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AfDB wants Kenya, Uganda Governments to help recover RVR debts

By Macharia Kamau | Nov 12th 2017 | 3 min read
By Macharia Kamau | November 12th 2017

African Development Bank (AfDB), the largest lender of Rift Valley Railways, is unsure on how to claim a colossal sum of money owed by the firm. RVR has lost its concessions to run the Kenya-Uganda Railway and currently has no revenue stream.

The lender in 2011 advanced Sh4 billion ($40 million) to the railway firm for rehabilitating as well as operating the railway. This was expected to help it gain stability and get into profitability. The Sh4 billion loan was part of Sh16.5 billion ($165 million) long-term foreign currency-lending programme with other international financial institutions.

AfDB and other financial institutions are now staring at huge losses after RVR’s two concessions by the Kenyan and Ugandan governments to run the century old railway line were terminated. Kenya terminated the agreement on July 31 and Uganda followed suit in October, both citing failure by RVR to meet conditions of the concession signed in 2007 and expected to run for 25 years.

AfDB East Africa Regional Director Gabriel Negatu said the bank is yet to forge the way forward on how to recover the loan. It is at the moment looking up to the Kenyan and Ugandan governments to provide a sense of direction on recovery of the funds. “We are waiting to see how they resolve the impasse right now. The railway authorities are looking at how to amicably resolve the issue and part of that consideration is how to respond to the financial commitments that they had made to us and to other lenders. It is still work in progress,” he said.

Negatu’s optimism is despite assertions by the Ministry of Transport and Kenya Railways Corporation that hinted that they are done with RVR and want little, if anything, to do with the company.

The ministry and KRC have in the past separately said RVR failed to honour its end of the concession agreement. This includes failure to remit concession fees as well as not ferrying the amount of cargo as the agreement stipulated, and which formed the basis for terminating the deal.

Write the obituary

KRC is currently operating the metre gauge railway, which is faced with a myriad of challenges that have seen it experience hiccups including tense labour relations that have resulted in halting of operations especially the Nairobi commuter service. The line comes at a time when Government is operationalising the Standard Gauge Railway, starting with passenger service in June with the cargo service expected to start January 2018.

The Government said it plans to refurbish the old line, including segments that are currently not used, to offer a ‘last mile’ solution to the SGR. Negatu, however, noted that there is still room for the old railway to co-exist with the SGR.

“Now that the SGR is online, they need to think differently about how to handle the metre gauge railway. Your traditional way of moving cargo from Mombasa to Kampala might not do it for now… there is need to link the SGR with other areas so we should not write the obituary for the old railway yet,” said Negatu.

RVR in 2006 won the concession to run the metre gauge railway for a period of 25 years, in what was then seen as the biggest attempt to effectively utilise the 100-year-old railway.

It has, however, been a decade of frustrations for both the owner and the operator of the railway. RVR has been unable to make major investments as was expected and at some point stopped paying concession fees to Kenya Railways due to financial constraints.

The loans advanced in 2011 were expected to enable the concession, then in its fourth year, turnaround operations but seems to have failed.

AfDB tops the list of lenders that had advanced credit to RVR at Sh4 billion. Others are the German Development Bank (Sh3.2 billion), Equity Bank (Sh2 billion), World Bank’s International Finance Corporation (Sh2.2 billion), Dutch Development Bank (Sh2 billion) and the Belgian Investments Company for Developing Countries (Sh1 billion).

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