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25-year Kenya-Uganda railway deal terminated

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The Kenya Railways Corporation has terminated Rift Valley Railways’ (RVR) 25-year contract to run the Kenya-Uganda railway, casting dark clouds over the future of the private operator. FILE | NATION MEDIA GROUP 

By BUSINESS DAILY

Posted  Wednesday, April 5   2017 at  12:30

The Kenya Railways Corporation has terminated Rift Valley Railways’ (RVR) 25-year contract to run the Kenya-Uganda railway, casting dark clouds over the future of the private operator.

The Business Daily has learnt that Kenya Railways terminated the contract last Thursday, citing RVR’s failure to meet set operating targets, including payment of concession fees.

RVR, whose ownership is controlled by Egyptian private equity firm Qalaa Holding, was informed of the decision through a letter delivered to its bosses on Thursday morning — a day after the operator moved to court seeking orders to stop it.

The termination process was set in motion in January when Kenya Railways managing director Atanas Maina issued RVR with a notice over unpaid fees amounting to $5.8 million (Sh600m) and a string of misses in cargo haulage targets.

Attend the meeting

RVR’s chief executive Isaiah Okoth declined to comment.

The journey to termination picked pace in mid-March when Kenyan officials travelled to Kampala for a meeting with their Ugandan counterparts to assess RVR’s performance.

Qalaa’s head of transportation division Karim Sadek, who was expected to attend the meeting, failed to show up, instead choosing to send a junior officer.

The snub infuriated the top government officials, who left the meeting having passed a resolution to terminate the contract at the end of the 90-day notice they had issued in January.

Rushed to court

Mr Sadek is reported to have got wind of the looming termination and rushed to court for an injunction to stop it.

But the court declined to issue the order and instead asked the rail firm to return to court the next day (March 30) with the defendants for an inter-partes hearing.

Kenya Railways, which was expected in court on Thursday morning, however made a pre-emptive strike by serving RVR with the termination letter that effectively made the impending court appearance irrelevant.

The dispute

The termination of the contract leaves RVR shareholders, including Qalaa, Uganda’s Bomi Holding, the Kenyan government and the international finance institutions (IFIs) that invested millions of dollars in the rail firm with 180 days to sell it to a strategic investor or return it to Kenya Railways.

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