NAIROBI-Rift Valley Railways shareholders, who recently signed a new concession agreement, are expected to engage a Brazilian holding company, America Latina Logistica (ALL), in the management of the Kenya-Uganda railway.
By enlisting the largest rail-based independent logistics operator in Latin America, the shareholders are going for a proven operator to solve the technical capacity constraints that bedeviled the initial concessionaire â€“ South Africaâ€™s Sheltam Railways Company.
â€œThey have technical ability and expertise to manage a narrow one-metre gauge railway like the Kenya-Uganda railway and in worse conditions,â€ a source said.
â€œThey will be seeking technical assistance from people from Brazil, who will provide the expertise on the operation of such a railway system,â€ transport permanent secretary Dr. Cyrus Njiru said.
The ALL operates a fleet of 1,100 locomotives, 31,000 railcars and 1,000 trucks.
It manages more than 21,000 kilometres in railroads spanning from the central region of Argentina to Brazilâ€™s south, southeast and midwest regions.
Contracting the services of a proven rail operator is among a raft of measures required under the revised concession agreement that Ugandaâ€™s Finance Minister Syda Bbumba and Kenyaâ€™s Transport minister Amos Kimunya signed in Kampala, recently.
International Finance Corporation, the private sector lending arm of the World Bank, advised the two governments on the concessioning.
Under the agreement, Egyptian firm, Citadel Capital, is the principal shareholder in RVR with 51% stake, Kenyaâ€™s private equity investment firm, TransCentury, 34%, while Ugandans hold 15%.
The agreement is expected to end boardroom wars pitting Kenyan and Ugandan investors against their Egyptian counterparts in a bid to replace Sheltam, which originally won the 25-year concession to run the 1,200km railway in 2006.
The wrangles peaked when Citadel Capital, the Cairo-based private equity firm, quietly acquired 49 per cent shares of Sheltam, the then majority shareholder in RVR.
â€œThings could start happening on the ground within 90 days and we expect major improvements in the next 24 months,â€ Dr Njiru said, â€œThe biggest problem has been capital and this will not be an issue now.â€
He pointed out that while in the past Sheltamâ€™s position as the lead concessionaire disadvantaged other shareholders from influencing critical management decisions, the situation has been addressed.
The source intimated that the repair of locomotives is under way and shareholders are buying steel for rehabilitation of the railway line. This is in line with the performance targets envisaged under the agreement.
â€œBesides meeting financial targets such as investing Sh20 billion ($250 million) to Sh24 billion ($300 million) in equity and debt in five years, we expect to increase capacity such as moving five million tonnes of cargo annually up from about a million tonnes we move presently,â€ said the source.
With shareholders expected to contribute about one third of the finances, the agreement is expected to unlock more capital injection from six international lenders
Brazilian firm to manage Uganda, Kenya railway network