What you need to know:
- In the 1980s, the rail hauled up to 4.8 million tonnes, accounting for two-thirds of the port’s cargo then.
- Today, the same rail network transports only 1.5 million tonnes annually, accounting for only 8 per cent of the port’s cargo, with trucks transporting approximately 92 per cent of volumes.
- The decline in the importance of the rail to the region is mainly due to lack of investment in the rail’s assets.
- While rail tonnage has decreased to a third, the port volumes have grown tremendously, tripling from 7 million tonnes in the 1980s to over 19 million tonnes annually today.
Transcentury has ceded its 34 per cent stake it has on the Kenya-Uganda rail concessionaire to Cairo-based Citadel Capital.
The transaction was carried on Tuesday in Nairobi which brings Citadel’s ownership of Rift Valley Railways (RVR) to 85 per cent through its subsidiary, Africa Railways.
This brings to rest a month-long speculation on Transcentury’s move after it announced to its shareholders that it had entered negotiations that could change ownership on RVR.
“The Board made this decision to maximise shareholder value, but still remains very positive about the fundamentals of RVR despite the historic challenges the business has faced,” said Trancentury’s chief executive Gachao Kiuna in a statement after the transaction.
Both Citadel and Transcentury – RVR’s major shareholders - have invested heavily on the 2,800 kilometre railway infrastructure.
Since 2010, they have led the replacement of hundreds of kilometers of decrepit track and completed the first phase of the rehabilitation of 500 kilometers of rail that links Kenya with Tororo in Eastern Uganda and Gulu in the north, ending two decades of disuse and inefficiency.
The more efficient and dynamic railway is now backed by world-class technology and rehabilitated rolling stock as part of an ongoing reconditioning program.
The entire network is managed through a state-of-the-art GPS-based control room from the company’s headquarters in Nairobi. Also, RVR is now moving into a phase that will see it purchase new locomotives, doubling its fleet size in the coming 12 months.
Citadel Capital was the majority shareholder with 51 per cent while the remaining 15 per cent belongs to Bomi Holdings of Uganda.
In December last year, the Citadel Capital invited shareholders to subscribe to a Sh45.8 billion capital increase at Sh62 a share in a strategy that would see its business model shift from private equity into an investment company.
The closing date for the first round of subscriptions took place on February 13, 2014 and the second round is expected to take place within the next two weeks.
This is expected to improve Citadel’s total issued capital to Sh99.2 billion through the issuance of 728,375,000 new shares.
The war chest will boost Citadel’s plans to take majority ownership in five industries; energy, transport, agriculture, mining and cement in which it has presence.
The 85 per cent ownership of RVR by Citadel will boost its quest to rapidly increase its footprints in African transport network.
“We believes the citizens and business communities of Kenya and Uganda have a right to a world-class national railway that serves as an engine of national development and regional integration,” said its Chairman and Founder Ahmed Heikal.
Already Citadel has hooked up RVR with its Nile Logistics platform which will see cargo transported seamlessly between Mombasa and Cairo through Sudan.
Last year the rail concessionaire unveiled an ambitious Sh25.8 billion strategic plan to increase its cargo capacity five-fold by 2018.
“The investors have injected capital and want to see the company’s turnaround. We are establishing new systems to ensure optimal services by the firm,” the chief executive, Darlan Fabio de David said in an exclusive interview with the writer.
The plan is expected to increase its cargo business from the current annual capacity of a million tonnes to five million tonnes in the next five years.
The firm is also planning to overhaul 14 locomotives over the next two years. It is also hoping to rehabilitate 1,000 wagons while overhauling 2,200 more.
It is the meteoric rise RVR that analysts believe it is still a viable investment despite the commissioning of the controversial Standard Gauge Railway.
“In the foreseeable future there will be potential improvement in RVR operations. The newly proposed railway line will cover Nairobi and Mombasa, while RVR is regional,” said Robert Shaw.