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Persons of interest in ongoing probe at Rift Valley Railways (RVR)

By PATRICK MAYOYO | July 3rd 2016
Former Kenya Ports Authority managing director Brown Ondego.  During his tenure, RVR spent more than Sh2 billion to repair 73 kilometres of the railway track between Mombasa and Nairobi and is one of former top RVR officials under the World Bank scrutiny. (PHOTO: COURTESY)

As the World Bank investigates the use of funds advanced to Rift Valley Railways (RVR), sharp focus will be on seven serving and former top officials at the rail company.

The World Bank is scrutinising the purchase of second hand locomotives by RVR using a Sh16.5 billion loan the bank helped arrange.

According to documents seen by The Standard on Sunday, RVR bought used standard gauge locomotives from National Railway Equipment Company, an American company, at Sh17.1 million each.

The locomotives were modified to metre gauge at a cost of Sh99 million each. Investigators will hold talks with Brown Ondego, Ahmed Heikal, Karim Sadek, Carlos Andrade, Darlan de David, Titus Naikuni and Isaiah Okoth.

Dr Heikal is the founder and chairman of Qalaa Holdings (QH), the parent company of RVR. Heikal personally spearheaded the firm’s entry in the East African market through investments in the Kenya-Uganda railway.

In the past 10 years, Heikal has transformed Qalaa Holdings from a general partnership private equity manager to a leading investment holdings firm investing in Egypt and East Africa.

Mr Ondego, a former Kenya Ports Authority managing director, joined RVR in 2008 as executive chairman before being relegated to the position of Executive Vice-Chairman in November 2012 where he became in charge of governmental and regulatory relations. During his tenure, RVR spent more than Sh2 billion to repair 73 kilometres of the railway track between Mombasa and Nairobi.

The railway modernisation project was to reduce cargo delivery time between Mombasa and Nairobi by six hours through rebuilding the most badly rundown sections, responsible for 60 per cent of blockage time on the rail line due to derailments.

Mr De David was the RVR Chief Executive Officer when the company entered into a contract with a company called Yalda Ltd, trading as Gear Africa, based in Mauritius for supply of a computer system for monitoring trains along the Kenya-Uganda railway at a cost of more than Sh900 million.

The contract also said to be a subject of the ongoing World Bank investigations was for technology upgrade that included global positioning system (GPS)-based software that centrally controls the movement of trains and cargo along the railway track. The automated train warrant (ATW) software was to allow online visualisation from an operations control centre in Nairobi of the precise location of trains along the railway. It was to replace manual management of crossovers at railway stations with satellite-enabled self-switching movement of trains.

Mr Sadek, as the managing director of Qalaa Holdings (formerly Citadel Capital) oversaw Africa’s leading equity firm’s acquisition of a 49 per cent stake in Sheltam Railways Company, the largest single shareholder and lead investor in RVR.
Sheltam owns 35 percent of RVR, which has a 25-year concession to operate a century-old rail line with some 2,000 kilometres of track linking the Port of Mombasa in Kenya with the interiors of both Kenya and Uganda, including the capital city of Kampla. The transaction gave Citadel Capital an effective ownership of 17.5 per cent of RVR.

As the managing director of Qalaa Holdings, Sadek is expected to shed light on most queries raised by World Bank investigators. Mr Andrade was at the helm of RVR for four years until March 1 this year when he was replaced by Mr Okoth as the new group CEO. Andrade is the man who oversaw the Sh28 billion capital expenditure plan that involved a series of loans from different financial institutions.

He was instrumental in the roll-out of the railway’s capex programme and improvement of its operational efficiency. Owing to the position he held, Andrade would be a key person ofinterest. Mr Naikuni was appointed chairman of RVR in November 2014 at a time when the Sh28 billion capital expenditure plan was being implemented.

He is expected to tell the investigators the decisions the RVR board of directors took and the direction they gave concerning the projects in question.

He joined RVR at a time when it was receiving the first delivery of 20 General Electric locomotives acquired from the US.

The locomotives are said to be part of issues under investigation by the World Bank. Naikuni is a former CEO of the national carrier Kenya Airways where he was at the helm from 2003.

Mr Okoth, who joined RVR in March, as CEO, may not have answers to many questions being raised at RVR. But as the CEO, he is expected to facilitate a seamless investigative process.

Okoth is a former East African General Manager of GE Healthcare, and took over operations at RVR from Andrade who had been at the helm of RVR for four years.

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