With a budget of Shs648 billion in the 2019/2020 financial year, the Uganda National Roads Authority is constructing an additional 900 kilometres of paved roads across the country, which will bring the total length of paved roads in Uganda to 5000km.
UNRA is relying on local construction firms to help achieve this target; a preferential contracting policy at the authority ensures local content of 30% for each road construction contract awarded.
At Stanbic Bank, we are committed to bridging the gap in the construction sector through fostering partnerships. We bring together key stakeholders such as the local contractors under their Uganda National Association of Building and Civil Engineering Contractors (UNABCEC) umbrella and public entities such as UNRA.
We have been engaging with both UNRA and UNABCEC to see how best Stanbic Bank Uganda can provide creative solutions that help both parties increase the capacity of local contractors.
Our purpose as Stanbic Bank Uganda is driven by the maxim ‘Uganda is our home; we drive her growth.’ Part of that purpose is ensuring that we partner with local associations such as UNABCEC to provide financing solutions that contribute towards the economic growth of our country. In turn, this support delivers both public and private infrastructure projects.
In addition, our partnership with UNABCEC provides customised solutions to members of the association which helps them work more effectively with UNRA.
Stanbic Bank Uganda’s three-way engagement with UNABCEC and UNRA tackles two key challenges. The first and biggest one is that local contractors usually don’t have the complete suite of road construction equipment. Our asset financing solution ensures that we can provide the required combination of equipment, such as compactors, motor graders, water bowsers and buck hoes to the contractors.
Currently, we are partnering with equipment suppliers such as Mantrac Uganda — providers of the Caterpillar brand — and General Machinery Limited (Gmach) — providers of the Komatsu brand — to guarantee availability as well as regular servicing at affordable prices. This helps UNABCEC members to remain competitive in the industry.
Our asset financing solution also gives the contractor an opportunity to purchase equipment and repay the loan over the life of the contract. The contractor contributes 20% of the total value of the equipment and Stanbic Bank pays the supplier the outstanding balance.
Additionally, all equipment is insured through our bancassurance solution to mitigate any risks arising from the type of work undertaken. Stanbic bancassurance has partnered with Uganda’s top insurance companies to enable the client to get very competitive terms and rates. We provide a ten-month financing loan that allows the contractor to match their repayments in receipt of funds from UNRA.
It is, however, not enough to only provide local contractors with financing without engaging UNRA to ensure timely payments for completed work. Stanbic Bank has been engaging the national roads authority to provide a sustainable solution that provides the contractor with a view of when payment will be made. This helps contractors plan their businesses better.
As we engage with UNRA to provide a clear schedule of payments to contractors, we are also very happy to provide cash flow relief by advancing funds of the invoices to allow for continued performance on contracts towards completion.
We have observed that this has been of great benefit to contractors as they are able to deliver projects within the agreed timelines, thereby maintaining credibility on the market, which remains one of the most important assets in the construction sector.
In addition, Stanbic Bank recognises that, for any construction company to succeed, there is a need for financial institutions to provide bid, performance, advance payment, and retention guarantees. But access to these instruments has always been linked to the collateral provided, which usually hinders many construction companies from accessing them, hence stagnating their growth.
Therefore, Stanbic Bank pioneered the unsecured bid bond offering which has allowed many construction companies to bid for and win projects. We are looking at expanding this initiative by supporting construction companies on the other guarantee requirements without necessarily looking at collateral to guide the discussions and decisions to provide them.
Stanbic Bank remains keen to partnering with local firms and making meaningful contributions to Uganda’s road construction sector.
Brian Tahinduka is the sector manager power, infrastructure, and telecoms at Stanbic Bank Uganda