Train cargo drops as RVR concession fee row escalates

Locomotive engines at an RVR yard in Mombasa in September 2014. FILE PHOTO | NMG
Locomotive engines at an RVR yard in Mombasa in September 2014. FILE PHOTO | NMG 

Volumes of cargo hauled by train dipped by 9.3 per cent last year, offering a glimpse into the deepening trouble between Kenya and the concessionaire of the Mombasa-Kampala line.

The Economic Survey 2017 shows rail freight traffic decreased from 1,575,000 tonnes in 2015 to 1,429,000 tonnes last year, sparking the feud between the Kenya Railways Corporation and the Rift Valley Railways (RVR).

The drop in volumes came with a proportional fall in RVR’s revenue.

“Revenue earnings from freight stream decreased by 10.6 per cent to Sh5.6 billion in 2016,” the survey states.

The Kenya Railway Corporation has since issued a termination notice on a 25-year concession contract with the Egyptian-controlled RVR citing failure to meet set operating targets, including payment of concession fees.

Under the concession agreement, RVR was supposed to pay concession fees on a quarterly basis, and the amount was due 30 days after the end of each quarter.

The termination process was set in motion in January when KRC managing director Atanas (above) Maina issued RVR with a notice over unpaid fees amounting to Sh600 million and a string of misses in cargo haulage targets.

The RVR, which is 80 per cent owned by Cairo-based Qalaa Holding won the 25-year contract to run the 2,352km Kenya-Uganda railway in November 2006 for the cargo business, and a five-year contract for the passenger unit.

The report shows passenger journeys contracted by 7.3 per cent from 2,359 in 2015 to 2,186 in 2016, even as earnings from passenger traffic stream recorded a 2 per cent improvement to Sh101 million in 2016.

Financial difficulties at the RVR led to its failure to remit the funds to KRC from January 2016. KRC said it would consider reversing the termination notice issued if RVR sells a stake to cash rich investors who wish to invest in the consortium.

Mr Maina said RVR has a 90-day window to seek capital and put its house in order, upon which Kenya and Uganda will take a stand on the contract.