Committee on National Economy Meeting With the Ministry of Finance and Ministry of Internal Affairs on the Proposal to Borrow Funds to Finance the National CCTV Network Project
On Wednesday 17th April 2019, the committee on National Economy met with the Ministry of Finance and Ministry of Internal affairs to provide responses and clarifications to the queries previously raised by the committee on the proposal to borrow up to 104.22 million USD from Standard Chartered Bank to Finance the National CCTV Camera Project.
The meeting was chaired by Hon. Saida Bumba the chairperson of the Committee.
Issues raised by the Committee and responses from the responsible Ministries
A clear explanation of the variations in the project costs on the different documents to the Committee.
- Facility Agreement USD 120,259,686.83
This is the project implementation contract signed on 28th May 2018 between the Government of Uganda and Ms. Huawei Technologies Uganda Co.
- Project profile USD 124,490,432.36
At sector submission of the project to the Development committee for approval, other components to the project outside the contract with Huawei were added;
- Digital Mobile Radio System at USD 2,948,545.
- 1% management and supervision costs at USD 1,202,597.
iii. Brief to Parliament USD 126,178,723.86
Government is borrowing to implement the signed contract.
According to the Draft Agreement, only two lenders have been identified with a total commitment of USD 86,022,277, leaving a balance of USD 18 million, whose source has not yet been identified, How is the third party to be identified and what plans are there to fill the gap in case the third source is not found? How much is the contribution from each source?
Standard Chartered Bank as the lead arranger will strive to secure all the funds required once the borrowing has been approved and an agreement entered into between Government of Uganda and Standard Chartered Bank.
- Is the project part of the approved budget for FY 2018/19 or the proposed FY 2019/20? Provide evidence of the budget provided.
Yes, the project is part of the approved budget for FY 2018/19 or the proposed FY 2019/20 under approved classified expenditure under the sector.
- How much is Government counterpart contribution to the total budget cost?
Government of Uganda contribution is 20% of the contract amount in addition to 15% SINOSURE Premium as well as the additional cost of service ducts and 18% VAT on local materials to be covered by the Government.
Standard Chartered Bank acts as an agent, arranger, global coordinator, and one of the lenders. Why is the loan structured in such a way that Standard Chartered Bank plays multiple roles?
These are required under the Export Credit Agency (ECA) financing arrangement and the roles thereof are clearly defined in the Financing Agreement.
- The 8.83% of the project cost amounting to USD 9,193,561.65 to the China Export and Credit Insurance Corporation for the SINOSURE insurance policy is very high and not mindful of the local insurance companies that have the capacity to provide this policy. How was this amount derived?
The USD 9,193,561.65is 8.83% of the loan amount as required by the insurance company.
- Can’t this insurance be procured locally as a means of promoting local content in Government projects?
It is the standard practice and requirement under the Financing from ECA that the borrower pays for insurance Policy provided by the Lenders’ insurance company.
The projected 5552cameras to be installed by the project may not be sufficient to cover all crime-prone areas and highways in the country. Has the Ministry considered bridging the gap by tapping into CCTV facilities by the private sector and other government institutions like KCCA?
The private sector is much willing to cooperate with police in terms of connecting their CCTV camera systems to the police network. Where there is commercial business like hospitals, shopping malls, UPDF leaves a terminal point to tap in the private network. However, more legal approaches are being pursued by legal directorates to safeguard partnerships.
Were procurement procedures followed in the execution of the commercial agreement between the Government of Uganda and Ms. Huawei Technologies?
Given the sensitive nature of the project, the procurement process was restricted according to the PPDA Act. Four companies were given bids of which 2 returned the bids and one succeeded.
What measures has Government put in place to promote the installation of the CCTV systems by the private sector?
This is an ongoing process that the legal minds have to work on. Currently, UPDF has a campaign strategy of sensitizing private organizations on best practices of CCTV installations and operation.
What is the Legal status of the framework under which the project will operate after completion? Does the Government have a policy regarding the implementation of this project as a security measure?
The legal framework is being handled by the legal directorate and it includes standard operating procedures of providing evidence to courts of law. The project is of security nature because it carries heavy information of security interest and is under the framework of classified systems.
Reactions, recommendations, and resolutions from the committee
- The committee observed that China was executing almost 100% of the duties in the project including the provision of insurance. The committee tasked the responsible ministries to elaborate on the issue.
The State Minister for Finance explained that according to the ECA policy, insurance services should be provided by the lenders. The insurance should be 8% of the loan.
- The committee also observed that the second phase of the project will not cover the whole country and thus inquired from the Minister to elaborate the strategies in place to ensure nationwide coverage of the project.
Hon. Kania Mario Obiga, State Minister for Internal Affairs explained that the Ministry shall organize for further installation after completion phase 2 of the project. However, covering the whole country is still an enormous challenge.
- The committee noticed the need to involve more local insurance companies in the project since it will not only be cheaper but in effect promoting and strengthening the capacity of indigenous companies as a deliberate policy of the government.
- The committee further noted that an inquest from the police showed only 13 cases have been solved by the camera, a low return compared to the investment put in despite the completion of phase one of the project.
The police elucidated that the project has aided in the reduction of car theft to 30% in the country.
- The committee further noted that most of the installed CCTV cameras don’t seem to be functional.
The Minister of State for Internal Affairs reassured the committee that the project will be evaluated by 31st August 2019 for its efficiency, he indulged the members to give it a benefit of the doubt until then.
- The committee resolved a meeting with the Insurance Regulatory Authority to explore their capacity in covering projects of such magnitude in a bid to encourage local content component in the project.
- The committee requested for an assurance from the Ministry of Internal Affairs that the money shall be directed to execution of the allocated duties by the end of August.
The Minister of Internal Affairs assured the committee as requested.
- The chairperson of the committee adjourned the meeting.