equity funds to invest in a road that has a toll, because then, poor people would have an alternative and only the rich would make the choice to be taxed for the convenience of reaching their destination quicker.

It remains unclear whether the Ugandan leader’s position will carry the day, since the third person with a vote on the issue is President Paul Kagame of Rwanda, whose government has had no problems borrowing from the international financial sources through bond markets.

For the standard gauge railway, the three countries have already agreed to borrow from China’s Exim Bank, with the presidents directing that a bankable project proposal be presented to before the next Heads of State Summit to take place two months from now in Nairobi.

But the private sector in the Northern Corridor is still keen to finance the remaining projects.

According to Mr Mweheire, the top 10 pension funds in the world have brought $2.5 trillion into East Africa’s financial systems. This money is available to be invested in the region’s infrastructure.

The vice chairman of the Uganda Chamber of Mines and Petroleum Association, Richard Kaijuka, made a case for the private sector to be allowed to supply steel for the SGR while Robert Ford Nkusi, the vice president of the Private Sector Foundation in Rwanda, asked that jobs in the Northern Corridor infrastructure projects be given to the region’s private sector.

Source: The East African

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