Turnaround now expected at railways

November 5, 2010
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, NAIROBI, Kenya, Nov 5- After Wednesday\’s signing of a management contract with a leading global rail group, the Rift Valley Railways Investments (RVRI) has said the onus is now on the shareholders to do whatever it takes to turn around the Kenya-Uganda railway concessionaire.

RVR Directors\’ Steering Committee Chairman Ngugi Kiuna told Capital Business that all shareholders had agreed to work towards bringing efficiency in the dilapidated rail system.

"All the shareholders are now very comfortable about the shareholding. The ball is in our court now to deliver on the work that needs to be done on improving the railway, operations and get more trains running on our rails," he said.

February\’s entry of Egyptian private equity fund Citadel Capital as a majority shareholder brought to the fore boardroom wrangles among the owners who include the Kenya\’s investment company TransCentury Group which had initially opposed the acquisition as it was also eyeing the stake.

A restructuring of the concession deeds saw Ambience Ventures, a subsidiary of Citadel Capital acquire 51 percent of RVRI –  49 percent of which came from the former largest shareholder South African\’s Sheltam Railways Company.

TransCentury shareholding also increased from 20 percent to 34 percent while the remaining stake is now held by Uganda\’s Bomi Holdings.

"As TransCentury, we are comfortable with the current shareholding, we are happy about where we are and it\’s in line with our desires and our capacity," Mr Kiuna who represents TransCentury on the board added.

With the wrangles behind them, Mr Kiuna said they now hope to recoup their investments and become profitable hence the reason they brought in Brazilian – América Latina Logística (ALL) – to assist with the company\’s management.

ALL, which has been credited with successfully undertaking the much-studied privatisation of Brazil\’s national railway, is expected to provide the concessionaire with key management and operational staff and as well as oversee the transfer of its technologies.
 
There were some fresh amendments that were made to the concessions 10 days ago that will now give all the shareholders the green light to become lead investors. In the original agreement, only Sheltam was the lead investor.

With these developments that will address the major twin challenge of lack of funding and slack management, the concessionaire is now expected to be on its way to recovery.

Mr Kiuna however cautioned that for tangible results to be seen and felt, there\’s need for the Kenyan, Ugandan governments and their people to exercise patience and give the Brazilian rail group time to get to work.

"In terms of seeing a great physical improvement in the operations of the rail, I think it will take a little bit of time because the money has to come in, we have to order the rail, do the rehabilitation and whilst its going on now, it takes time for it to get done," he emphasised.

The two largest investors are said to be planning how to raise $250 million (Sh20billion) to revamp the infrastructure and other operations.
 

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