How the Masaka-Mutukula road contractor CICO gamed a pre-financing deal to build with government money

MASAKA — The Chinese firm reconstructing the Masaka-Kyotera-Mutukula road entered a pre-financing deal it never had the money to honour and has since dragged its feet on purpose, betting that the two-year financing window will lapse and force government to start paying for a road it was contracted to build with its own money, Works and Transport Minister Fred Byamukama has alleged.

Laying out the scheme during an inspection of the stalled 89.5-kilometre highway on Saturday, Byamukama said Chongqing International Construction Corporation (CICO) had turned the pre-financing arrangement on its head. Under the deal, the contractor was to fund the works from its own resources for the first two years, after which the Finance ministry would begin paying. The minister said the firm had instead used that window to stall, so that public money — not its own — would ultimately build the road.

In a pre-financing arrangement, the contractor bankrolls the project upfront, meeting the cost of labour, materials, equipment and mobilisation from its own capital or from loans it raises, rather than waiting on government to release funds. Government does not pay as the work is done; instead, it reimburses the contractor later, in agreed instalments and usually with interest, once an agreed period has elapsed or set milestones are certified. The model appeals to cash-strapped governments because it shifts the early financial burden onto the builder and ties payment to delivery — the contractor carries the risk, and only recovers its money by first putting the road on the ground. It rests on one assumption: that the firm actually has the money to build first and be paid later. Byamukama’s charge is that CICO signed up to exactly this bargain without the means to keep its side, then engineered delays so that the reimbursement clock, rather than its own balance sheet, would end up funding construction.

“You are targeting the two years to end, because after two years, finance will start paying you,” he said. “So in actual sense, you are playing on our minds, using our money to build the project.”

Two years into the contract, Byamukama said, the road is only 23 percent complete — a pace he described as deliberate. He said the firm had leaned on the strength of unnamed powerful backers to buy time, and warned that government had read the tactic and would not be trapped by it.

“We cannot allow you contractors to take us where to go. We are paying you, even pre-financing, we are paying you,” he said. “If you have been using this system where contractors feel big, it has ended.”

The minister gave CICO 90 days to begin laying bitumen or lose the contract, and said a terminated firm would be blacklisted and barred from any future road works in Uganda. He dismissed the prospect of a legal fight, saying government had cancelled bigger contracts before and would compensate the firm if it had to, so long as the road got a serious contractor.

“I am giving you 90 days. If you do not bring the bitumen here, look at me very well, we will terminate your contract,” Byamukama said. “We have got the Attorney General, the President is there, I am here. Take us to court, we shall pay you. After terminating you, we even put you in blacklists. You will never get a road in Uganda.”

At the heart of the standoff, according to the minister, is the contractor’s refusal to lay the bitumen specified in the signed design. Byamukama said CICO had studied the approved design and the contract, then rejected the specified bitumen thickness on the argument that it would not last — a claim he said masked a bid to inflate the project. In its place, the firm proposed an alternative design that would push the cost up by Shs150 billion.

He said the engineers who prepared the original design were present at the site and had certified in writing that the approved road would serve for 20 years, leaving the contractor with no technical basis to reject it. Refusing an approved government design, Byamukama said, was itself a breach of contract that bordered on criminal.

“Where do you get powers to refuse the designs we have given you? What is the contract you signed?” he said. “Actually, you should even be arrested. That is breach of contract. You are conniving with our staff to steal government money.”

The minister said the scheme had inside help, and that officials who colluded with the firm were being flushed out. “The man who has been lying to you all along, we have chased him, and we are chasing more,” he said. “You either work on the road, or accept your company to go into the blacklists.”

Byamukama said the slow pace was straining relations along the shared corridor, with Tanzania complaining over the state of the route, and he rejected the firm’s appeals to global supply disruption and conflict as cover for the delays, noting that other contractors across the country were laying bitumen without such excuses.

The Masaka-Kyotera-Mutukula road, flagged off by Prime Minister Robinah Nabbanja in March 2024 at a cost of about Shs691 billion, is one of Uganda’s most strategic links to the Tanzanian border at Mutukula and is scheduled for completion in 2028. CICO has not publicly responded to the minister’s allegations.