Uganda’s President Museveni has ordered Prime Minister Ruhakana Rugunda to block an imminent approval of an additional loan to a Chinese firm implementing government’s fibre optic cable project.

Mr Museveni made the directive after finally reading the Auditor General’s letter which shows that the project cost had been inflated and poorly procured.

In April 2012, Mr Museveni asked Auditor General John Muwanga to conduct an audit of the project being implemented by Huawei Technologies with a loan from Exim Bank of China, following queries about the cost and quality of work done.

Mr Muwanga contracted international consultancy firm Ernst & Young to do the audit and reported back to the President. But Mr Museveni said he had not seen the report until one-and-a-half years later.

The Auditor General’s report shows that during the implementation of the first two phases, the National Backbone Infrastructure (NBI) and the Electronic Government Infrastructure (EGI) projects, “the approximate loss or amount of money or savings that could have been made if better advised is $41.9m (about Shs116b).”

From consultations with different telecoms and reviewing of the bills of quantities for the project, Mr Muwanga said he reached an inevitable conclusion that “the project price was grossly inflated.”

“There was a lot of unnecessary equipment that was deployed to different transmission stations, some of which is still not being used to-date. We also noted that the cost of fibre per kilometre was significantly higher than that for many of the local operators in Uganda based on the review of the bills of quantities, some of whom have also had Huawei Technologies implementing their optic fibre cable projects,” the Auditor General observed in his report.

Linking the region
The project, by weaning the government off using the satellite link for telephones and other forms of data transmission, were supposed to reduce related costs for the government by half.

The project is part of an East African Community terrestrial fibre optic cable covering 15,600km, which is supposed to link all the five EAC countries of Uganda, Kenya, Tanzania, Rwanda and Burundi, to the rest of the world through the under-sea cable in Mombasa.

The project was to be implemented in four phases, three of which were to be financed by a $106m (about Shs293.5b) loan from China.

Phase one seeks to link all government departments and agencies whereas the second phase would link Uganda to Kenya in the east and South Sudan to the north.

The third phase would connect to the border with Rwanda.

The Auditor General recommended that different players, including Huawei Technologies, rectify faults identified by an earlier forensic audit by National Information Technology Authority Uganda (NITA-U) before proceeding to the next phase.

Museveni pulls plug on loan
After finally reading the Auditor General’s letter, Mr Museveni wrote to Dr Rugunda the same day, instructing him to act promptly.

“Apparently, the Auditor General wrote back to me on June 20, 2013, but I only saw the letter today [December 5, 2014] pointing out that the project was overpriced by $41m (about Shs116b),” he wrote.

“I have now received complaints that Exim Bank of China is approving another $9m (about Shs24.9b) for this company even before the other rectifications are done. Call the minister of ICT, Attorney General and others to sort out all this. Let your experts read the Auditor General’s report and recommend corrective measures,” Museveni instructed Rugunda.

When contacted, Dr Rugunda, who headed the ICT ministry at some point as the project was being implemented, only said: “Government is addressing the issues and the fibre optic project is on course.”

Attorney General Peter Nyombi said upon receiving instructions to look into the matter, he asked for a copy of the Auditor General’s report, which he said his team would study and advise accordingly.

Auditor General’s findings
The Auditor General noted in his report that the procurement process was not done effectively and the initiation and conceptualisation of the project was not properly undertaken. He further noted that the use of single sourcing for a project of this magnitude and complexity denied government the benefit of competition.

In the report he also said many weaknesses were identified with the way and manner in which the process was done, many of which he said resulted from the initial processes of planning and requirements identification not being properly undertaken. The project inception, he further noted could not be handled by a ministry [ICT] which was in a formative stage.

Mr Aggrey Awori, the former ICT minister, said he learnt after he had taken on the ministry that Huawei Technologies was single sourced because preparations for the Commonwealth Heads of Government Meeting (Chogm) in 2007 could not allow time for competitive bidding.

He said, however, this could not have been an excuse for the concerned officials to inflate the cost of the project.

Background

In 2006 government acquired a loan of $106m ((about Shs293.5b) from China to build a 2,11km optical fibre cable for the National Backbone Infrastructure, the laying of the optical fibre to link all government offices and the supply and installation of communication equipment to enable transmission of voice, data and conferencing services.

The project was to be completed in four phases over a period of 27 months and the loan was to cover only three of these phases. The project commenced on October 11, 2006 and was scheduled for completion on March 10, 2010, but by the time the Auditor General did the review mid-2013, only the first phase had been completed, with phase two nearing completion.

The President in April 2012 asked the Auditor General to probe queries about quality of cables used, and the cost and quality of works undertaken thus far, for which purpose the Auditor General contradicted the international consulting firm Ernst and Young.

Tit bits
The contractors. The Shs300b project was contracted to Huawei Technologies through the Ministry of ICT and NITA-U.
Completion. The project, which commenced on October 11, 2006 had been scheduled for completion on March 10, 2010, however, eight years later the project is just in its second phase.

[Source: Daily Monitor]