Rift Valley Railways (RVR) has hit back at the government over plans to review the concession agreement for running of the Kenya-Uganda railway saying that it has met terms of its pact.
Egyptian PE fund Citadel, which owns 51 per cent of RVR, reckons the rail firm has met its obligations of investing at least $40 million in the business and that threats to cancel its contracts are unfounded.
Transport Secretary Michael Kamau threatened to review the concession agreement over poor performance of the rail business, arguing that RVR has failed to live up to expectations of the Kenyan and Ugandan governments seven years since being granted the concession.
But Hassan Massoud, the vice president of Citadel Capital, says the reference point should be the 2010 agreement and not the one inked in 2006, when the PE fund had bought the stake.
“Our obligation was to invest $40 million in infrastructure improvement, period. And we have raised more funds,” said Mr Massoud.
“As far as we are concerned the concession started in August 2010. This is Kenya and we don’t expect the government to make unilateral decisions like cancelling the concession.”
The rail firm said it has paid the Kenya and Uganda governments concession fees of $53 million (Sh4.6 billion) since August 2010. RVR CEO Darlan Fabio said the firm has paid a total of $53 million to the Kenya and Uganda governments as concession fees to date.
The firm won a 25-year contract to run the 2,352km Kenya-Uganda railway in November 2006 on the cargo business and a five year contract for the passenger unit whose tenure was extended by months in 2008.
“We have had a seven-year concession, and since it started cargo transported by rail has gone down from 15 per cent to three per cent, we will look at the concession again and see whether it is working,” Mr Kamau recently said.
On the passenger business, the government has opted to offer the rail firm shorter one-year contracts, which gives the State a window to consider new operators should it be dissatisfied with RVR, said a senior official at the Transport ministry.
Kenya’s passenger rail services have not recorded any significant improvement. Official statistics show that the total kilometres covered by the operator dropped from 389 million in 2009 to 365 million kilometres last year.
Performance in the cargo business has also not been impressive with the volume transported from Mombasa port growing only marginally from 1,060 million tonnes in 2009 to 1,135 million tonnes last year. This is despite the cost benefits transporters stand to gain moving cargo by rail.
The Kenya Railways Corporation, which oversees the concession on behalf the government, appears not satisfied with RVR’s progress.
RVR was expected to overhaul the dilapidated metre gauge track, the first such major investment 20 years, repair wagons, and overhaul locomotives after a receiving a Sh13.9 billion ($164 million) debt.
Last month, the rail firm said it completed the repairs of the Mombasa-Nairobi track at a cost of Sh1.7 billion.
Despite the massive potential that rail transport has for improving the region’s economy, it has always played second fiddle to roads in both cargo and passenger transport.
In the last financial year trains hauled about 1.6 million metric tonnes of cargo originating from Mombasa port estimated at about 20 million metric tonnes per annum.
The rest of the freight was handled by trucks, which Mr Kamau blamed for the destruction of roads.
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