World Bank penalises Rift Valley Railways railways for corruption

Mombasa port workers view one of the three locomotive engines imported by Rift Valley Railways (RVR) on December 28. Part of the projects funded by the World Bank's International Finance Corporation included the purchase of locomotives by RVR. [File, Standard]

The World Bank has put sanctions on the defunct Rift Valley Railways (RVR) for corruption during the controversial Kenya-Uganda Railway concession agreement.

The move by the global lender comes following revelations of corrupt dealings in projects funded by the the World Bank’s private sector arm - the International Finance Corporation (IFC).

Investigations into the projects saw the World Bank put sanctions on RVR alongside another firm, with a third one being banned from participating in the bank’s projects for two years altogether.

“The World Bank today announced the debarment of Africa Railways Logistics Ltd for two years in connection with an employee’s attempt to improperly influence the customs and port clearance process for locomotives that were part of two investment projects by the International Finance Corporation (IFC) the private sector arm of the World Bank Group,” said the World Bank in a statement.

This means that the firm, which runs massive rail infrastructure projects across sub-Saharan Africa, will not be eligible to participate in World Bank-funded tenders for the next two years.

“Two related companies – Africa Railways Ltd and Rift Valley Railways Kenya, (RVRK) were sanctioned with conditional non-debarmnet,” said the bank.

This means the two, unlike Africa Railways Logistics, remain eligible to participate in World Bank-financed projects as long as they comply with their obligations under the settlement agreement.

This is the first time the World Bank is issuing a debarment related to an IFC investment, with RVR admitting violation of tendering requirements by one of its employees who has since been dismissed.

“An employee of RVRK, who also owned a subcontracted company, both failed to disclose his ownership interest in the company and attempted to improperly influence the customs and port clearance process for the locomotives which is a corrupt practice,” said the bank in part. The IFC investments included a loan to purchase locomotives, wagons, infrastructure and cover other costs associated with railway concessions in Kenya and Uganda.

The investment dates back to 2006 when the IFC entered negotiations with South Africa’s rail company Sheltam that first won the concession for the 2350km Kenya-Uganda Railway. The project saw the IFC commit $32million (Sh3.2 billion) to go towards the costs of resettlement and retrenchment that would follow the modernisation of the aging rail system.

The IFC again in 2011 signed a $15million (Sh1.5 billion) equity investment with Africa Railways Ltd, the holding company formed to manage RVR.

A high court ruling last June bought RVR’s concession deal with Kenya Railways to an acrimonious end days before the newly built Standard Gauge Railways officially began operations.