Citadel Capital has acquired a 49 percent stake in Sheltam Railways Company, the largest single shareholder and lead investor in Rift Valley Railways (RVR). RVR has a 25-year concession to operate a 100-year old railway line with 2,000 kilometres of track linking the Kenyan port of Mombasa with the Kenyan and Ugandan interiors.
Sheltam has a 35 percent stake in RVR, giving Citadel effective ownership of 17.5 percent of the latter. However, Citadel has its sights set on ultimately acquiring 100 percent of Sheltam.
In a statement announcing the deal, Citadel managing director Karim Sadek said: “Kenya Uganda Railways is a storied line with immense potential waiting to be unlocked by the smart deployment of capital and management talent, two things Citadel Capital would bring to the table. Going forward, it is our intention to acquire 100 percent of Sheltam at the same time as we continue exploring other investments in Africa’s promising transport sector.”
Added Citadel managing director Amr El-Barbary: “An efficient rail network could, in time, bring East African transport costs down by as much as 50 percent due to the operational and fuel efficiency of shipping by rail. Kenya Uganda Railways hauls just over 1 million tons per annum out of an existing market of 16 million tons being handled in Mombasa port today. New investment and a fresh approach to management could see that figure grow to 5 million tons per annum within five years.”
The 25-year concession for the rehabilitation, operation and maintenance of the Kenya-Uganda railway was awarded to the RVR consortium in a 2006 privatisation led by Sheltam, a South African rail and marine services firm, and including six other shareholders.
The consortium’s ownership of the line has been highly controversial, with alleged under-investment and various targets missed in relation to such things as repair and rehabilitation and the volume of goods transported.
Last month, Citadel announced its intention to invest between $200 million and $400 million over the next two years in the East African countries of Kenya, Uganda and Tanzania in sectors including transport as well as agriculture, consumer foods and banking.