Uganda: Chinese loan for digital migration project blocked amidst overpricing fears

Mergers, Acquisitions and Financial Results

The Ugandan government has halted a USD74 million loan from the Import and Export Bank of China (EXIM) that was to be used to fund a digital migration project. Although the Ugandan government has signed a Memorandum of Understanding (MoU) with the Chinese government, the deputy secretary to the treasury announced the cessation of the deal, citing instructions from the Prime Minister.

The terms of the loan stipulate that Huawei must be the vendor to supply the equipment and complete the installation, side stepping the tender process that would allow other companies to compete for the contract. The prices quoted by Huawei and the Uganda Broadcasting Corporation (UBC) were called into question by the leader of the opposition Nandala Mafabi, who claims that the total amount quoted is more than double needed, and for some items more than four times more expensive than it should be. Mafabi claimed that an independent industry expert estimated the deal to be worth between USD20 million and USD28 million, rising to USD30 million if the ‘very best’ equipment is used. UBC claimed that the cost of setting up a system to handle TV for Kampala and upcountry areas was USD5.8 million, but Mafabi argued the amount was closer to USD1.2 million. Local paper New Vision claims that other TV operators have spent the equivalent of UGX1 billion (USD365,000) to migrate to a digital technology.

Uganda is due to migrate from analogue to digital television by the end of 2012 but the Uganda Communication Commission (UCC) believes that UBC, the country’s sole national operator, and the only licensed digital broadcaster, will not be ready in time for the deadline.

The Ugandan government has become increasingly wary of dealing with the Chinese government after a recent controversy surrounding a similar deal to install fibre-optic cabling, also funded by EXIM and carried out by Huawei, was discovered to have been overpriced and utilised incorrect equipment.