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Economy

Kenya to review RVR termination notice

Head Karim Sadek, the managing director at Qalaa Holdings, which is the parent company of the Rift Valley Railways. FILE PHOTO | NMG
Karim Sadek, the managing director at Qalaa Holdings, which is the parent company of the Rift Valley Railways. FILE PHOTO | NMG 

Kenya will consider reversing the termination notice issued to the operator of the Kenya-Uganda railway Rift Valley Railways (RVR), if the firm sells a stake to cash-rich investors.

Kenya Railways Corporation (KRC) Managing Director Atanas Maina on Monday said RVR has a 90-day window to seek capital and put it’s house in order.

The Egyptian controlled company was served with a termination notice after failing to pay the Sh600 million fees for the year to December 2016 to KRC, missed cargo haulage targets and did not maintain railway assets as agreed in the 25-year contract.

“They are talking to some parties who wish to invest in the consortium. That is one way to get out of the situation,” Mr Maina told the Business Daily without disclosing the suitors.

“Should they get the new investment, we will look into it and, in consultation with Uganda, take a stand,” he said.

This came after the Business Daily on Monday learnt that Kenya Railways had terminated the contract last Thursday.

The RVR is 80 per cent owned by Egyptian private equity firm Qalaa Holding with the remaining fifth controlled by Uganda’s Bomi Holding and international finance institutions (IFIs).

“The lenders can also step in and remedy the situation,” said Mr Maina. The termination process was set in motion in January when Kenya Railways issued RVR with a default notice that was followed by a three-month warning of intent to terminate the contract, according to the former.

The journey to termination gathered pace last month when Kenyan officials travelled to Kampala for a meeting with their Ugandan counterparts to assess RVR’s performance.

Qalaa’s head of transportation division Karim Sadek, who was expected to attend the meeting, failed to show up, instead choosing to send a junior officer.

The move infuriated the top government officials, who left the meeting having passed a resolution to terminate the contract.

Railway transport has continued to lose a share of the cargo business as importers opt for roads.

Official data shows that trains accounted for only 5.6 per cent of the 26.7 million tonnes of cargo transported from Mombasa port in 2015.

RVR was gearing up for fresh pressure this year with the start of operations on the new Sh450 billion standard gauge railway from Mombasa to Nairobi, which will ferry heavier and bigger containers faster and relieve pressure on Kenya’s congested roads.

Mr Sadek had unsuccessfully sought a court injunction to stop the termination.

The firm managed to obtain a court order on March 31 asking the parties to seek an out-of-court settlement. 

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