Egyptian firm buys stake in RVR

February 22, 2010
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, NAIROBI, Kenya, Feb 22- Egyptian private equity firm Citadel Capital has confirmed its acquisition of a 17.5 percent stake in the Kenya-Uganda railway concessionaire, Rift Valley Railways (RVR).

This follows another acquisition of a 49 percent shareholding in Sheltam Railways Company, which previously held 35 percent of RVR.

“Citadel Capital will look to inject more than Sh11.5 billion in Kenya-Uganda Railways over the coming five years,” said Karim Sadek, the Managing Director of the firm which operates in Africa and the Middle East with investments worth $8.3 billion under its control.

“This is the first of several investments we are exploring in East Africa and is a natural extension of our proven interest in the Continent’s transportation and logistics sector,” he added.

Citadel has kept mum and refused to comment on the takeover which came to light last month and which sparked boardroom wars pitting a local investment group, Trans-Century which was also eyeing the stake from Sheltam.

Sheltam won the 25-year concession to operate a century-old 2,000 kilometre-rail line in November 2006 with the promise to turn around the operations of the RVR.

A few years down the line however, it became evident that the South African firm was not delivering any results forcing the shareholders to rework the ownership agreement.

Trans-Century has a 20 percent shareholding in RVR while Prime Fuels of Kenya holds a 15 percent stake. Centum Investments Kenya, Tanzanian Mirambo Holdings and Australia’s Babcock and Brown each own a 10 percent share.

Mr Sadek however pledged to turn around the fortunes of the concessionaire and hinted that they were looking at acquiring the remaining stake at Sheltam.

“Kenya Uganda Railways is a storied line with immense potential waiting to be unlocked by the smart deployment of capital and management talent. Going forward, it is our intention to acquire 100 percent of Sheltam at the same time as we continue exploring other investments in Africa’s promising transport sector,” he disclosed.

The manager added that having an efficient rail network would enable the East African countries to reduce transport costs by as much as 50 percent.

Transport prices in East Africa are among the highest in the world, with transport to Uganda from Kenya presently costing more than $0.13 per ton/kilometre largely due to heavy reliance on trucking.

“Kenya Uganda Railways hauls just over one million tons per annum today out of an existing market of 16 million tons being handled in Mombasa Port today. New investment and a fresh approach to management could see that figure grow to 5 million tons per annum within five years,” he added.

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