African Press International (API)

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More investors sought for Kenya-Uganda Railway system following failure of RVR

Posted by African Press International on October 5, 2008

<Business feature by Leo Odera Omolo

Kenya and Uganda are in the process of amending joint railway concession agreement with the Rift Valley Railway to pave the way for recruitment of more shareholders willing to invest in the 1400km rail line.

Top Ugandan officials led by the Minister for Works and Transport John Nasasira and senior officials from Kenya met over the weekend and charted the way forward to begin the amendment proceeding.

The officials were drawn from the ministry of works and transport and finance of the two countries.

The revision of the contract will adjust the shareholding of both Uganda and Kenya.

According to the agreement currently in force, 10% shares were reserved for the private sector s in each country. Adjustment in the shareholding will lay the ground for more companies to be incorporated.

We are still holding discussions with the private sector. A number of players have shown interest the Ugandan Minister was quoted saying this to the participants.

The Minister however, declined to divulge details of the companies willing to join RVR only saying it is just too early

Meanwhile a spokesman from the Uganda Privatization Unit Jim Magungu is reported to have disclosed that Sheltan was moved from the commission deal to create space for potential firms to take over.

.The Kenyan and Ugandan railway network jointly entered into a 25 year concession agreement with Rift Valley Railways, a South African company, in late 2006. The embattled railway operator has since struggled to retain its contract and obtain more funds from international financiers. The shareholders have pledged to raise 10million USD.

.Nairobi and Kampala have made it clear to RVR that by next month (October 2008) this year, the railway operator should have injected 40million dollars into the business or risk losing the contract for non-performance.

The return of Mirando holdings and Prime fuels as well as the urgency of finding new partners with capital means that the shareholding of Sheltam is bound to be minimized and it may eventually pull out.. Sheltam was until recently the leader of the RVR consortium.

The South African corporation has its stake trimmed down to below 35per cent in a major revision of the commission terms.

.RVR Kenyan new executive chairman Brown Ondego was recently quoted by the EASTAFRICAN Weekly as saying that the concession was one of the conditions expressed by Kenya and Uganda before enforcing a 206 million investment

RVR had originally pledged to raise 28 million USD at the beginning of its operation in 2006. This would have enabled its financiers, the International Finance Corporation {IFC}and KfW of Germany to provide 64million.USD.

Uganda and Kenya also say they together with RVR, are revising the contract to enhance infrastructure development especially the widening the gauge of the track.

Uganda officials say the initiative will boost the railway speed from 60km/hr to 100km/hr. the enhancement in the East African Community railway master plan.

We are sharing with RVR the master plan so that they harmonise with us a senior official in the ministry of works and transport said recently.

Under the design prepared by the Kenyan government, construction at a standard gauge railway line of 1.4 meters should commence immediately, as opposed to the EAC secretariats proposal of rehabilitating the existing railway network first.

Kenya Railway Corporation (KRC) is also proposing an open access management model that allows private players to operate their own rolling stock such as locomotives and wagons on the common railway at a user fee.

Kenyan Transport Minister Chiran Ali Makwere was recently quoted as saying that the MOU, which was prepared by the standard gauge railway consultative group, would involve construction of a new rail network in line with world standards which dictate an in rail which is 1.4 meters.

A gauge is the width between railway lines and Kenya currently uses a rail system with a 1 meter width, which according to experts is obsolete and unproductive

.In the new design , the group has proposed construction of new lines from Mombasa to Bujumbura, via Kampala and Kigali and Nairobi to Addis Ababa and Nairobi to Adis Ababa through the northern Kenya. Another line which will be built from Dar Es Salaam through Isaka.

The proposed system according to transport minister will have the capacity to transport up to 900 tonnes at an average speed of 450km/hr. it is expected that with the intersection of this gauge the cost of transport will drop between 15% and 20%

Tanzania and Rwanda will also construct a 10435mm standard gauge railway from Isaka to Kigali thereby connecting the countries with the region from heavy duty wide gauge rail line

.East Africa is a predominantly narrow gauge zone, Kenya , Tanzania and Uganda are mainly served by 1000mm gauge rail lines. Some 60% of the worlds railways are already standard gauge which is also called international gauge.

Ends

leooderaomolo@yahoo.com

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API

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