Off track? Experts query new railway dream

Monday October 26 2009

Commuters hang on a Nairobi train. The governments are concluding talks to restructure the concession after it emerged that RVR’s performance on aspects of investment, operations and management was not satisfactory. Photo/FILE

Commuters hang on a Nairobi train. The governments are concluding talks to restructure the concession after it emerged that RVR’s performance on aspects of investment, operations and management was not satisfactory. Photo/FILE 

By DAVID MALINGHA DOYA

The decision by the governments of Uganda and Kenya to build a standard gauge railway line went against the counsel of certain donors.

The donors wanted the two countries to take the less costly alternative of revamping the existing railway.

The two countries would then gain from improved efficiency, faster speeds and more volumes of cargo for about 20 years.

This alternative was recommended after a feasibility study commissioned by the East African Community (EAC) on the region’s railway master plan.

At the same time, the Kenyan government — through the Kenya Railways Corporation — did a study for a regional railway network that recommended immediate establishment of a new standard gauge line.

Officials of KRC successfully sold their recommendation to the business community and politicians, notably Uganda’s President Yoweri Museveni, who in support declared: “the existing railway is only fit for the museum.”

The EastAfrican has learnt that the run-up to the recent signing of a memorandum of understanding between Kampala and Nairobi featured heated debate between the governments and donors on which alternative was more feasible.

Uganda was represented by John Nasasira, Minister of Works and Transport, while Kenya was represented by Transport Minister Ali Mwakwere.

Certain donors pushed the governments to follow the recommendation of the study commissioned by the EAC Secretariat.

Without mentioning names, Uganda’ State Minister for Works John Byabagambi said, “That study was influenced by certain donors, but we believe that taking a radical decision to build a new standard gauge railway line once and for all, is a better option because our economies are growing every other year.”

It is understood that the decision was influenced by a preferred financial model in which each government was to finance its part of the network and later allow private players open access at a fee.

However, an ideal financial model should not be in a hurry to recoup the cost of investment through high user fees, a situation that EAC’s recommended plan was keen on avoiding.

Observers say the governments might find it hard to secure funding for the new infrastructure, given that it is expected to be very expensive. Also, the governments have disagreed grossly on technical terms with some prospective funders.

The study that would show the anticipated cost is not yet done, but experts estimate $1million for every kilometre of the over 1,200 kms from the coast to Kampala.

Ironically, officials from Uganda said it will not be a problem, given its feasibility.

“I can tell you that we already have signed an MoU with the German government to fund the infrastructure. Plus, we will look at domestic revenue,” said Mr Byabagambi.

The governments are instead addressing the “apparent baggage” of their concession with the Rift Valley Railways, particularly on what building a standard railway from Mombasa to Kampala would mean to this concession.

Depending on what comes out of feasibility studies, the new standard gauge railway network would introduce a competitor to RVR in the event that it is built parallel to the railway line currently managed by the concessionaire.

If studies recommend that the existing railway be widened to the standard gauge, RVR’s role might have to be redefined in the context of improving the network, thereby introducing new financial implications.

Both governments and the concessionaire are concluding talks to restructure the concession, after it emerged last year that RVR’s performance on aspects of investment, operations and management was not satisfactory.

Apparently, the rail’s share of international freight cargo fell from 16 per cent before the concession to about 10 per cent now.

The EastAfrican has seen some notes on the matter that the line Minister is to present to Cabinet soon, ahead of an anticipated announcement of the new concession structure next month.

The notes are damning to the concessionaire for poor performance, and recommend incorporation of a company held by line ministries to, among other things, be a custodian of government railway assets and operate railway infrastructure. Only train operations are to be privatised.

It is not yet clear what provisions will be given in regard to the ambitious plan of building the standard gauge line.

The Ministry of Works and Transport in Uganda believes that it would be better to build a new parallel line.

The Privatisation Unit in Uganda said that either way, the economies will gain from improved efficiency in the railway sector because transport will not only be faster but volumes transported would also increase, and that this would imply better performance on the part of RVR.

“We do not see a contradiction but, rather, improvements in the sector performance and the concessionaire,” said Jim Mugunga, the Privatisation Unit’s spokesperson.

Brown Odengo, chairman of RVR confirmed that they were in talks with both governments on restructuring the concession and on the implications of building a standard gauge railway line.

“I can’t comment on the matter until our discussions with the governments are done,” he said.

If the governments build a parallel railway line to the existing one, experts say that available options are to cede management of the new infrastructure to the existing concessionaire, or to another one.

With the train of complaints against the Sheltam-led RVR consortium, it is likely that they will go for another concessionaire.

The EastAfrican has learnt that the new concession structure will feature a new investor from either Australia or Brazil to manage the infrastructure, while Sheltam, which holds the RVR concession, will remain in that capacity.