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Published: 11 February 2017
Rift Valley Railways for sale
Qalaa Holdings has announced that it will sell its majority stake in Rift Valley Railways, the narrow gauge railway that runs from the Port of Mombasa westwards to Nairobi and Kampala. Meanwhile, progress is being made with the standard gauge "MoKaKi" line
The Egyptian company is in talks with unnamed potential purchasers of its 73.76% stake. Apart from the west-east railway, RVR operates spur lines, with the entire network extending to 2,350km. The RVR concession has another 14 years left to run.
A Qalaa statement reads: “The decision to divest from RVR comes in the wake of management’s conclusion that additional capital is required to complete RVR’s transformation programme, which has already yielded positive results according to recent operational performance reports.”
Any new investor will presumably have to provide assurances on the provision of the additional capital required. With the new standard gauge railway between Mombasa and Nairobi approaching completion, the future role of the RVR line is in some doubt.
Qalaa has indicated that it “will continue to provide operational and managerial support” to RVR, and continue to implement the turnaround strategy, until the sale is finalised. RVR has been upgrading the line and rolling stock since it took over the concession in 2006, long before the parallel standard gauge railway was proposed.
The latter is now being named the Mombasa-Kampala-Kigali (MoKaKi) project, as the Rwandan capital is intended to be the terminus of the line.
In December, the Kenyan government finally paid KSh416M (US$3.93M) in compensation to RVR for damage caused to the line during post-election violence in 2008 and subsequent loss of business. The sum had been outstanding for five years and its payment only came to light following an investigation by Kenya’s Ethics and Anti-Corruption Commission.
It had been claimed that some of the budget for the MoKaKi feasibility study had disappeared, but it has now been revealed that the money was used to settle the RVR debt.
The next leg of the MoKaKi railway has, meanwhile, taken a step closer to being built. The government of Uganda has awarded China Harbour Engineering Company the US$2.3B contract to develop the section of the new standard gauge railway between the town of Malaba on the Kenyan border and Kampala, replacing a MoU signed between the Ugandan government and China Civil Engineering Construction Corporation for the same project in 2012.
It has been reported in Uganda that land covering 60% of the 273km route has already been acquired. The section of line running from Kampala westwards to the Rwandan border, which will be roughly the same length, will be the subject of a separate contract. In addition, a spur line will run from Uganda to Juba in South Sudan.
Project coordinator Kasingye Kyamugambi said: “As soon as studies are complete and approved, and funds secured, works on the other sections of the SGR will commence.” According to the Kenyan government, the Kenyan section of the line was 98% complete in early January and on course to begin operating by the start of 2018.
Total costs are put at US$2.3B, including rolling stock. As with the Kenyan stretch of railway, some funding is expected to be provided by Export-Import Bank (Exim) of China, although it has not yet been revealed how much.
However, Kampala will provide 15% of the money itself, as well as the land required. Under the terms of the contract, the line is to be completed by mid-2020. The government estimates that the railway will save the country US$2B a year and that it will be about 65% cheaper than current rail and road haulage.