Ideas & Debate

Shady backroom operators, World Bank report cloud latest RVR sale plan


Rift Valley Railways locomotives being offloaded from a cargo ship at the port of Mombasa in December 2014. FILE | NATION MEDIA GROUP.

If telecoms operator Safaricom is the poster child of privatisation in Kenya, the Rift Valley Railways is its nemesis.

From the credibility of the process that gave birth to it — its launch was twice delayed in the last minute as the Treasury haggled with Transport ministry on the finer details — to the integrity of Sheltam Railways, the company that won the concession in 2006, it all began in a fiasco.

Since then, the ownership of the concession has changed multiple times, culminating to Qalaa Holding’s acquisition of a majority (85 per cent) stake in the company.

It has emerged that Qalaa is in the market looking for a buyer for its majority stake.

People familiar with the matter say the Egyptian firm has had discussions with a number of prospective buyers and have recently zeroed in on a consortium led by Rubix Energy Kenya Ltd, Rubix Energy Uganda Ltd, Shreeji Enterprises, Armstrong & Duncan and Transnet (which is yet to confirm its commitment).

Qalaa intends to offload 80 per cent of its shareholding in the loss-making business to the Rubix-led consortium and to retain a five per cent stake in the operation. The remaining 15 per cent is owned by Bomi Holdings of Uganda and is not up for sale.

What has, however, alarmed keen observers of this transaction is the speed at which the sale agreement between Qualaa and the prospective buyers is being pushed — the sale closure having been scheduled for December 31, 2016.

It has not helped that Rubix group (Kenya & Uganda, Armstrong and Duncan) have had questionable dealings with RVR, leaving a lot of discomfort in their wake.

Even more discomforting has been the realisation that those questionable deals were facilitated by individual RVR officials, who had indirect non-arm’s length dealings with the Rubix group.

Also puzzling is Qalaa’s decision to keep a five per cent shareholding in RVR, having made a decision to sell off its stake in the company.

The public may also want to take an interest in the capacity of the prospective buyer, Rubix, to efficiently run the complex business of railway logistics having had no past experience in such a venture.

This bid would have made more sense with the involvement of Transnet, the South African firm which has a reputation of running credible railway operations in Africa.

Rubix’s leadership of the consortium that will be in charge of RVR is therefore a mere continuation of the current situation in which Qalaa — an investment firm — ventured into the railway business with no experience.

At the heart of the many factors that cast a shadow on the credibility of this transaction is the fact that the team of advisers working for Rubix is made up of former RVR executives who left the company in controversial circumstances.

Poor performance

The team includes Andreas Heinel, the former chief commercial officer at RVR, who was sacked by Qalaa in 2015 for poor performance.

Heinel was one of the expatriates that Qalaa brought into RVR, despite the fact that they did not have the requisite qualifications for the positions.

READ: Ex-State House man Murage leads Sh13bn bid to buy RVR

It, therefore, beats reason that the same person who was sacked is the one being relied on to sweeten the deal between Qalaa and Rubix and in return Transnet.

Also in the team of backroom operators shepherding the deal is Alister D’Souza — the former general manager (commercial) — who was found to have joined RVR using forged academic papers.

He initially indicated that he was a holder of a Bachelor of Commerce degree from the University of Nairobi. But a search of the university’s database returned negative results, forcing him to resign just as RVR opened disciplinary proceedings against him.

How Alister got himself involved in the Rubix deal or even what his role is remains a mystery.

Bong Yoon, the current chief finance officer (CFO), is also a man of questionable academic qualifications. The graduate of the United States International University (USIU-A) is not a holder of a CPA — the minimum qualification that the Institute of Public Accountants of Kenya (ICPAK) requires for one to practise as an accountant.  

But even more important is that the entire RVR operation has been seriously discredited by a recent emergence in Uganda of a World Bank report implicating them in massive corruption, gross mismanagement of the concession and wastage that have crippled the operations of one of East Africa’s key economic infrastructure.

The report implicates Karim Sadek of Qalaa and Bong Yoon, among other senior RVR executives, of colluding not to pay taxes on imported locomotives amounting to billions of shillings. (The full story will be published on Thursday).

Sources at RVR’s Nairobi headquarters said that a junior employee was sacked as a result of internal investigations into the tax fraud saga.

It was not clear whether the prospective buyer of RVR has been fully briefed on this matter that has left the company at the risk of World Bank sanctions.

Stanley Murage, a former State House aide in the Mwai Kibaki government, is among the directors of Armstrong and Duncan where he sits on the board as chairman. His son, Mwangi Murage, is also a director in the company and doubles as its managing director.