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Jul 27, 2012

Big Kenya–Uganda railways overhaul poised to begin

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The enormous task of rehabilitating and modernising the cen- tury-old railway network in Kenya and Uganda is set to begin – six years after privatisation.

Just when the authorities in the two countries had once again started expressing reservations about Rift Valley Railways’ (RVR’s) ability to transform the archaic system, the company has revealed rehabilitation work is about to start, following the arrival of rail bars and sleepers from China worth $19-million.

RVR CEO Brown Ondego says the arrival of the consignment heralds the beginning of the programme to revive the fortunes of the railway network in the two neighbouring countries.

“The delays we have been experiencing were due to delays in releasing of funds by our fin- anciers. Now that they have started to release the funds, we are not wasting more time,” he says.

Recently, RVR took delivery of 6 869 t of rail bars and 10 000 sleepers from China that will be used to repair some 70 km of sec- tions of the permanent way between Kenya’s capital, Nairobi, and the coastal city of Mombasa.

According to Ondego, this is the first step in a comprehensive five-year turnaround programme aimed at transforming railway transport in Kenya and Uganda. The programme has a price tag of $168-million, which is being funded by a consortium through a syndicated loan.

Early this year, the financiers released the first tranche of the loan – $49-million – which enabled RVR to procure the rail material from China.

“We intend to start laying the permanent way imme- diately because we want to increase the speed of trains and increase haulage,” he states.

Meanwhile, a report compiled by the Joint Railway Commission, a body set up by the two governments to oversee the performance of RVR, states the company is still underperforming on most of the parameters set out in the 25-year concession.

For instance, RVR managed to transport a mere 1.7-million tons of cargo in 2011 of about 10-million tons of cargo arriving at the Mombasa port. This means that about 90% of the cargo arriving at the port destined for Uganda, South Sudan, Rwanda, Burundi and parts of the Democratic Republic of Congo is transported by road.

RVR, which is owned by Egypt-based private-equity firm Citadel Capital and Kenyan infrastructure firm TransCentury, was originally owned by South Africa’s Sheltam Railways.

The company operates 100 loco- motives, 3 500 wagons and the 2 352 km rail track in a concession spanning 25 years.

“Our primary focus is to improve the condition of the permanent way so as to improve transit times as line speeds will increase from the current restrictions of between 25 km/h and 30 km/h to 70km/h,” explains Ondego.

On the Ugandan side, RVR has embarked on the construction of nine culverts between Busembatia and Jinja at a cost of $4.9-million.
RVR hopes the turnaround programme will translate into a market share growth of between 10% and 12% in the medium term.

The programme is being financed by the International Finance Corporation ($22- million), the African Development Bank ($40-million), the German Development Agency ($32-million), the Dutch Develop-ment Bank ($20-million), the ICF Debt Pool ($20-million), the Belgian Investment Company for Developing Countries ($10-million) and Kenya’s Equity Bank ($20-million).

Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
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