Rift Valley Railways Consortium

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RVR 9409 Nairobi.jpg
Rift Valley Railways
Type Private Consortium
Industry Transportation
Founded 2005
Headquarters Nairobi, Kenya
Key people

Ngugi Kiuna
Chairman
Darlan De David[1]


Group Chief Executive Officer
Bong Yoon
Chief Financial Officer
Services Railway Systems
Website Homepage

The Rift Valley Railways Consortium (RVR) is a consortium that was established to manage the parastatal railways of Kenya and Uganda. The consortium won the bid for private management of the century-old Uganda Railway in 2005. The Kenya-Uganda railway had been run by the East African Railways and Harbours Corporation 1948 - 1977.

History[edit]

The railway line, derided as the 'Lunatic Line' by a critical British press during its construction[2] (and still referred to colloquially as the 'Lunatic Express' even to the current day), runs some 900 kilometres (560 mi) from Kenya's Indian Ocean port of Mombasa, through Nairobi, and up the Rift Valley to Kisumu on the shores of Lake Victoria.

Another leg of the same railway system traverses the Great Rift Valley, through the town of Eldoret in Kenya, enters Uganda at Malaba and passes through Tororo and Jinja to enter Kampala, Uganda's capital. From Kampala, the railway continues on to Kasese in Western Uganda, close to the border with the Democratic Republic of the Congo, approximately 1,600 kilometres (990 mi), northwest of Mombasa, Kenya. At Tororo, the northern leg of the Ugandan railway system branches off and travels northwestwards, through Mbale, Soroti and Lira to the city of Gulu, the largest metropolitan area in Northern Uganda. From Gulu, the line continues west to end in Pakwach, on the banks of the Albert Nile, approximately 1,500 kilometres (930 mi), northwest of Mombasa, Kenya.

Original Shareholding[edit]

Originally, RVR was led by Sheltam Rail Corporation of Sheltam Trade Close Corporation (STCC) of South Africa that has experience with management of other African railways. Minor partners of the consortium were Kenya’s Prime Fuels (15%), Mirambo Holdings of Tanzania (10%) and Comazar (10%) and the CDIO Institute for Africa Development Trust (4%), both of South Africa. The consortium plans to invest in the railway system, upgrade it, reduce inefficiencies, utilize a smaller work force, and generate an annual concession fee of 11.1% in each country. In addition it will pay 1 million United States dollars each year for the passenger service concession in Kenya and 500,000 US dollars annually to Uganda for the same reason.

On 28 July 2006 the East African Standard reported that the take-over, originally planned for 1 August 2006, was postponed to 1 November 2006. This operational take-over took place in November and is scheduled to last for 25 years.[3] The 2007–2008 Kenyan crisis included destructive riots that blocked and partly destroyed the rail system between Kenya and Uganda leading to difficulties in supply. Further, destruction and loss of income led to significant financial losses.[4]

On 9 October 2008, Toll Holdings of Australia announced that it has entered into a contract to manage the Kenya-Uganda railway, replacing the management by Rift Valley Railways Consortium (RVR). The consortium has been criticized for falling freight traffic in the two years since taking control, while RVR alleges the drop is due to the poor condition of the railway infrastructure and the damage done by protesters during the 2007–2008 Kenyan crisis. Officers from Toll subsidiary Patrick Defence Logistics will manage the railway after the transition.[5] As of February 2010 the Kenya Uganda railway was still under the management of the Rift Valley Railways Consortium.

Shareholding in early 2010[edit]

In February 2010, the East African Community announced plans to raise capital to "upgrade and expand the existing railway network to boost the region’s competitiveness". In a related development, the Egyptian investment company Citadel Capital, bought a 49% stake in Sheltam Railway Company of South Africa, the lead investor in the RVR consortium.[6] At that time, shareholding in RVR is as depicted in the table below: [7]

Rift Valley Railways Stock Ownership
Rank Name of Owner Percentage Ownership
1 Sheltam Railways of South Africa 35.0
2 TransCentury Investments of Kenya 20.0
3 Prime Fuels Limited of Kenya 15.0
4 Centum Investments of Kenya 10.0
5 Mirambo Holdings of Tanzania 10.0
6 Babcock & Brown of Australia 10.0
Total 100.0

Disagreements[edit]

During the first quarter of 2010, there was rancor among the six disparate shareholders in the consortium as they jostled for control of the company. Citadel Capital of Egypt, by buying 49% of the lead investor in the consortium, had changed the balance of power among the shareholders. Trans-Century filed a lawsuit in an attempt to block Citadel Capital's entry into the consortium, but was turned away by the court in Mauritius, where RVR is incorporated.[8] Press reports from East Africa indicated that Charles Mbire, a wealthy Ugandan entrepreneur, who represents Uganda on the RVR Board of Directors, had expressed interest to purchase the 15% shareholding that should be reserved for Ugandans in the RVR consortium.[9]

Current shareholding[edit]

In March 2010, the RVR shareholders met in London, under binding arbitration. Following those talks, effective April 2010, the new shareholding in RVR stood at: (a) Citadel Capital of Egypt: 51% (b) TransCentury of Kenya: 34% and Bomi Holdings of Uganda: 15%. Africa Railways is a subsidiary of Citadel Capital, an Egyptian private equity firm.[10] Trans-Century Limited is a private Kenyan investment company, whose shares are listed on the Nairobi Stock Exchange. Bomi Holdings Limited is a Ugandan investment company owned by Ugandan entrepreneur and RVR Director, Charles Mbire.[11]

The revised shareholding agreement was signed in Kampala, Uganda's capital city on 25 August 2010.[12] The new owners pledged to invest US$250 million in the consortium to revitalize the railway network.[13][14]

In March 2014, Trans-Century Limited, a Kenyan investment company, that is publicly listed on the Nairobi Stock Exchange, divested from RVR by selling their 34% ownership interest to Citadel Capital of Egypt for an estimated US$37.8 million (KES:3.216 billon).[15]

Rift Valley Railways Stock Ownership At May 2014
Rank Name of Owner Percentage Ownership
1 Africa Railways of Egypt 85.0
2 Bomi Holdings Limited of Uganda[16] 15.0
Total 100.0

Partnerships[edit]

In November 2010 Rift Valley Railways Consortium signed a technical and management agreement with América Latina Logística, based in Curitiba, Brazil. The firm is the largest independent company of its kind in Latin America. It has operations in Argentina and Brazil, where it oversaw the successful privatization of the national railway system. América Latina Logística will provide RVR with key management and operational staff and will oversee the transfer of technology, including selection and sourcing of raw material and IT software and hardware. The initial partnership is for a renewable term of five years, starting in November 2010.[17]

New financing[edit]

In March 2011, media reports indicated the RVR intended to raise US$240 million to fund its expansion plans over the next five years. US$140 million will be raised by capital injection by the three corporate investors. The remaining US$100 will be borrowed from commercial banks. RVR already has a credit line estimated at about US$54 million.[18]

In July 2011, RVR secured a US$40 million loan from the African Development Bank (AfDB) to finance its improvements and expansion. In the same month, RVR reported a positive EBITDA (Earnings before interest, taxes, depreciation and amortization), for the year ending 30 June 2011. This marked the first positive annual EBITDA since African Railways acquired a 51% stake in RVR, in late 2009.[19] In August 2011, East Africa media outlets reported that RVR had secured a US$164 million long-term loan from a consortium of six International financial institutions, which include (a) International Finance Corporation (IFC), (b) German Development Bank (KfW) (c) Equity Bank Group and (d) Dutch Development Bank (FMO).[20] Another US$80 million will be raised by the shareholders. The difference will be realized from internally generated profits. The total amount needed over the next five years has been revised to US$287 million.[21]

Future investments[edit]

In August 2011, media outlets in East Africa reported that RVR was interested in financing and building the railway line linking Juba, the capital of South Sudan, to the industrial town of Tororo in Eastern Uganda, at the International border between Uganda and Kenya, an estimated distance of approximately 700 kilometres (435 mi), through Gulu and Nimule. The decision to proceed with this project would require approval from all partners in the RVR consortium and from the governments of Uganda and South Sudan.[22] With new investments, RVR anticipates to cut down transit time for goods between Mombasa, Kenya and Kampala, Uganda to seven days from the current twenty-one.

New developments[edit]

In December 2010, RVR announced plans to increase freight volumes by 350% in the next year through improved infrastructure, in particular upgrading old rails.[23] In September 2012, RVR began a major renovation of its locomotive overhaul facility in Nalukolongo, a suburb of Kampala. During the same month, RVR commission a refurbished ferry connecting Port Bell in Uganda to Mwanza in Tanzania and promised to commission a second vessel on the same route before the end of 2012.[24]

On the line to the South Sudan frontier, the consortium expected to open the Tororo to Pakwach section to traffic in December 2012.[25] However, this ambitious time schedule could not be fulfilled. The line northwest from Tororo towards Pakwach was cleared of vegetation and structures were repaired. The first commercial train in 20 years ran through on the metre gauge track from the Kenyan port Mombasa to the Ugandan town of Tororo and onwards to Gulu on September 14, 2013.[26] In October 2013 the Tororo-Gulu-Pakwach line was officially commissioned by the Ugandan head-of-state.[27] Meanwhile, a plan for a Chinese-built line from Nairobi to Mombasa with open access would see RVR competing for business with other operators, which may lead to another legal battle.[28] In July 2014, RVR received US$70 million in loan disbursement from a consortium of international financing agencies, as part of the US$287 million financing plan for the period 2011 - 2016.[29] RVR will use some of the funds to establish passenger commuter service in Kampala, in collaboration with Kampala Capital City Authority.[30]

See also[edit]

References[edit]

  1. ^ Musisi, Frederic (6 November 2013). "RVR Invests Shs10 Billion In Locomotive Expansion". Daily Monitor. Retrieved 5 May 2014. 
  2. ^ "Aboard the Lunatic Express by Linda Watanabe McFerrin". Retrieved 16 July 2007. 
  3. ^ Njoka, Kimathi (28 July 2006). "East Africa: Kenya And Uganda Railways Takeover Date Postponed". East African Standard (Nairobi). Retrieved 5 May 2014. 
  4. ^ Ahabwe, Albert (11 February 2008). "Kenya: Railway Transport Also Paralysed". East African Business Week (Kampala). Retrieved 5 May 2014. 
  5. ^ Speedy, Blair (10 October 2008). "Toll to manage Kenya-Uganda railway". The Australian. Retrieved 11 October 2008. 
  6. ^ Kisero, Jaindi (15 February). "Inside The Hostile Takeover of RVR". The EastAfrican. Retrieved 5 May 2014. 
  7. ^ Wandera, Stephen (9 February 2010). "RVR Pays Off Uganda And Kenya Shs6 Billion Debt". Daily Monitor. Retrieved 5 May 2014. 
  8. ^ Kisero, Jaindi (6 January 2010). "Egyptians Outwit TransCentury In Bid To Control Railways Firm". Daily Nation via Railpage.com.au. Retrieved 5 May 2014. 
  9. ^ Wakabi, Michael (15 February 2010). "Ugandan Millionaire Bids for A Stake As Boardroom Control War Intensifies". Retrieved 5 May 2014. 
  10. ^ Nation, Reporter (20 July 2011). "Rift Valley Railways Investments Secures AfDB Loan". Daily Nation. Retrieved 5 April 2014. 
  11. ^ Ogwang, Joel (2013). "RVR Raises $287 Million To Revive Uganda-Kenya Railway Service". New Vision. Retrieved 5 May 2014. 
  12. ^ Monitor, Reporter (26 August 2010). "Railway Deal Signed". Daily Monitor. Retrieved 5 May 2014. 
  13. ^ McGregor, Sarah (23 March 2010). "Kenya-Uganda Rail Network to Get $250 Million Upgrade". Bloomberg News. Retrieved 5 May 2014. 
  14. ^ "Citadel Capital’s Rift Valley Railways Boost Ugandan Economy with The Opening of Key Trade Route Between Kenya & North Uganda". Citadel Capital. Retrieved 5 May 2014. 
  15. ^ Musisi, Frederic (3 April 2014). "Citadel Capital Gains More RVR Stake". Daily Monitor. Retrieved 5 May 2024. 
  16. ^ "Citadel Completes Rift Valley Railways Restructuring". Daily News Egypt via Zawya.com. 27 August 2010. Retrieved 5 May 2014. 
  17. ^ Wahome, Mwaniki (3 November 2010). "Kenya: Brazilian Firm to Manage RVRI". Daily Nation. Retrieved 5 May 2014. 
  18. ^ Johnstone, Ole Turana. "Rift Valley Railways to Raise $240 Million for Expansion". Bloomberg News. Retrieved 5 May 2014. 
  19. ^ Kasita, Ibrahim (22 July 2011). "RVR Owners Report Huge Profit Margin". New Vision. Retrieved 5 May 2014. 
  20. ^ Press, Release (3 August 2011). "East Africa: IFC, Global Lenders Finance Kenya-Uganda Railway, Supporting Regional Economic Integration". International Finance Corporation via AllAfrica.com. Retrieved 5 May 2014. 
  21. ^ Moses Michira, Mark Okutah (2 August 2011). "RVR Secures KSh14.7 Billion Upgrade Debt". Business Daily Africa. Retrieved 5 May 2014. 
  22. ^ Odhiambo, Allan (5 August 2011). "RVR Targets Planned Uganda-Sudan Railway Line". Business Daily Africa. Retrieved 5 May 2014. 
  23. ^ In, Uganda (10 July 2013). "Track Improvements Speed Up Rift Valley". Railways Africa. Retrieved 5 May 2014. 
  24. ^ Asiimwe, Dicta (8 September 2012). "Upgrade Plan for Kenya-Uganda Railway". The EastAfrican. Retrieved 5 May 2014. 
  25. ^ Kalungi, Nicholas (25 July 2012). "RVR To Cut Mombasa-Kampala Transit Days From Fourteen to Seven". Daily Monitor. Retrieved 5 May 2014. 
  26. ^ Uganda's Northern Line Revived, Railway Gazette International retrieved October 09, 2013.
  27. ^ Makumbi, Cissy (23 October 2013). "Museveni Opens Gulu Railway Line". Daily Monitor. Retrieved 5 May 2014. 
  28. ^ Kisero, Jaindi (22 September 2012). "Kenya, China Quietly Strike Deal On Modern Railway Line". The EastAfrican. Retrieved 5 May 2014. 
  29. ^ Juma, Victor (8 July 2014). "RVR Receives KSh6 Billion Loan for Upgrade". Business Daily Africa. Retrieved 8 July 2014. 
  30. ^ Musisi, Frederic (10 July 2014). "RVR Gets UShs185 Billion Loan for Upgrade As Passenger Train Plans Gain Steam". Daily Monitor. Retrieved 10 July 2014. 

External links[edit]