Infrastructure

IFC leads successful turnaround effort for Kenya Uganda Rail

East Africa’s transportation network is taking a turn for the better, following the August 2 signing ceremony for a $164 financing package to rehabilitate the Kenya Uganda Railway, a vital trade link from the coast of Kenya into Uganda.

IFC, along with six leading international finance institutions, extended the financing to Rift Valley Railways International (RVRI) to back a $287 million capital expenditure program to improve the operating company’s infrastructure and rolling stock. IFC becomes the largest financier to Rift Valley Railways, providing $42 million – a loan of $32 million loan, of which $10 million is already disbursed, and an additional $10 million in equity to be committed.

Other institutions that participated in the package include: African Development Bank ($40 million); Germany’s KfW Bankengruppe ($32 million); Dutch Development Bank FMO ($20 million); Kenya’s Equity Bank ($20 million); Cordiant’s Infrastructure Crisis Fund ($20 million); and the Belgian Investment Company for Developing Countries ($10 million). The balance of the funding for the $287 million capital expenditure program was contributed by shareholders and generated through operations.

RVRI is a portfolio company of Citadel Capital, an Egypt-based private equity firm with $8.7 billion in investments across 14 countries in Africa. The Kenya-Uganda railway line has a track length of 2,350 kilometers, and employs 219 locomotives and 7,500 railroad cars. Other key shareholders are TransCentury and Bomi, which are Kenyan and Ugandan companies, respectively.

A key regional transportation network

The Kenya-Uganda railway line is a key transportation network for East Africa, with a track length of 2,350 kilometers, 219 locomotives and 7,500 railroad cars. The rehabilitation of the railway will support regional integration within the region and encourage cross-border trade and investment by reducing the cost of doing business in East Africa.

Long-term IFC support

IFC has demonstrated a long-term commitment to the project, from its inception through difficult times. Following the departure of the project’s initial sponsor in 2009, IFC led the restructuring of the Rift Valley Railways shareholder group to attract new shareholders and investors for the rehabilitation of the project.

Commenting on the on-going rehabilitation effort, Brown Ondego, Group Executive Chief Officer of RVRI said, “Our rehabilitation program has already delivered impressive early results, and year on year, we’ve seen a 30 percent drop in accidents per train kilometer.”

Transport prices in East Africa are among the highest in the world, largely due to heavy reliance on trucking. A lack of operating capacity has resulted in rail capturing less than 10 percent of East Africa’s transport market. An efficient rail network has the capacity to reduce East African transport costs by as much as a third due to the operational and fuel efficiency of rail shipment.