Kampala, Uganda
The Kenya and Uganda governments have told Rift Valley Railways (RVR) shareholders that they have to transfer their interests to a new entity , the Kenya-Uganda Railway Holdings (KURH) in which each partner’s stake will depend upon its capacity to contribute part of the US$50 million needed for a turn around.

This new position has followed the failure of the South African firm which won the concession to manage the Kenya and Uganda Railways for 25 years starting in 2006 to get new capital to enable it to fulfil its mandated role. 

 Sources close to the deal say this failure has been due to the shareholding structure which insisted that Sheltam Trading as lead investor hold 35% of the shares.

It also restricted shareholders from injecting in more capital injections by insisting that it only be done in proportion to equity.

The international lenders want the shareholders to raise the much needed $50 million needed to run the railways now.

Following a meeting between the two countries transport ministers last weekend, sources quoted Kenyan Transport Minister Cyrus Njiru as saying that KURH will provide an equal opportunity for all current share holders to participate.

“What has been agreed will unlock funds from lenders as well as shareholders equity,” he said.

This will free the railways from the inaction it has been in during this last year as Kenya Railways attempted to wrestle the concession to the ground for failing to perform and only being protected by the courts.

For example Kenyan based TransCentury Group which controls a 20 per cent stake and wanted to raise its stake could not do so to beat the Sheltam stake as lead investor even though Roy Puffet the Sheltam boss who was also Chief Executive of RVR left last year after accusations of failing to perform.

International lenders and financiers like the International; Finance Corporation (IFC) and the German KfW have withheld over $60 million due to that shareholding anomaly that insists on a 35 per cent minimum amount for the lead investor.

RVR which took over management of the Kenya and Uganda railways has been beset by boardroom wrangles from the outset when some of the firms it had won the concession with were locked out at the last minute.

At the same time both Kenya and Uganda were unhappy with its performance as the freight carried by the railways declined to below 10% under its charge and railway speeds slowed down further both of which were indications that RVR was not performing.

Brown Ondego became the new Chairman of the Board two years back with promises of revamping the railways –if the finances were availed- but not much improvement took place even though new firms came on board along with some new managers.

It was also alleged that lack of an effective railways system was encouraging congestion in Mombasa and several times goods destined for railway transport had top be changed to roadside to limit the delays at the Port, every body was unhappy with RVR..

In the last few months RVR had to be protected from being taken off the concession by various legal injunctions.                       

Ends