RVR loses fight to save 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 has terminated the 25-year contract that it signed with the Rift Valley Railways’ (RVR) to run its century old metre-gauge line to Uganda.

The decision was reached by consent made in the High Court Monday between RVR and the Kenya Railways (KR) Corporation.

“It is hereby ordered by consent that the concession agreement dated January 23, 2006 be and is hereby terminated today July 31, 2017,” ordered Justice Grace Nzioka.

“The parties will within 30- days effect orderly transfer of employees and assets and agree on modalities of hand back of all the property to KR and the Government,” she added.

The threat to terminate the concession agreement has been hanging in the air since January after financiers failed to come to RVR’s rescue.

RVR, controlled by Qalaa Holding - an Egyptian equity fund - has on several occasions been accused of failure to meet set operating targets including payment of concession fees.

It had moved to court earlier this month seeking to stop Kenya Railways from terminating the contract.

No disruption of services

In joint statement signed by KR managing director Atanas Maina and RVR chief executive Isaiah Okoth, the two sides said they had formed a takeover committee ensure transport services are not disrupted by the termination.

“RVR will endeavour to ensure that there is minimal adverse economic and social impact associated with the transition,” the joint statement reads in part.

RVR, which currently controls just under five per cent of Mombasa Port’s cargo, has over the years specialised in haulage of heavy and bulky cargo, especially those on transit to Uganda.

Kenya has since June 1 been test-running its standard gauge railway trains from Mombasa to Nairobi.

The SGR trains do not pose immediate threat to RVR as their cargo services not only end in Nairobi but tests on them were postponed to December.

The journey to terminate RVR concession picked pace in mid-March when Kenyan officials travelled to Kampala for a meeting with their Ugandan counterparts to assess RVR’s performance.

The move is set to harden the stand of the Ugandan government which has also threatened to terminate its contract with RVR over underperformance.