President Museveni’s ambitious grand plan to have Uganda Airlines fly again as soon as possible has encountered a headwind with the government stuck on how to raise the initial capital to get the project off the ground.
An official familiar with the multi-billion dollar project, told Sunday Monitor this week that approaching an external source (China’s EXIM Bank being on top of the list) was initially discussed as the immediate alternative at hand for government to raise the initial investment capital. However, due to the ever changing competing priorities, “there is a second thought on borrowing to finance a project whose returns are very debatable” notwithstanding available reports on the cost-benefit analysis of a national carrier.
The National Planning Authority, which, together with ministry of Works, is spearheading the project, had last year indicated that the initial capital expenditure required to fly Uganda Airlines again was earlier put at $400m (Shs1.4 trillion).
Since the revival plans started on recommendation of a report by government agencies, including the Uganda Development Corporation, Civil Aviation Authority and National Planning Authority, the plan was/is for government to buy and operate its own aircrafts like South Africa, Ethiopia and neighouring Kenya; for which they needed to borrow at least $331m (Shs1.1 trillion) to purchase six aircrafts for starters.
The official also intimated that President Museveni is very keen on “borrowing the Ethiopian experience, and probably having the Ethiopians help Uganda get the first foot on the ground—including sharing of technical staff.
Ethiopian Prime Minister Hailemariam Desalegn left the country yesterday (Saturday) afternoon after a three-day state visit, but it is still unclear whether during talks with President Museveni—at State House on Thursday and at Kisozi farm on Friday—the two discussed the matter.
Works minister Monica Azuba-Ntege confirmed to this newspaper on Wednesday they had [that day] forwarded a White Paper to Cabinet outlining the several modalities of getting the project off the ground.
“The ministry of Finance gave us a certificate of implication for the project, and this will guide the discussions,” she said. “Some of the modalities are; whether we should operate the entity as a statutory corporation, through Public Private Partnership (PPP)/co-financing, or we should just bring an investor to operate it—but that is all subject to discussions.”
Asked when Cabinet was likely to discuss the matter, Ms Azuba said “hopefully” next Wednesday but “well, at least we submitted it.”
Like our sources intimated, the minister, however, expressed misgivings on government borrowing/turning to China’s EXIM Bank to secure funding for the project, saying “our preoccupation right now is getting money for the oil roads that are required to facilitate oil production” in the oil belt, Albertine Graben, in South Western Uganda.
This newspaper disclosed on Thursday that government is tabling a loan request of more than $500m (Shs2 trillion) to Exim Bank, which will be supplemented by withdrawals from the Petroleum Fund, and additional funding from the ongoing budgetary cuts for financing 10 oil roads and a bridge in the Albertine Graben.
Government is in great anticipation of a cash advance of $2.8b (Shs8 trillion) from Exim Bank for financing the construction of the first phase of the Standard Gauge Railway (SGR)—the 273km line running from Malaba to Kampala.
Exim Bank already is financing other government’s expensive signature projects, among others the $2.2b (Shs7 trillion) Karuma (600MW) and $590m (Shs2 trillion) Isimba hydro-power dams, $500m (Shs1.8 trillion) Kampala-Entebbe Expressway and $200m for expansion of the Entebbe airport.
A report, the Presidential Economic Council Paper on the Revival of Uganda’s National Carrier, prepared by government agencies tasked to plot the process, recommended that if Uganda Airlines is to be revamped, government should consider buying brand new aircraft instead of leasing.
Attempts to reach the National Planning Authority were futile as our repeated calls were not answered by press time.
During his inaugural address to Cabinet last year, President Museveni termed the lack of a national airline “a big shame,” criticising Kenyan, Ethiopia and South African “brothers” for ditching the comradeship and instead opting to exploit Ugandans. “I thought that our brothers in Ethiopia, Kenya, South Africa, etc. having airlines would serve all of us. That, however, is apparently not the case,” he said.
Finance minister speaks out.
The minister of Finance, Mr Matia Kasaija, yesterday said reviving the national carrier is not a top priority in our economy at the moment.
“We don’t have money for it right now. We have already reached our borrowing limit and as such, we are prioritising roads at the moment,” he said.
The Finance minister said they would focus on the airline after tackling the key priority areas at the moment.
NPA report on the project.
“Government will purchase the aircraft using loan finance sourced internationally at an interest rate of 5 per cent per annum and over periods of 7-10 years (One A330-200 cost is estimated at $109.5m (Shs372 billion). Two are required, while a CRJ900 costs $27.96m (Shs95b),” the report points out.
Money matters. Government proposes to borrow $331m (Shs1.1 trillion) for the purchase of six aircraft to ply both regional and international routes. One of the possible sources of the borrowed funds is the PTA Bank, which the report notes, has shown the intention to finance the project.
The 89 page blue print notes that the revamped national airline would be spending about $45.2m (Shs156.6 billion) annually on leasing expenses for six aircraft.
Golden days. Uganda initially had an airliner, established in May 1976 under the Idi Amin government but was in 2001 liquated over heavy debts that stood at a tune of more than $6m (about Shs21b). The liquidation, a painful reality, did not settle in well with a number of stakeholders, who blamed government for deliberately killing the airline. – Jonathan Adengo
The government will inject $70m (Shs238b) for operating the airline as start-up capital and working capital.
The government proposes to borrow $331m (Shs1.1 trillion) for the purchase of six aircraft to ply both regional and international routes.