China-Uganda Ties: A Critique

Published on 16th September 2013

Economic ties between China and Africa have grown steadily as reflected in the increasing aid to Africa in recent years. In the latest official disclosure, China indicated that it had provided over 7 Billion USD to Africa in aid. Trade between Africa and China as 2012 stood at $200 bn down from $9 bn in 2000.

China and Uganda’s diplomatic relations date back to when Uganda attained its independence in 1962. According to data released by the American research group AidData, in the decade between 2000 and 2011, China’s aid to Uganda was an enormous $4.67b, slightly more than Uganda’s budget for this financial year. The aid china provides is mainly in the form of technical assistance, with an emphasis on training in Chinese institutions; grants; interest-free loans; preferential loans that have an interest subsidy; and debt relief. In 2007, a debt cancellation protocol for all debts before 2005 was signed by the two heads of state, which amounted to USD 30 million. 

The sectors which have greatly benefited are: transport, manufacturing, health, mining and agriculture. Some of the notable Chinese projects include the  Kibimba (now Tilda) and Doha rice schemes, construction of the Wakawaka Fish landing site and construction projects such as government buildings (the Ministry of Foreign Affairs and the $36.3m  construction of the President’s Office), Naguru Hospital and Mandela National Stadium.

Chinese companies continue to be beneficiaries of big infrastructural projects including the Karuma Dam (600MW) and the 51.4km Kampala- Entebbe highway. In the Ugandan President’s speech at the ground breaking for Karuma Dam, he intimated that two other Chinese companies, Gezhouba and CWE (China International Water and Electric Corporation) will similarly take on Ayago and Isimba. CNOOC is one of the 3 firms involved in oil exploration in Uganda.

According to the Chinese Enterprise chamber of commerce in Uganda, the Chinese investment in the country is currently worth $596m (as of February 2013) creating employment opportunities for more than 30,000 Ugandans. The Chinese are planning to construct a multi-million dollar school that will teach Chinese to local students, in order to broaden trade and cultural ties between the two countries.

China is one of Uganda’s main trading partners. In 2012, the trade volume between the two countries came to US$575.5 million, among which China's export was US$546.01 million, and import US$29.49 million. This implies that Uganda exports 5% of what it imports from China. China’s strategy is to phase in zero-tariff treatment to 95% of the products from the least developed African countries that have diplomatic relations with China, starting with 60% of the products in 2010.

It is worth noting that while the Ugandan president says that Chinese lending is completely free of meddling and high-handedness there are still concerns over the huge trade imbalances between Uganda and China. Uganda trade exports volume to China are 5% of what it imports from China. Most of Chinese aid is tied – with Uganda being required at times to import from China or least hire Chinese contractors.  Most of China’s aid is project mode, whose sustainability depends heavily on continuous support from the Chinese Government. Aid flows from China are not laid out transparently to other donors and development partners, including those that are locally present.

The Chinese infrastructure projects in Uganda attract higher unit costs than similar projects in other countries.  The Renaissance dam on River Nile, which Addis Ababa projects will cost $4.7 billion, will produce 6,000 Megawatts of power(10 times that of Karuma dam) when fully developed while Karuma is projected to cost $2.2billion. Also the cost per kilometre of the  $ 476m four lane Kampala- Entebbe expressway is  $ 1.5m, a kilometre of the six lane  $ 612m Addis Ababa toll motor way will cost 1.3m. All factors including purchasing power parity constant, on both projects-Uganda will be paying higher than Ethiopia.
There are alleged elements of rent-seeking activities between Ugandan and Chinese officials. The Karuma hydro power dam procurement process was dogged by allegations of impropriety and whistle-blowers’ complaints that culminated in court petitions and the Inspectorate Government (IGG) halting the process citing bribery and corruption in the process. A court injunction halted the process ordering the government to repeat the technical evaluation which led to award of the tender to China’s Sinohydro Corporation. The procurement flaws delayed the project for two and half years.

Although the Chinese have made significant investments in Uganda and continue to make inroads in major infrastructure projects involving roads, railway electrical power and communications, the Ugandan government has not benefited greatly from increased trade with China.

The hypothetical question on who the beneficiary from the increased China-lization of Uganda is needs a closer assessment.

By Enock Nyorekwa Twinoburyo
The author is an Economist.


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