The fate of Rift Valley Railways appears to have been sealed after Kenya indicated that the operator will no longer ply the Nairobi-Mombasa route on the metre gauge as the government shifted priority to the recently launched standard gauge railway, which is expected to start cargo operations in January 2018.
The confirmation by the Ministry of Transport comes as Kenya Railways prepares to strip the Nairobi-Mombasa section of the 118-year-old metre gauge railway line.
Transport Cabinet Secretary James Macharia told The EastAfrican that the SGR will be the trunk line from Mombasa on Kenya's Coast to Kisumu in the western part of the country, while the metre gauge line operated by RVR retains a connectivity role for areas that the SGR will not reach.
“From Mombasa to Nairobi, we will not need the metre gauge rail any more. The current 1.2 million tonnes of cargo that RVR carries will go to the new line as we seek to revamp the interconnectivity to towns like Kitale, Nakuru Assessment
“We are currently only utilising 50 per cent or 1,000km of the old 2,100km railway network. We already have a team from Kenya Railways assessing how we will revamp these interconnectivity routes. As for the old Nairobi-Mombasa line, we have the option of uprooting it and using the proceeds from its disposal, to possibly fund the revamping of the other routes,” Mr Macharia said.
Ugandan Finance Minister Matia Kasaija, while presenting the 2017/18 budget on Thursday, announced that his country was terminating the agreement with RVR due to its poor performance.
“The management of the Uganda railway will revert to the Uganda Railways Corporation (URC) from RVR,” Mr Kasaija said.
Kenya seems to be following the SGR contract signed in 2010, which states that Kenya Railways will raise money from selling the assets of the existing metre gauge railway line.
In the contract, Kenya Railways indicates that it expects to receive a salvage value of $41 million through disposal of locomotive wagons, railway tracks and sleepers of the existing railway, with a further $10 million from concession fees from two new cargo operators, who were supposed to compete directly with RVR.
Kenya had toyed with the idea of having two operators — RVR to operate the old line and Kenya Railways to run the standard gauge rail.
But some government officials reckoned that the existing concession with RVR will become untenable once the new Chinese-built line is commissioned because of the profitability, operations and performance issues bedevilling RVR.
It will be interesting to see how RVR takes this news given that when it signed the concession with Kenya Railways in 2006, it as allowed to have a 25-year monopoly of railway services on the Mombasa to Kampala route as well as the Nairobi commuter services.
In the revised concession agreement in 2010, RVR said that there were safeguards in place that it was expecting from the Ugandan and Kenyan governments, including offering it the opportunity to operate rolling stock on the railway line, staggered payment of unpaid concession fees and also compensation in case of loss of business to the new standard gauge line.
“The legal documents amending the concession agreement signed in August 2010 brought in safeguards for RVR from the government and set up these liaison committees to address any potential areas of conflict between the two lines. This is the mechanism that will ensure that RVR’s ongoing operations are not put at risk. Our expectation is that we will have equal opportunity, a level playing ground,” former RVR chief executive Carlos Andrade told The EastAfrican in an earlier interview.
In April this year, RVR was served with a concession termination notice by the Kenya government after it failed to remit its fees as stipulated in the agreement.
Kenya Railways has since started repossessing all the concessioned assets while Kampala gave RVR a notice of intent to terminate the concession, which has elapsed.
“The choice is: Do I send 3,000 staff home or do I pay Kenya Railways?” Isaiah Okoth, RVR’s group chief executive told International Railway Journal in an interview.
RVR is banking on its large number of stations and freight termini to complement the SGR.
Mr Okoth said that the transit freight will be crucial for the firm in the next five years as the construction of the second phase of SGR between Nairobi and Kisumu takes shape.
“The new line presents an opportunity for us. We will now act as a distributor for SGR for both passenger and freight traffic. The SGR passenger station is located several kilometres outside Nairobi so we are proposing a rail connection to the city centre station from their main station. We are strategic to SGR and we are already talking to them about how to transfer freight between the two railways as we have a lot of networks within Nairobi and several branch lines in the country that would help to extend SGR’s reach,” Mr Okoth said.