AfDB, Others Commit USD165 million to Railway Infrastructure in East Africa

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The African Development Bank (AfDB) has committed USD40 million to support a five-year capital investment programme for Rift Valley Railways, a consortium established to manage the parastatal railways of Kenya and Uganda.

The AfDB’s funding is part of a USD165 million long-term foreign currency-lending programme with other international financial institutions. The Rift Valley Railways consortium won the bid for private management of the over 100-year old Kenya-Uganda railway in 2005.

The lending programme was signed between Rift Valley Railways, senior officials of the governments of Kenya and Uganda and representatives of the various lending parties in Nairobi yesterday.

The AfDB financing will be used to rehabilitate, operate on and maintain a regional railway concession and related facilities in Kenya and Uganda. The Rail network runs from Mombasa Port in Kenya to the Ugandan capital in Kampala, with a branch to Pakwach in northeastern Uganda.

The project company Rift Valley Railways Investments owns 100 percent of Rift Valley Railways Kenya and 100 percent of Rift Valley Railways Uganda, which are both registered in Kenya and Uganda respectively.

The realisation of this project will establish an efficient, reliable and integrated rail system in Kenya and Uganda and represents a major step in the development in transport systems of Uganda and other similar landlocked countries. The refurbishment will lead to reduced transit times and is expected to lead to an increase of the rail market share of the freight transport requirement.

In a joint statement, the Ministers from Kenya and Uganda commented, “The two Governments are happy to report that Rift Valley Railways has shown commitment in meeting its obligations and improving rail services in the two countries. Rift Valley Railways has presented several investment plans for track maintenance, rehabilitation of locomotives and wagons for consideration by the Governments of Kenya and Uganda. It is expected that following the signing of the loan agreements between RVR and the lenders, finances will be released expeditiously for the implementation of these plans.”

Brown Ondego, CEO of Rift Valley Investments, attributed the positive earnings of Rift Valley Investments to dedicated teamwork. He said ‘Our rehabilitation program, which we kick started in November 2010, has already delivered impressive early results,” said Brown Ondego, Group Chief Executive Officer of RVR. “Net ton kilometres were up 9 percent in the first half of 2011 compared with the same period last year, while turnaround times — a key measure of asset utilization — on the strategic Mombasa-Kampala route dropped 27 percent in the same period. Year-on-year, we have also seen a 30 percent drop in accidents per train kilometre.’

Commenting on the African Development Bank’s investment, Gabriel Negatu, the AfDB’s regional director for East Africa, offered continued support for the development of infrastructure in the region. “With the restructuring and investment plan, Rift Valley Railways has the potential to increase its volumes and its customer base significantly, thus increasing economic activity in the region,” he said. “The Rift Valley Railways project represents a significant opportunity to contribute towards bridging the infrastructure gap in East Africa. The African Development Bank continues to play a lead role in financing the infrastructure gap in Africa.”
Since 2003, the African Development Bank has approved about USD2 billion worth of funding for the development of transport infrastructure in Africa by its private sector arm. The projects have included the development of ports, roads, airports and railways and have been financed in various forms comprising corporate finance, project finance and public-private partnerships.

The African Development Bank’s involvement in strategic partnerships with other development finance institutions, including other multilateral development banks, in key sectors like transport infrastructure ensures significant catalytic effects. It generates, for example, USD7 in finance leverage for every USD1 invested, and also contributes to job creation and income growth.

Signatories to the signing ceremony included Germany’s KfW Bankengruppe, the International Finance Corporation (IFC), Dutch development agency FMO, Cordiant Group, an infrastructure crisis facility, Equity Bank of Kenya and Belgian Investment Company for Developing Countries (BIO).

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