Infrastructure

Turkish Firm Inks $3bn Deal for Uganda Electric Railway

Yapı Merkezi is expected to complete the 272-kilometre railway in 48 months.

Updated on

October 18, 2024

Yapi Merkezi Uganda railway construction. — The deal was signed in Kampala, Uganda, on Tuesday. (Photo: Courtesy)

Uganda has signed a $3 billion deal with Turkish firm Yapı Merkezi to build an electric railway from Kampala to Malaba, on the Kenyan border, paving the way for the project’s kick-off.

The move comes three months after the country picked the Turkish firm for the project, following the cancellation of its deal with a Chinese firm last year after an eight-year delay.

Perez Wamburu, the project coordinator, told reporters in Kampala that the deal signed on Tuesday will allow the contractor to commence construction of the railway next month.

“We signed a contract with Yapı Merkezi from Turkey for construction of a 272-kilometre line at €2.7 billion ($3 billion)”, Mr Wamala said on Tuesday.

The Kampala-Malaba standard gauge railway, which entails Uganda’s first segment of a planned 1,700 km regional railway, will be one of Yapı Merkezi’s largest overseas projects.

The project, expected to take 48 months, will be funded by Uganda’s own resources and loans from Standard Chartered in the United Kingdom, backed by export credit guarantees.

Yapı Merkezi recently completed a 541km standard gauge railway from Dodoma to Tabora in Tanzania at a cost of $3.1 billion, a track record that influenced Kampala’s decision.

“We have done due diligence on this company, and we have seen what they have done in Tanzania,” Mr Wamburu said in August when announcing the contractor’s engagement.

The Malaba-Kampala SGR project is a key part of a regional initiative launched nine years ago by East African states, including Kenya, Uganda, Tanzania, Rwanda, and South Sudan.

The railway aims to lower transport costs, accelerate transit, and boost economic growth through better connectivity within Uganda and its neighbouring countries.

Uganda has lagged behind on the project, with only Kenya and Tanzania having made significant progress in constructing their respective sections to date.

In 2015, Uganda struck a deal with China Harbour and Engineering Company Ltd to build the Kampala-Malaba SGR line, subject to the firm securing project funds from China Exim Bank.

However, the terms of the $2.2 billion loan were deemed unfavourable, prompting the country to partner with the Turkish contractor, which offered more favourable conditions.

Yapı Merkezi signed an MoU with the Ugandan Ministry of Transport in July 2023 to undertake the work, and the contract negotiations were finalised in July this year.