RVR to spend Sh5bn on wagon upgrade

Rift Valley Railways is to spend Sh5.2 billion ($62 million) buying new wagons and restoring old ones to help it take on road freighters, who take the bulk of cargo that goes through the port of Mombasa.

RVR, which operates the Kenya-Uganda railway and which is owned by, among others, Kenyan infrastructure firm TransCentury and Egyptian group Citadel Capital, plans to nearly double capacity on every train to 1,500 tonnes.

Along with track renewal to allow trains to move goods faster, RVR hopes the investment will help it raise its share of freight to 35 per cent in the next two and half years, up from four per cent.

“We will be able to run bigger capacity trains, thereby improving our loading capacity and reducing the operation’s transit times,” the firm’s executive chairman Brown Ondego said.

While cargo volume at the port of Mombasa has shot up to more than 20 million tonnes as at the end of last year from seven million tonnes in the 1980s, volumes transported by RVR have declined from 4.8 million tonnes to 1.5 million tonnes in the same period.

This poor show has been linked to the bad state of wagons and rail network that has seen cargo owners turn to the more expensive road transport — a move that has partly contributed to the poor state of roads in Kenya.

Rehabilitation of the rail network, which runs between Kenya and Uganda, is viewed as critical to expanding trade across the east African region and is estimated to reduce transport costs by up to a third. It mainly transports maize, wheat and steel.

RVR has initiated turnaround efforts that have seen it borrow $164 million (Sh13.6 billion) from a consortium of banks.

It has also changed its executive suite to tap fresh ideas, making Mr Ondego the CEO and hiring four executives.

The loan, which it received from financiers like African Development Bank, Equity Bank and World Bank’s private lending arm IFC, will be disbursed in the next five years and spent on modernising the railway.

RVR intends to revamp 100 locomotives, 3,500 wagons and the entire rail track that stretches from Mombasa to Kampala.

Five years since the granting of the concession, RVR’s performance has failed to live up to expectations of both the Kenya and Uganda governments. Lack of financial and technical muscle on the side of the lead investor, Mr Roy Puffet of Sheltam, is blamed for this.

RVR recorded a 13 per cent growth in revenue last year, but fell short of matching its peak performance four years ago.

The firm’s revenues grew from Sh4.6 billion in 2010 to Sh5.2 billion in 2011, helped by a marginal increase in freight traffic and transport charges, according to the Economic Survey 2012.

Freight traffic stood at 1.6 million tonnes last year compared to 2.3 million tonnes in 2007 when it had performed at its best.