The Rift Valley Railways (RVR) consortium will take over the Uganda-Kenya railways on November 1 after getting funds needed to start operations.
Finance minister Dr. Ezra Suruma said this at the signing of the Direct Agreements between RVR, the governments of Uganda and Kenya and its financiers the International Finance Corporation (IFC) and Germanyâ€™s KfW at Serena Kampala Hotel yesterday.
Under the agreements, RVR will immediately access $88m to start operations. RVR is to provide $24m equity, while the IFC and KfW will each lend $32m or $64m.
â€œSigning of the Direct Agreements today is one of the assurances that required finances for the concession are secured and the concessionaire is ready to take over the two railways,â€ Suruma said.
â€œThe Government is comforted by the fact that IFC and KfW are not ordinary financiers, but partners in development. With this commitment, the concessionaire will live up to its commitment to improve the railways,â€ he said.
Suruma and Chirau Ali Mwakere, Kenyaâ€™s minister for transport, signed for the Uganda and Kenya governments respectively.
Jean Phillip Prosper and Klaus Gihr signed for IFC and KfW respectively. Roy Puffet signed for RVR.
Mwakwere said although traditionally, government provided infrastructure services, some of them like railways had not been competitive, were disappointing and needed public funds for investment.
â€œRestructuring entails a clean break from past practices. A few concessions have been abandoned due to operatorsâ€™ bankruptcies but I am confident this railway concession will be a success,â€ he said.
The consortium led by Sheltam Trade will operate the railways of both countries which cover 3,159km for the next 25 years.
It will pay $3m and $2m to the Kenyan and Ugandan governments respectively as well as concession fees equivalent to 11.1% of its gross revenues per year in each country.
It will pay $1m per year to Kenya for passenger operations.
RVR will invest $322m in improving infrastructure and rolling stock and $80m will be invested in the first five years.
Its winning proposal includes a turnaround and development programme expected to lead to significant growth and increase in freight traffic volume in the first five years.
RVR to take over Kenya-Uganda railways