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East African Railway Operator Faces potential Competition

Rift Valley Railways (RVR), has stated the 25-year concession that was signed with the governments of Kenya and Uganda gave it the mandate to operate the existing line from Mombasa to Kampala.

This comes on the heels of recent media reports that indicated that the government of Kenya had inked a 'secret deal' with China to build a modern standard gauge railway line between Mombasa and Nairobi.

Responding to East African Business Week, Mr. Brown Ondego, the Group Chief Executive Officer RVR said the agreement takes cognizance of the fact that there could be the development of a standard gauge railway and it clearly stipulates the obligations the two parties have in the event this is to happen, including offering RVR the opportunity to operate the service.

However, according to a regional newspaper the new plan is that the Chinese-built railway will be operated under an arrangement known as "open access," where multiple operators will be allowed to operate freight businesses on the standard gauge railway system in competition with RVR.

The paper further reports the new deal will have far-reaching implications for the existing concession agreed to with Rift Valley Railway in both Uganda and Kenya.

It adds under the current agreement, RVR's interests are guaranteed by clauses that stipulate that the governments of Kenya and Uganda cannot -- during the tenure of the concession -- introduce changes that jeopardize RVR's profitability.

Ondego on the other hand maintains that the repair of the permanent way (Mombasa to Kampala) is part of the initial capital investment programme of $23m aimed at making the railway more reliable and efficient.

He wrote in an e-mail to the East African Business Week, "RVR plans to replace 70km of line between Mombasa and Nairobi and rehabilitate nine major culverts between Busembatia and Jinja. So far 17 kms of railway have been replaced and all the prefabricated culverts have been cast."

He added, "The initial civil works to gain access to the culvert sites including construction of access roads has been completed according to schedule. We fully expect this first phase of the line rehabilitation project in both countries to be completed by the first quarter of 2013."

However, if reports that Kenya and Uganda are jointly negotiating with China to fund and construct a new standard gauge railway that will connect the two countries are to be believed, then it would complicate RVR's business interests on that line.

Kenyan newspaper, Daily Nation quotes Mr. Amos Kimunya, Kenya's Transport Minister as saying that Kenya was in talks with China to facilitate the construction of a new line between Mombasa and Malaba.

It further reports that the government of Uganda was also negotiating for funds to construct the stretch of the line that runs into its territory from the border point of Malaba.

"Negotiations with the Chinese are ongoing and we anticipate that work could commence by year end," the minister told attendants at a luncheon hosted by the Kenya Ports Authority in Nairobi.

On a similar note, Brown Ondego also told the East African Business Week that the concession agreement that RVR signed with the Government of Uganda for 25 years did not include a provision for passenger services.

"However RVR has expressed an interest in running a commuter service in Kampala given the fact that it has the passenger wagons available, experience and manpower necessary. Discussions are ongoing with the relevant ministries and the privatization unit regarding changes to specific details of the concession agreement," he wrote in an e-mail.

East African Business Week

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