Smiles and frowns as RVR contract is cut short; Uganda Railways is back!
Kampala, Uganda | ISAAC KHISA | Uganda Railways Corporation, the company which operated rail transport in the country until the government passed its operations to a concessionaire in 2006 is set to return in September. And if there is one person who is super excited about the move, it has to be Kassim Omar, the chairperson of Uganda Clearing Industry and Forwarding Association (UCIFA), an umbrella body of indigenous clearing and forwarding firms in Uganda. He told The Independent that he cannot wait for the return of the UR-double black letters on a yellow background in a red border; the company ligature in Uganda’s national colours.
“I am very happy that Kenya-Uganda Railway is returning to the Ugandan government because that is what we have been advocating for.
“In any case, there was no need for the government to sign that concession because all that was needed at that time was to find a way to strengthen Uganda Railway Corporation than trying to look for concessions…RVR was a total failure,” he added.
Omar says RVR was carrying only 5% of the freight volumes from the port of Mombasa, leaving the bulk of cargo to be transported by road in spite of the fact road transport costs 15% more of the total freight costs.
Uganda Railways operations were contracted to Rift Valley Railways (RVR) in November 2006 in a 25-year concession. Under the deal, RVR was to run the 2,352km Uganda-Kenya railway for freight business, and a five-year contract for the passenger unit. But it now appears RVR just lost its concession over the century old metre-gauge railway.
Kenya already terminated its contract with RVR on July 31 and Uganda plans to do the same by Sep. 04.
Charles Kateeba, the managing director of the Uganda Railways Corporation confirmed the development to The Independent in an interview.
“After terminating the contract, Kenya and Uganda through their agencies Kenya Railways and Uganda Railways Corporation, respectively, will run the show,” Kateeba said, “we are going back to the old arrangements.”
He said a 3-month notice of intent to terminate the contract was issued to RVR in June and added that the two governments are currently preparing for the rail take-over next month subject to RVR not running to the courts to block the move.
RVR has for some time been cash-strapped and unable to meet the costs of its operations and obligations of the concession. Not that it came as a surprise to the many voices that opposed the concession in 2006 and have watched it tumble from one crisis to another.
Under the concession, RVR was to pay $3million and $2million to the Kenyan and Ugandan governments respectively as well as concession fees equivalent to 11.1% of its gross revenues per year in each country.
It was also supposed to pay US$1million per year to Kenya for passenger operations. Other conditions included continued investment in the railway network and increase the freight volumes.
But while RVR was able to meet the initial payments and invest substantial amount of money into the rail network through revenue generated and loans, it failed to meet other requirements including paying concession fees and increase in freight volumes.