KENYA-UGANDA RAILWAYS CONCESSION
- Reference: P-Z1-DC0-011
- Approval date: 13/07/2011
- Start date: 19/12/2011
- Appraisal Date: 05/07/2010
- Status: OngoingOnGo
- Implementing Agency: RVR Investments (Pty) Ltd
- Location: MULTINATIONAL
The project involves a concession over a rail network running from Kenya to Kampala in Uganda and consists of 2,350 km of track, 219 locomotives (<(><<)>50 working), 7,500 wagons (<(><<)>1,000 operational) and a depot in Kampala. The 1,350 km mainline consists of two segments: Mombasa Port to Nairobi terminal (530km) and Nairobi to Kampala terminal (803km). It also includes ferries operating between Port Bell (Uganda) and Kisumu (Kenya) and Port Bell and Mwanza (Tanzania) plying Lake Victoria. In addition, the Government of Uganda has indicated that they would like to include the line from Tororo in Uganda towards the oil producing region in North Western Uganda within the concession.
In Novemeber 2006, the Kenya and Uganda railways awarded the concessions to Rift Valley Railways ("RVR"), a consortium led by Sheltam Rail Company Limited, a South African company . Under the concession, RVR was to invest USD 322 million in rehabilitating existing assets and in new rolling stock and operating equipment for the rail network. However the concession was affected by various issues including mismanagement and was reorganized and recapitalized to avoid termination due to non-performance. The shareholding was restructured to enable the injection of new equity and management expertise. The current shareholders now include Citadel Capital (51%), TransCentury (34%), and Bomi Holdings (15%).
Under Citadel, RVR has developed new business plan, predicated on achieving a balance between asset productivity turnaround and fuel efficiency to meet the concession targets and also profitability over a five year investment period. The business plan was developed by America Latina Logistica (ALL) and it envisages several capital investments including upgrading the main rail line, locomotives and wagons, and installing information and communications technology systems. ALL will provide RVR with key management and operational staff and will oversee the transfer of technology, including selection and sourcing of raw material and IT software and hardware. The business plan is expected to deliver a freight volume of 4.5 mtpa by 2014.
According to its new business plan, RVRI is to implement a maintenance turnaround and development program that is expected to deliver a freight volume of 4.5 million tonnes per annum (mtpa) by 2014. Realization of the project will establish an efficient, reliable, and integrated rail system in Kenya and Uganda and represents a major step in the development of Uganda and other similarly landlocked neighboring countries.
The project is high on the priority of both Kenya and Uganda and is clearly mentioned in the Kenya CSP (2008
The restructuring program allows to relieve some of the pressure on the roads that connect the countries, and to facilitate an easier and cheaper freight of goods across the region. There is a clear impact on the consumers and export sectors in Kenya and Uganda, and on the neighboring states also. In addition to these, almost all projects that take place in the region, including these financed by the Bank, make use or plan to use the railway to transport the equipment and machinery from Mombasa port to the construction sites. Very often, the same route will be used to carry the project outputs back to the port for export. The Bank is looking at a number of projects in Kenya, Uganda, Rwanda, Burundi, Congo, DRC that will need the railway services.
The overall impact of the restructuring program on the regional economy has been conservatively estimated with a net economic present value of USD 278 million and economic rate of return of 52% (real). This estimate does not consider further impacts on trade and regional integration that will accrue to other regional economies: Rwanda, Burundi, and Congo.
DZIMIRI Paul - PISD3