Uganda section of RVR hangs on via court injunction

Tuesday November 14 2017

Locomotive engines at an RVR yard in Mombasa in September 2014. FILE photo | nmg

Locomotive engines at an RVR yard in Mombasa in September 2014. RVR is crippled by massive debt, vandalised assets, legal hurdles and employee strikes. FILE PHOTO | NATION 

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Rift Valley Railways is still holding onto its concession in Uganda after it went to court a day before its notice of termination was to expire and got an injunction against the government, seeking to be allowed to renegotiate the deal.

The troubled concessionaire was serving the notice of termination, which was supposed to expire on September 5, but they went to court on September 4 and obtained an injunction that has been extended twice till November 23.

The EastAfrican has learnt that RVR is deep in debt and struggling to run the business. It has racked up two months’ salary arrears for its workers; its assets and track are being vandalised; and it cannot afford to fuel its locomotives.

This situation has paralysed rail operations and left clients’ cargo stranded along the route.

Concession fees

“I do not even know why they went to court,” said Victor Byemaro, the national general secretary of Uganda Railways Workers Union. “They can’t buy fuel, can’t service the locomotives, and can’t maintain the line. For more than a month it has been like this. There is no business and cargo is not coming in.”

RVR’s assets have been vandalised, particularly the track between Kawolo and Namanve near Kampala, leaving cargo stuck in those places.

Among the major clients of RVR Western are logistics firm Spedag Interfreight, fuel company Total, Hima Cement, Roofings Ltd and Mukwano, with volumes of cargo stuck at various places for weeks.

“We have had a lot of cargo [stranded] for weeks. I cannot go into details now, but it is a lot,” said Milton Kandole, the regional manager of rail services at Spedag.

Sources told The EastAfrican that RVR has a $3 million performance bond that was executed with UAP Insurance, guaranteeing RVR’s capacity to complete the 25-year concession it won in 2006 to jointly operate the Kenya and Uganda railway services.

The owner of the rail assets, Uganda Railways Corporation (URC), is owed concession fees amounting to $15 million, sources said.

Finance Minister Matia Kasaija called in the performance bond on October 4 when he wrote to RVR to formally cancel the concession and demanded that the company settle all fees due to the government within 30 days.

Mr Kasaija also told RVR to immediately hand the conceded assets back to URC with a report detailing all data, files and software, to complete the transition.

Death knell

“There is no transition because of the court process. But we think we can sort this out, either administratively or legally,” said Charles Kateba, URC’s managing director.

In addition, URC was set to meet with RVR officials on September 6, to kick-start the transition and eventually URC to take over the reins of the Ugandan leg of the 106-year-old railway line, a process that was expected to ensure resumption of normal rail operations.

Since a Kenya court sounded the death knell for RVR in August, the Ugandan part of the concession was thrown into disarray and at best remained dysfunctional, with no bank accounts to draw money from to keep the service operational.

Then followed a strike that paralysed operations for weeks as workers downed their tools demanding to be paid their salaries.

Even when the workers resumed work, operations remained problematic as the bank accounts of the head office in Nairobi had been frozen following the termination of the contract in Kenya.

Efforts to reach RVR Uganda general manager Joram Nyanzi were unsuccessful as he was reportedly out of office.
At the time RVR Uganda went to court, Kenya Railways Corporation was getting ready to link up with URC to resume co-ordination and manage operations between the two countries, but the court process halted this effort.