I often see Ugandans speak of the high costs of road construction in Uganda and I shudder. The conversation of the ‘elites’ is rarely any different from that of my friends with zero formal education, casting their fishing nets in the village of Mityana.
As such, I have decided that once every week, I will take out time just to raise the quality of debate in different areas. Today, I will concern myself with the actual reasons that influence the costs of road infrastructure in Uganda. Contrary to popular opinion, corruption plays very little into the cost of a road in Uganda.
These are the things that influence your costs:
If you’ve constructed a house before, you should know that building on a rock, building in a wetland, or swampy area, building on soft soil, all these things are not the same. That implies for example that if you are constructing a kilometre in Kisoro, it’s not the same as a Kilometre in Soroti.
2. Soil Texture
Once again, it is cheaper to construct a road in Karamoja than in Kabarole. In Kabarole, you will have to dig for more than 2 meters before you can reach the hard surface and then proceed to have the base and sub-base. The deeper you excavate, the costlier the project.
3. Nature of financing
Take an example of Entebbe Expressway. It was a turnkey project aka design, build and finance. The cost of the loan on this road was 6%. Why? Because the contractor took all the risk upon himself. He designed the road for you, he looked for the money and then proceeded to construct the road.
So is government borrowing? What are the concessionary terms? What are the interest rates? That is why you get to interest yourself in the cost of debt servicing relative to GDP. That is a better measure.
4. Nature of Contract
Is it a one-off project? Does the contractor expect continuous work? If I am Ortega Construction and I expect to construct more roads in Uganda, then I am going to charge less. But if it is a one off contract, then I will charge you much. Why? Because in accounting there is depreciation.
So I will depreciate all my equipment off one project. For starters, equipment accounts for 30 to 40% of the cost of road construction. If I have continuous work, then I will choose to amortize my equipment over a number of projects.
But should it be one off, then all my equipment will be amortized on one project. Again, it is about economies of scale.
5. Width of a road
Again, you can’t compare roads unless you know the width. Even an increment of a centimeter can mean all the difference. How wide is the road being constructed?
6. Service Duration of the road
How long is the road meant to last? Is it 20 years? 10 years? A 20 year old road will cost more than a 10 year old.
7. Type of Contract
Not all roads are the same. Sometimes you are building an entirely new road. Sometimes you are simply rehabilitating a road. Sometimes you are resurfacing. Other times, you completely redesign the road.
8. Axle Load of the road
Now constructing a road from Kampala to Malaba is costlier. Because of the high axle load. Compared to a road being constructed in the deep end of Najjera that will only carry subarus loaded with alcohol and slay queens.
9. Volume of Cars
Again, this will also determine how long a road will last. So if you design a road for 100 cars and you get traffic of 10000 cars, that road will not last as long as planned.
10. Prolongation Costs
Although these are not initially a direct cost of the road, often times prolongation costs can hit harder than imagined. Northern By-pass is a clear example. In construction, you are expected to handover a particular area to the contractor by a particular date.
There is a daily rate for equipment and for labor. So if Ortega construction mobilizes its graders and then government of Uganda delays to handover because some person has not yet been compensated or the wife has refused to vacate, the Ortega will charge you daily.
So on Northern Bypass you have people who were compensated but have refused to go. They want a higher price. You had delays of relocating utility lines. UMEME had not planned for relocations. Then UMEME also had to seek for permission from ERA.
So these financial claims will be made by Ortega for time-related costs as a result of delays caused by the owner or client. If it was the reverse, you would have liquidated damages.
11. Lifecycle costs
Now if a project runs beyond its lifecycle. If you were meant to finish a project in two years but because of delays, it hasn’t happened. Costs of materials will have varied. These are allowable variations. I will also charge you for changes in interest rates. Because my bank will be on my case.
Now I could go on and on concerning the actual factors that influence the cost of road construction in Uganda. But this should be an eye opener to things you need to begin asking yourself;
1. What land reforms can we begin carrying out? If you are compensated for example, you should vacate even if you have disputes.
2. Can government begin developing local content when it comes to road construction? That could mean allowing for initial mistakes and poor quality roads. Competence is developed at a cost.
3. Could we perhaps build a national construction company? What if we scaled UPDF engineering to this ability?
4. What is the solution to infrastructure financing in Uganda? How do we collect more taxes? How do we borrow at better rates?
Once you can answer these details on a particular road, you can have the confidence to shout that the cost of this road is high. High compared to what? High based on what? You begin to realize that our problems are beyond corruption. Corruption is not anywhere near our biggest problems!