Government Abandons Butaro Road Project After Indian Companies Double Construction Cost

Government of Rwanda suspended construction of a road leading to a major hospital and international university when contractors sought to rip-off government, it has emerged.

A private company, which had earlier also agreed to construct the same 64km road, suddenly decided to drop out, citing unexpected costs which had risen and high cost of financing from banks.

The road in question is the Base-Kirambo-Butaro-Kidaho in northern province. It was to be tarmacked, heading to the world-reknowned Butare Hospital and Cancer Institute, as well as the University of Global Health Equity (UGHE).

The highway was to also connect Rulindo and Burera districts, as well as link the rest of the country to touristic parts of Burera district including Lake Ruhondo.

Construction began in July 2016 by NPD Cotraco at Rwf 71billion. The firm is private construction company of the Rwanda Patriotic Front (RPF) party’s holding company Crystal Ventures. The firm had agreed with Government that it would singlehandedly construct the road, and government would repay it through instalments.

Appearing before joint session of Parliament this Tuesday, Finance and Economic Planning Minister Dr Uzziel Ndagijimana said the private entity, which he did not name, gave up on the project by mid last year.

Lawmakers had asked the Minister, as part of his first quarterly economic update, to explain why construction on the Base-Butaro-Kidaho road had stopped for now over a year.

Dr Ndagijimana said after the private entity abandoned works, government sought a loam from the India Export Import Bank (EXIM), which was indeed acquired. However, the process fell apart.

Back in May 2018, the Finance Minister himself put-pen-to-paper on a financing agreement with India EXIM Regional General Manager Tarun Sharma at a function in Kigali. The loan was $66.6m.

Construction did not get underway, reason why lawmakers were seeking explanation from the Finance Minister.

He told MPs of the tough conditions imposed by the Indian government to release the financing.

First, the road would be constructed by Indian companies, said Dr Ndagijimana. They informed us that such loans are given out to create employment for Indians, added the Minister.

The next stage was that five Indian road construction companies submitted bids. It is at this stage that the whole loan scheme went into crisis.

“The companies submitted bids which were more than two times the cost we had anticipated. We couldn’t continue,” said the Minister, in surprisingly candid revelations to the lawmakers.

He added: “The initial planning for the road was done in accordance with standard procedures and also based on other similar roads. It is unlikely that the original plans were done wrongly. We couldn’t understand how these Indian companies had decided to demand for such high costs.”

If government had opted to go ahead with the construction of the Base-Butaro-Kidaho road, it would have had to seek a loan of up to $150m.

The Finance Minister said government had gone back to drawing board to review the project and how it will be funded. A new alternative will be found very soon, he added.

ERRATA: This story has been slightly edited to remove reference to the Ministry of Defense which was in previous version. NPD Cotraco is not in any way attached to this Ministry. We apologize for the error.