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RVR finally loses its 25 year railway contract

LOCOMOTIVE ENGINES AT AN RVR YARD IN MOMBASA. FILE PHOTO | NMG
LOCOMOTIVE ENGINES AT AN RVR YARD IN MOMBASA. FILE PHOTO | NMG  

Kenya Railways has finally terminated Rift Valley Railways’ (RVR) 25-year contract to run the Kenya-Uganda railway after the State corporation failed to resolve long-standing business disputes with the concessionaire.

Kenya Railways managing director Atanas Maina and his RVR counterpart, Isaiah Okoth, Monday agreed that RVR will hand back operations, employees and assets of the 100-year-old railway to the agency within 30 days.

The deal was sealed at the High Court, where RVR had in January rushed to contest Kenya Railways’ impending termination of the contract.

Kenya Railways had cited failure to pay Sh600 million concession fees and missed cargo haulage targets as reason for the planned termination.

“It is hereby ordered by consent: That the concession agreement dated January 23, 2006 be and is hereby terminated today July 31,2017,” the High Court said in its ruling Monday.

The two parties will now form a joint takeover committee to oversee smooth transfer of assets and operations to Kenya Railways.

“In doing so, KR/RVR will also endeavour to ensure there is minimal adverse economic and social impact associated with the transition,” a statement jointly signed by Mr Maina and Mr Okoth says, adding that operations will not be affected by the change of guard.

The termination signals that RVR failed to meet conditions by Kenya Railways, which had in April said it would reverse its notice if the firm sells a stake to cash-rich investors.

RVR was given a 90-day window to look for the investor.

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

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.

The journey to termination gathered pace in March 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 (SGR) from Mombasa to Nairobi, which will ferry heavier and bigger containers faster and relieve pressure on Kenya’s congested roads.

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