Final blow for Rift Valley Railways as Uganda ends rail deal

Rift Valley Railways racked up debts of up to Sh16 billion over the 11 years it ran the Kenya-Uganda railway. [File, Standard]

Ugandan has joined Kenya in terminating a concession to run its railway line.

The latest move marks the end of a decade of disappointments and missed opportunities for both countries’ railway sectors after Rift Valley Railways (RVR) failed to live up to its hype when it was given the concession to run the regional rail in 2006.

While it was a question of when rather than if Uganda would follow Kenya in terminating the deal, the move is a major blow for the company that is majority-owned by Egyptian investment firm Qalaa Holdings and means the debt-laden RVR has no revenue streams, hence no means of servicing loans it took ostensibly to improve the decades-old line.

The firm owes lenders and suppliers more than Sh16 billion.

The Ugandan Government cited failure by RVR to meet its obligations as set out in the concession agreement signed when the firm took over the Kenya-Uganda Railway in 2006.

The Uganda Railways Corporation (URC) will operate the line on the Ugandan side.

Turnaround plan

The termination of the concession comes two months after RVR’s concession to run the metre gauge line in Kenya was terminated.

Kenya Railways Corporation (KRC) levelled similar claims against RVR.

Uganda’s Finance Ministry in the Friday letter terminating the concession, ordered RVR to hand back all assets to URC ‘without limitations’.

The mMinistry also wants the firm to pay all concession fees that are in arrears as well as other funds due to the Ugandan Government and Uganda Railways within a month.

The firm owes Uganda Railways $8.5 million (Sh850 million) in concession fees. The script in Uganda follows what happened in Kenya, where the court ordered RVR to hand over assets and employees to Kenya Railways by the end of August.

The court order was, however, silent on the concession fees owed to KRC. The corporation earlier this year said RVR owed it Sh600 million.

RVR was contracted to run the 2,353-kilometre Kenya-Uganda line in 2006 for a period of 25 years.

Different international lenders had over the 10 years advanced millions of dollars to RVR to finance its metre gauge railway turnaround plan.

The lenders include African Development Bank ($40 million - Sh4 billion), German Development Bank ($32 million - Sh3.2 billion), Infrastructure Crisis Facility ($20 million - Sh2 billion), and Equity Bank ($20 million - Sh2 billion).

Others are the International Finance Corporation ($22 million - Sh2.2 billion), Dutch Development Bank ($20 million - Sh2 billion), and Belgian Investment Company for Developing Countries ($10 million - Sh1 billion).

The debts are now likely to be shouldered by the shareholders.

The company is 80 per cent owned by Qalaa Holdings, the Egyptian private equity firm, with the remainder being held by Uganda’s Bomi Holdings and international financial institutions.