It is estimated that nearly 16 million tonnes of cargo is handled at Kenya’s Mombasa port every year, with the majority of incoming and outgoing goods being transported via road. This has led to congestion at the port as well as high logistics costs and delays.
Rail transport, which stakeholders believe has the potential to transform the economies of east Africa, has for years been characterised by poor infrastructure and inefficiencies.
Rift Valley Railways (RVR), which holds a 25 year concession to operate more than 2,000 kilometres of track linking the Indian Ocean port of Mombasa to the interiors of Kenya and Uganda, is hoping to revive rail transport in the region.
Egypt’s Citadel Capital owns a 51% stake in RVR through its platform company Africa Railways. A five year US$287 million turnaround strategy is expected to transform RVR into a profitable organisation. The key focus is to overhaul the aging and dilapidated rail network system that was poorly maintained for decades.
“All the locomotives that we inherited both in Kenya and Uganda had gone over what is called the four year mandatory overhaul and eight year major overhaul, which involves rebuilding locomotives. Typically a locomotive has a life span of 20 to 30 years. They were tottering towards their death,” says RVR chief executive Brown Ondego.
This year, the firm will be spending between $25 million and $35 million to rehabilitate infrastructure and improve its operations. According to Ondego, new rails are expected in the first week of June while rolling stock and wagons could arrive by the end of the year.
“We will be rehabilitating the mainline locomotives and purchase new ones to replace those beyond repair. We are also going to refurbish the wagons. In two years the services will be impressive and completely transformed,” says Ondego.
Ondego points out that efficiency at RVR will end the congestion at the port of Mombasa.
“We will ease the congestion at the Mombasa port. We are currently moving 1.2 million tonnes annually. We want to move this to 2.2 million tonnes in the next financial year and grow that by 20% every year to 4.5 million tonnes in the next three to four years,” says Ondego.
He adds: “A train can carry even up to 70 containers. Now imagine 70 lorries at the port. No wonder the port is congested.”
According to Citadel Capital, an efficient rail network could lower east African transport costs by as much as 35%.
“We are expecting to move from loss making to profit making in the 2012 to 2013 financial year. They (investors) put their money in the right place. Once we become profitable there is no reason why we should not be paying dividends to our shareholders. They made huge investments and ought to get a good return,” says Ondego.
But even with its grand plans, one of the major challenges the management of RVR has to grapple with is restoring confidence in its customers.
“Both Kenyans and Ugandans are impatient and feel like this will not work. We believe it will work. No economy has grown without rail transport. It is cost effective, competitive and efficient,” he assures.