Kenya and Uganda tell RVR to inject $40m into railway by month-end

Kampala and Nairobi have decided to temporarily let the Rift Valley Railways consortium continue managing the Uganda-Kenya railway line and under very tough new conditions.

The decision came — after months of tension during which the two governments threatened to terminate the concession over underperformance.

The decision, which could not have come at a more opportune time for RVR, was reached at a closed-door meeting at the Kenya Ministry of Transport headquarters in Nairobi between senior officials from the two neighbouring countries.

Apparently, the reprieve was given on the basis of a turnaround strategy sponsored by a key shareholder — the Trans- Century Group — with a 20 per cent stake in the consortium.

Uganda’s State Minister for Works and Transport John Byabagambi told The EastAfrican in Kampala that they reconsidered their position on doing away with RVR after shareholders — announced that they would inject $40 million into the regional investment by the end of August.

Under the conditions, Sheltam — the leader of the RVR consortium — has been asked to inject an additional $14 million by Monday this week.

“They have said they are putting in more money by Monday. So we cannot rush as a government to terminate the contract with the concessionaire,” Mr Byabagambi said soon after he had been briefed by the team from Nairobi.

The turnaround strategy presented to the two governments includes a commitment by RVR’s shareholders to appoint a new chairman, managing director, a new chief operating officer and a new financial controller.

Finally, the governments of Kenya and Uganda want the concessionaire to provide an assurance from the two lending institutions — IFC and KFW — that they will support the turnaround package. A meeting of all shareholders has been called for August 8.

Technocrats from the Finance and Works Ministries in Kampala met their counterparts from Kenya in Nairobi during the course of last Thursday and made last-minute resolutions that will see RVR retain the management of the concession.

The consortium, which is operating under the Rift Valley Railways trademark, has recently come under fire for failing to improve the quality of services on the 100 year-old line that runs from the port of Mombasa to the Ugandan capital.

In a ministerial policy statement to parliament last month, John Nasasira, Uganda’s Minister for Works and Transport, said, “Railway freight volumes have not increased as expected. The company has breached several important provisions of the concession agreement, including those pertaining to the payment of the concessional fees and maintenance of the conceded assets.

The quality of service is reported to be worse than before Rift Valley Railways took over. Rift Valley Railways has serious financial and management problems and is seeking an equity partner.

The Kenya and Uganda railway networks jointly entered into a 25-year concession agreement with Rift Valley Railways, a South African company, in late 2006. Under the agreement, the respective governments were required to revamp the existing railway infrastructure and assets.

Mr Byabagambi said a political decision by both Nairobi and Kampala would be taken after RVR had fulfilled its commitments.