22 September 2014       Download

Cabinet Secretary for Transport and Infrastructure notes RVR is meeting concession investment terms, creating an engine of national economic development

Rift Valley Railways, the national rail operator of Kenya and Uganda and a unit of Qalaa Holdings in the East African transportation and logistics sector, celebrated the arrival of three new locomotives manufactured in the United States.

The deliveries, the latest in US$ 287 million (KES 26 billion), five-year turnaround program for RVR, are part of a program that will see the rail operator add 20 new US locomotives and six rehabilitated engines to its fleet this year.

“Qalaa Holdings and its partners in Africa Railways have so far invested more in improving RVR in the last 32 months than had been invested in the previous 30 years combined. Alongside our track record in the past two-and-a-half years, the US$ 25.3 million (KES 2.3billion) acquisition of 20 new locomotives from the United States is proof positive of our commitment to investing in RVR — of doing everything necessary to ensure it succeeds,” said Karim Sadek, Qalaa Holdings’ Managing Director for Transportation, at a ceremony held in Changamwe, Mombasa. 

A senior Kenyan government official attending the event noted that RVR had been found wanting in the first three-and-a-half years of its concession before the entry of Africa Railways as lead shareholder. (Africa Railways is a vehicle for investment in the African rail sector controlled by Qalaa Holdings and leading international limited partners, including top development finance institutions).

“The Government of Kenya is committed to supporting RVR’s investment and growth goals and to provide an enabling environment that will allow railway operations in Kenya and the region to thrive,” said Eng. Michael Kamau, Cabinet Secretary for Transport and Infrastructure. “Taking cognizance of the investment made and the work in progress by RVR, there are indications that this public-private partnership is turning the corner — and there are encouraging signs of bright days ahead in the railway sector which will positively impact many other sectors of the economy and society at large.”

The ceremony was attended by senior government officials from both Kenya and Uganda including Stephen Chebrot, Uganda’s Minister of Transportation.

In remarks to attendees, Sadek noted that, “Since our entry to the concession, we have led the rehabilitation of the most damaged sections of railway track between Mombasa and Nairobi. In the process, RVR removed 24 kilometers of speed restrictions in just two months. We have rebuilt nine crumbling culverts between Jinja and Busembatia in Uganda, allowing the direct movement of heavy trains to Uganda. We have repaired and re-opened the 500-kilometer-long Tororo-Pakwach railway line after 20 years of disuse. We have led the acquisition of modern railway operating equipment, an investment of US$ 2.3 million (KES 200 million) that will dramatically improve the pace and quality of railway track improvement.”

As a result of these and other investments, Sadek said, “RVR has reported a 50% reduction in incidents per million ton-kilometers in the first half of this year, a 51% decline in blockage time, and a 29.5% rise in monthly net ton-kilometers in the same period. We have landed important new freight clients and cut the cycle time — or round trips — from Mombasa to Kampala from 16 days at the beginning of the year to the current 10 days. One-way trips from the port to Kampala are now being completed in 3.5 days, down from 7 days in January.”

Kamau observed that: “I am now happy to note that following the disbursement by lenders and the contribution of the agreed amounts by the shareholders, RVR has been able to invest to the tune of US$ 343 million (KES 30.4 billion) which exceeds the aggregate sum required to be invested contractually.

 “I have no doubt that if Rift Valleys Railways continues to invest in both the track and rolling stock, we shall see improved performance in the railway sub-sector. It is notable that since January 2013, RVR's freight haulage performance has seen a fairly steady rise mainly due to investment in permanent way on the Mombasa-Nairobi section and the refurbishment of rolling stock. In addition, RVR is current in the payment of concession fees and so far has paid a total of US$ 50 million (KES 4.4 billion) to the Government since commencement of the concession..

 “We want to thank the shareholders and lenders whose support has made this possible. We value your partnership and willingness to invest in rail operations and choosing Kenya and Uganda as an investment destination,” Kamau concluded.

Africa Railways is backed by lenders including African Development Bank, International Finance Corporation, KfW Entwicklungsbank, FMO, Belgian Investment Company for Developing Countries, ICF Debt Pool, and Kenya’s Equity Bank as well as Standard Bank of South Africa and CFC Stanbic Bank. Africa Railways shareholders alongside Qalaa Holdings include IFC African, Latin American and Caribbean Fund, LP (ALAC), the private equity fund managed by the IFC Asset Management Company, LLC; FMO; DEG; FISEA (a vehicle owned by Proparco); and International Finance Corporation.

“Qalaa Holdings and our partners in Africa Railways are entirely committed to the nations of Kenya and Uganda. We are absolutely convinced that we can create not just the best railway operator on our continent, but that we can write on the ground a shining example of how African solutions are the best solutions to African challenges,” concluded Sadek.

Acquisition of the 20 new locomotives is backed by a US$ 20.3 million (KES 1.8 billion) facility from Standard Bank of South Africa and CFC Stanbic Bank.

News of the locomotives comes just weeks after Qalaa Holdings and its partners in Africa Railways recruited former Kenya Airways CEO Dr. Titus Naikuni as the new Chairman of the Board of Rift Valley Railways. Naikuni brings extensive operational, business leadership and policy formulation experience to the rail operator.