As preparations enter the final bend for Uganda to construct roads inside DR Congo, several experts have expressed pessimism about its economic viability.
Last November, President Museveni and his DR Congo counterpart Felix Tshisekedi agreed to the deal that would see the construction and upgrading of 223km of roads in DR Congo that connect to the Ugandan border.
The project is aimed to improve the business relations of both countries in which Uganda mostly exports cement, iron and steel to DR Congo while in return, it is mostly timber and precious minerals, especially gold.
According to Museveni, Uganda earned $532m from cross-border trade with DR Congo in the 2018/2019 financial year and he is hopeful the construction of this road network will more than double the country's earnings.
The works include constructing and upgrading the 80km road from Kasese to Beni city, a second road that is 54km from Beni to Butembo town and an 80km road from Kisoro to Bunagana.
However, the project estimated at $334m (Shs 1.2 trillion) has come under scrutiny, especially when it became apparent that Uganda has set aside $66m (Shs 224bn), which was approved by parliament on October 20.
According to Bugiri municipality MP Asuman Basalirwa, parliament passed a supplementary budget approving the deal without understanding the intricate details of the memorandum of understanding (MOU) between Uganda and DR Congo in spite of assurances from Amos Lugolobi, parliament's budget committee chairperson, that they saw the MOU.
In particular, questions have been raised on the capacity of the contractor, Dott Services, a company with a controversial history.
Over the years, the company has been embroiled in several contractual disputes with UNRA over shoddy work and it took the intervention of President Museveni to force UNRA to work with them.
Gen Katumba Wamala, the minister of Works and Transport, told parliament that government did not contract Dott Services for the project but the company was instead hired by DR Congo government.
PROJECT OVERVIEW
According to the MOU between Uganda and DR Congo that The Observer has seen, Dott Services is singled out as the private contractor for the project.
"This project shall be financed through a PPP model by a special purpose vehicle set up for that purpose, which shall mobilise 60 per cent of the total project costs, and a subsidy contribution that shall be made by both the governments of DR Congo and Uganda for purposes of making the project viable, and buying down the cost of capital and hence reducing the user tariffs," reads part of the MOU.
This means Dott Services will lead a Special Purpose Vehicle to procure debt financing and recovery of the project investment through a road toll tariff agreed upon with DR Congo.
"The fulfilment of this undertaking by the company or Special Purpose Vehicle through the submission to the DR Congo of appropriate comfort letters from reputable international financial institutions is a condition precedent to fulfil implementation of this agreement," reads the MOU.
On this background, The Observer understands Dott Services is currently undertaking requisite construction studies in the area, which will be subjected to approval by the two countries before the commencement of work.
"Both Uganda and DR Congo undertook to obtain and provide approvals required for the fulfilment of their respective obligations in accordance with the lender's requirements and project development agreement," the MOU reads.
Incidentally, both Uganda and DR Congo agreed to use Dott Services for private financing of infrastructure as the model of raising Shs 1.2 trillion for financing the construction.
"The contributions of both the government of Uganda and DR Congo are geared towards buying down the cost of capital being mobilised by Dott Services and hence making eventual tariff affordable to the road users of which the Ugandan transboundary trackers are beneficiaries," further reads the MOU.
However, a top ministry of Works official who preferred anonymity told The Observer there are irregularities with the way the DR Congo government entered a private contract with Dott Services without asking for bids.
"We as technocrats could not do much because it was done at the top level but no serious government can commit itself to deal with a private company without any bidding," said the official.
"Under the arrangement, Dott Services is required to raise 60 per cent of the total budget but we know they don't have this capacity. No serious international financial institution is going to finance this and, instead, they are going to use the financial commitments as the starting capital to do the work."
All this creates doubt whether the project will not turn out to be a raw deal.
ABOUT DOTT SERVICES
The company is owned by four Indians led by the CEO Venugopal Rao, managing director Maheswara Reddy, Prasad Reddy and Komi Reddy. It was started in 1994 as Dash Uganda Limited and later changed name to Dott Services.
During the justice Catherine Bamugemereire-led commission of inquiry is investigating allegations of fraud and mismanagement in Uganda National Roads Authority (UNRA), Rao admitted that Dott Services also own the mini hydro-power development project and we also own the Buseruka hydro-power project in Hoima.
He also admitted that Dott Services always endures delays in completion of projects due to delay on land compensation, strip maps and detailed designs for projects. He also denied that the company has a godfather in President Museveni's younger brother, Gen Salim Saleh.
"We are self-made people, qualified engineers and we do not have business associates whatsoever. So, no one can influence our projects," Rao said.
Source
