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Uganda blocks Chinese loan over procurement concerns

Michael Malakata | Aug. 3, 2011
There are growing concerns about China's involvement in contracts in the region.

As wariness about China's investments in Africa grows, allegations of procurement flaws and overpricing has moved the Ugandan government to block a US$74 million loan from the Import and Export Bank of China (EXIM) meant for a digital migration project.

The loan process has been halted even though the Ugandan and Chinese governments had already signed a Memorandum of Understanding (MoU). Keith Muhakanizi, the deputy secretary to the Ugandan treasury, made the announcement last week and has thus far given no indication that the loan process would be restarted.

The move highlights growing controversy surrounding the awarding of ICT contracts to Chinese firms in the region. It comes less than two weeks after the Pan African Group of China controversially won a tender for Kenya's digital TV signal distribution operation. Opposition lawmakers accused the Kenyan government of flouting the tender process and knocking local companies out of the bidding.

Zambia is also in talks with the Chinese government to supply and install digital equipment at the national broadcaster, the Zambia National Broadcasting Corp. (ZNBC), without subjecting the tender to the bidding process as required by the country's laws, according to opposition political parties.

As in many other countries in Africa, the Chinese government has been funding a number of ICT projects in Uganda through loans whose conditions are that supply and installation contracts are given to Chinese companies.

Last year, Huawei Technologies was embroiled in a controversy over a tender to lay fiber-optic cable in Uganda. The national transmission backbone and e-government infrastructure initiative was a $106 million project, funded by a loan from EXIM Bank of China. The project was temporarily halted over controversy involving allegations of inflated costs and the use of incorrect cabling.

However, the latest controversy on the contract to supply and install digital equipment seems to have strained the relationship between the Ugandan government and Chinese companies. Huawei is accused of inflating the cost of the contract in addition to flouting procurement procedures.

"There is high corruption in the telecom sector because Chinese companies are not following country laws in tender acquisitions because of certain conditions attached to the loans from China," said Edith Mwale, telecom analyst from Africa Center for ICT Development.

Huawei was contracted to supply and install the digital equipment for Uganda Broadcasting Corp. (UBC) through a private negotiation, without advertising to allow other companies to bid for the tender. Tender procedures in many African countries including Uganda allow for competition in the bidding process.

The Ugandan government has been under pressure from opposition lawmakers who questioned the cost of the contract and the manner in which the contract was awarded.

Opposition leader Nandala Mafabi told journalists last week that the list of equipment in the tender was totally different from that of the contract. Nandala claimed the real value of the contract is between $20 million and $28 million and not the $74 million being claimed by Huawei Technologies.

The Ugandan TV market, like any others in the region, is set to migrate from the current analog broadcasting platform to digital broadcasting by next year. The controversy surrounding the contract is expected to delay the migration period, however.

The controversy in Uganda and Kenya comes less than a month after the Chinese government was accused of helping to block news websites in Ethiopia and jamming Ethiopian Satellite Television (ESAT) and other broadcasters. The Ethiopian Free Press Journalist Association (EFJA) has said that China has been providing training, technology and technical assistance to the regime to enable it to jam ESAT's transmission.


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