China Eximbank provides $350 million preferential buyer's credit for Entebbe-Kampala Toll Road Construction Project

China Eximbank provides $350 million preferential buyer's credit for Entebbe-Kampala Toll Road Construction Project On May 18, 2011, China Eximbank and the Government of Uganda signed a $350 million preferential buyer’s credit (PBC) loan agreement [CHINA EXIMBANK PBC NO. (2011) 8 TOTAL NO. 159] for the 51 km Entebbe-Kampala Toll Road Construction Project.

The borrowing terms of the PBC (loan) were as follows: a maturity of 20-years, an interest rate of 2%, a grace period of 7-years, a 0.25% management fee, and a 0.75% commitment fee.

The loan was secured with (1) a minimum cash balance in a USD-denominated repayment reserve (escrow) account, and (2) project revenues (toll road revenues) deposited in a UGX-denominated sales collection (escrow) account. As of June 30, 2019, the cash balance of the repayment reserve account was UGX 125,405,431,628 ($37,621,629.48).

According to the Government of Uganda’s Aid Management Platform (AMP), the loan ultimately achieved a 100% disbursement rate, with China Eximbank making 23 loan disbursements (worth $349,999,999.99) between 2012 and 2019: a $52,500,000 disbursement on June 29, 2012, a $52,500,000 disbursement on November 16, 2012, a $5,066,898.31 disbursement on February 21, 2013, a $12,146,943.51 disbursement on June 25, 2013, a $6,343,496.07 disbursement on December 11, 2013, a $11,764,381.60 disbursement on March 13, 2014, a $16,179,136.37 disbursement on June 30, 2014, a $16,338,200.32 disbursement on August 14, 2014, a $19,317,251.42 disbursement on December 8, 2014, a $8,277,420.88 disbursement on March 13, 2015, a $9,100,892.73 disbursement on May 12, 2015, a $8,988,925.79 disbursement on June 24, 2015, a $9,348,021.01 disbursement on October 20, 2015, a $41,280,630.56 disbursement on August 31, 2016, a $9,596,570.36 disbursement on November 17, 2016, a $11,560,298.76 disbursement on December 16, 2016, a $13,092,343.94 disbursement on June 8, 2017, a $5,734,503.47 disbursement on September 25, 2017, a $9,223,099.74 disbursement on March 2, 2018, a $11,206,723.63 disbursement on August 24, 2018, a $3,491,241.99 disbursement on December 21, 2018, a $11,925,107.64 disbursement on March 28, 2019, and a $5,017,911.89 disbursement on May 17, 2019.

According to the Uganda Ministry of Finance, Planning, and Economic Development's Report on Public Debt, Grants, Guarantees and Other Financial Liabilities for Financial Year 2021/2022, as of December 31, 2021, total loan disbursements amounted to $349,999,999.99 and the loan’s amount outstanding (including arrears) was $282,692,309.99.

The 51 km expressway project was expected to cost $476 million, with $126 million of the funding coming from the Government of Uganda.

China Communications Construction Company, Ltd. (CCCC) was the contractor responsible for implementation of the project. The project was supervised by Beijing Expressway Supervision Company. The purpose of the project was to construct a toll road from Entebbe Airport to the country’s capital, Kampala.

It was part of Government of Uganda’s overall strategy for decongesting Kampala through construction of an inner beltway comprising the Kampala Northern and Southern Bypasses as well as an outer beltway along the edges of the Great Kampala Metropolitan Area. It also aimed to enhance trade and movement between the two cities.

The four-lane highway also features at least four toll stations and four interchanges with overpasses, along with a connection to the new highway to Munyonyo, Uganda’s major international conference destination.

The link between the new highway and Munyonyo includes a 3 km, two-lane bridge constructed to run over a Nile River marshland that cuts across the proposed road link.

Construction was originally expected to begin around July 2012, with the project taking three years to complete (July 2015).

On November 21, 2012, President Yoweri Museveni Wednesday officially launched the project at a groundbreaking ceremony in Kyengera. The project was ultimately completed on June 15, 2018. However, it has reportedly underperformed vis-a-vis its original objectives. Seventeen months after the completion of the project, the tolling system for the expressway was still not operational.

Traffic levels were low, which cast doubt on whether the Government of Uganda would generate enough toll revenue to meet its principal and interest repayment obligations under the China Eximbank PBC loan.

As of April 2019, the Government of Uganda had still not passed a law to allow for tolling on the road, despite its first loan repayment to China Eximbank being due on May 22, 2019.

By 2021, a company had been contracted to manage the toll collection process, however tolls were still not being collected and the expressway remained underutilized,.

While some trips from Kampala to Entebbe have seen significant reductions in travel time, the 51 km expressway has reportedly failed to alleviate the main traffic bottlenecks that affect most trips from the city center.

The new expressway does not reach downtown – it only connects to the Northern Bypass which is also difficult to reach from downtown during the peak traffic period.

It does, however, provide a good connection between the international airport, the President’s Palace in Entebbe, and the Munyonyo Resort on the lake where President Museveni entertains foreign dignitaries.

According to ITDP Africa, which did an analysis of the traffic problem on the old Entebbe-Kampala highway, the traffic bottleneck was almost entirely caused by a few saturated roundabouts and double-parked vehicles at a critical market.

ITDP Africa concluded that ‘it was clearly not necessary to spend $475 million’ on the construction of a new expressway.

Furthermore, implementation of the project is reported to have taken place within nationally protected areas of Uganda as well as within potential critical habitats. With that being said, the project. has created 1500 jobs annually, with 90% going to local employees.