The construction of the Masaka-Mutukula Road is now expected to cost an additional Shs64 billion, bringing the total project cost to Shs815.186 billion.
The contractor, China Chongqing International Construction Corporation (CICO), has requested that the Ugandan government cover the 8 percent insurance fees for a loan taken from China. This insurance cost was not disclosed during the initial pre-financing agreement negotiations.
Launched in March this year, the Masaka-Kyotera to Mutukula road project aims to improve the major trade route between Uganda and Tanzania, currently plagued by large potholes that hinder trade and transportation. The government entered into a two-year pre-financing agreement with CICO, with the construction expected to take four years.
During a recent session of Parliament’s Committee of National Economy, Buliisa County legislator Allan Atugonza revealed the additional Shs64 billion cost. He explained that the contractor initially indicated no intention of charging insurance fees. However, a later addendum, which expanded the project scope to include another road, introduced Shs54 billion in insurance for the Masaka-Mutukula Road and Shs10 billion for the new road.
Atugonza questioned the necessity and legitimacy of the additional cost, pointing out the lack of proof that the insurance money would be paid to a Chinese insurance company. He also criticized the logic behind the government covering 100 percent of the insurance cost for a pre-financing arrangement where only 60 percent of the project cost is financed by the contractor.
Committee members, including Pakwach District Woman MP Jane Pacuto, expressed surprise and concern over the oversight. Pacuto demanded evidence of the insurance requirement from Chinese authorities, emphasizing the need for transparency.
Defending the insurance fee, Juvenile Muhumuza, Commissioner of Development Assistance & Regional Cooperation at the Ministry of Finance, argued that the 8 percent charge is relatively low compared to other commercial loans. He cited historical data indicating that insurance fees from Sinosure, the Chinese insurance company, are moderate.
Muhumuza further explained that such fees are standard practice in international borrowing, not specific to Uganda’s risk profile. The government’s commitment to pay these fees reflects global norms in commercial financing.
In December 2023, Parliament approved the pre-financing agreement with CICO, which includes constructing the 89.5 km Masaka-Mutukula Road, rehabilitating the 11 km Nyendo-Villa Maria Road, upgrading a 3.5 km access road to the Uganda People’s Defence Forces barracks in Masaka, and adding 28.5 km to the Kikagati-Kafunzo Road.
Under this agreement, CICO is responsible for securing funding and completing the construction, with the government repaying the contractor within two years post-completion.
