RVR inks chemicals, fertiliser cargo deal with Egyptian traders

Rift Valley Railways is set to become the main inland transporter of Egyptian fertiliser and chemicals from the Mombasa port after signing a memorandum of agreement with the Egyptian export council for chemicals and fertilisers.

The MoU was signed at the weekend during the Africa 2016 conference in Egypt between the export council and Egyptian private equity fund Qalaa Holdings.

Qalaa holdings owns 85 per cent of the Rift Valley Railways (RVR), the company that operates the Kenya-Uganda railway line services under a concession agreement.

Qalaa managing director Karim Sadek told the Business Daily that the MoU stipulates that RVR would offer members of the council discounted rates on large volumes of commodity, while the firm would become the exclusive carrier for the members from the port.

Exporters in Egypt are usually grouped under sector defined councils, which negotiate deals collectively with overseas markets.

Chemicals and fertiliser constitute 23 per cent of Egyptian exports to Kenya and Uganda. “For Egyptian exporters, the inland transport part has always been a big problem.

They understand the shipping to port but from there they struggle a bit. The service we are going to offer them is not just rail transport, it will also have warehousing at inland container depots,” said Mr Sadek.

In 2014, Kenya received 250,000 tonnes of Egyptian imports, although they were container rather than bulk imports, including goods such as paper products, white goods and fertiliser.

RVR expects some of the Egyptian exporters to also take up the option of a joint venture plan on construction of handling facilities at railway lines that it introduced recently.

Each client signing up to the plan — referred to as a contract-based revenue model — will be expected to invest between Sh2 billion and Sh3 billion in building storage and handling facilities at loading and offloading points in Mombasa, Nairobi and Kampala, and in turn benefit from lower freight charges on the railway.

Mr Sadek said an oil firm and a bulk grain trading firm have already signed up to the plan for facilities in Kampala, while the railway firm is close to tying up a deal for a loading facility in Nairobi.

The setting up of the facilities adjacent to railway lines is similar to the National Cereals and Produce Board’s plan which saw silos built next to railway lines to eliminate the need for trucking grain to and from the railway stations.

“We are finalising our first Nairobi deal in the next two months. These are long term transport agreements on contract basis instead of spot payments, meaning that we will have a pre-agreed annual load which gives us certainty on volume and revenue,” said Mr Sadek.