SA group to run African railways

18 October 2005

A consortium led by South African company Sheltam has won the concession to operate the railways of Kenya and Uganda. The Rift Valley Railway Consortium (RVRC) beat the last of its rivals, an Indian-led consortium, in its bid to operate the ailing Kenyan-Uganda railway system for the next 25 years.

The 104-year-old railway is called the “Lunatic Express” by locals.

The 25-year deal was signed in Nairobi on Friday. The seven year-long bidding process was overseen by the World Bank.

Under the terms of the deal, the RVRC will pay an initial US$5-million fee and 11.1% of annual gross revenue per year thereafter.

Sheltam bid $1-million for the passenger business, although the countries were ready to accept a negative bid, implying that they would subsidise the winner.

“(The) winning proposal includes a turnaround and development programme for the two railway systems, expected to lead to a significant increase in freight traffic volumes within the first five years,” the selection commitee said in a statement.

The consortium has committed itself to increasing traffic on the railway by 75% in the first five years.

RVRC’s lead investor, the Sheltam Group of Companies, has a 61% share. Two other South african companies, Comazar Limited and the CDIO Institute for Africa Development Trust, together hold 14% of the consortium.

Sheltam is a Port Elizabeth-based company with operations in South Africa, Zambia, Namibia and the Democratic Republic of Congo.

Kenya’s deputy transport minister, Andrew Ligale, was quoted in Uganda’s Sunday Vison as saying the lease would provide significant financial relief to his government, which has been subsidising the railway for several decades and in the past three years has spent the equivalent of $40.6-million keeping it alive.

A final agreement with the two governments is expected to be signed in November, with the consortium taking operational control of the railways by the end of March 2006. reporter