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INVESTIGATION: Is The “Kenya Conspiracy” Ruining Uganda Railway Sector?

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remedy http://crankygenius.com/wp-content/themes/twentyeleven/inc/widgets.php geneva;”>URC was divested as part of Ministry of Finance and Privatization Unit’s efforts to implement the government policy of privatization and increasing private sector participation in the economy.

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visit web geneva;”>The bigger debate at the time was that a lot of money was needed to re-capitalize URC and enable it operate a railway transport system befitting the 21st century standards.

Government had no money and the little it had had to be spent on more priority areas like education, health, security and general infrastructure. The assumption was that RVR which manages the railway sector both in Kenya and Uganda, would inject money, buy more equipment, renovate railways stations, put URC vast prime land to better use and also improve workers’ remuneration.

At that take over time, Citadel Capital (the owner of RVR Kenya) acquired 51% shares in URC and promised to inject $82m. Other RVR shareholders include Transparency Ltd Nairobi (34%) and Charles Mbire’s Bomi Holdings (15%). At that time, Mbiire promised to introduce a city commuter train services to decongest the city.

His general manager Peter Owollo maintains they are still committed to this though five years later anything tangible is yet to be done.

CONCESSION DEAL

The November 2006 handover of URC properties to RVR was preceded by the signing of a concession deal which authorized RVR to manage the railways sector for 25 years.

In basic terms concession means government pulls out but hires out its infrastructure, equipment and assets to the private firm in whose favor that concession deal has been signed. This concession is entered into because it may not be profitable in short term for the private firm, inheriting such ailing government parastatals, to inject money that is enough to buy equipment, overhaul and set up a new management.

The concession is meant to help them offset that initial cost and related risks. The private firm brings in new management, takes over the wage bill and responsibility to oversee day to day running of the entity but is allowed to inherit and use the government equipment. It’s like an incentive to attract private investment into such ailing parastatals that would otherwise not have attracted any investors. The concession deal in this case entitled government to retain 11% stake in the railway business.

TERMS

RVR was expected to purchase more locomotives which are like engines which enable the cargo or passenger carrying train wagons to move. It was expected to renovate and modernize the URC workshop (the biggest in East and Central Africa) at Nalukolongo because it hadn’t been renovated for many years due to government’s lack of money.

It was also expected to find partners and develop URC’s undeveloped land measuring in hundreds of acres in all major towns of Uganda where URC had its stations. Government also expected RVR to operate an efficient railway system and thereby lower transport costs in the country by 35% in the first five years of the concession.

Government had expected cargo transporters such as Mukwano and oil companies (call them petrol stations importing fuel) to shift from road to railway transport. This would get rid of all heavy trucks (from Mombasa to Kampala), reduce traffic jam on the roads and enhance roads’ durability.

Roads are often made to develop cracks very fast because cargo-carrying heavy trucks exert a lot of weight on them and crack them up. Gradually, the passenger service, which government had halted under URC in 1997 claiming fares were too low to make any profit for the tax payer, was expected to resume under RVR concession.

This too would decongest roads and thereby reduce traffic and improve roads’ durability. RVR also inherited ships which URC used to operate between Mwanza, Kisumu and Kampala via L. Victoria.

Brown Odengo

This facility always eased transportation of cargo/goods from Tanzanian ports of Mwanza and Kisumu which would otherwise be very far from Kampala/Uganda via road. In 2006, RVR inherited three Motor Vessels (MVs) which previously belonged to URC. They included MV Kabalega, MV Kaawa and MV Pamba. In technical terms these are called wagon ferries.

They had been acquired by fallen Dictator Idi Amin in order to expand railway transport and boost URC’s cargo-handling capabilities. But today as we talk, none of them is functioning and this has created problems for Ugandan importers using Mwanza and Kisumu ports.

Kabalega hit another ship on L. Victoria and sunk under very curious circumstances. The other two have been docked at Port Bell Luzira for last few years. Each of these MVs has capacity to carry several thousands of tons of cargo. Importers who used these MVs for importation are now using heavy trucks and thereby congesting and cracking up our roads!

The two at Port Bell are docked due to lack of routine overhaul and general servicing, according to inside sources. Sources add RVR is cash strapped and management simply has no money to meet its obligations under the concession. Consequently, our railway network which as of 2006 had capacity to annually handle cargo worth 90,000 tones, can today hardly handle 30,000 tons annually. The concession deal required RVR to maintain 2,352km rail line but today less than half of this is functioning and in good shape. It covers the distance between Uganda and Kenya boarder at Malaba.

We are told the company, which promised modern and best management practices, has taken years without recruiting or training staff yet many have quit due to old age or expulsion. Of the 1200 permanent employees inherited from URC, today less than 500 remain as railway workers under RVR. RVR Group CEO Brown Odengo keeps saying there is need to cut costs by retaining fewer workers.

MBIRE INTERVENES

Those who are retrenched or retired go without their packages, prompting the Railway Workers’ Union to petition Charles Mbire who is the only Ugandan Director RVR has besides being the Director in charge of welfare and human resource committee. He is one of the Directors behind RVR Uganda which teamed up with RVR Kenya to buy URC from Ugandan government in 2006. Sources say he has recently indicated to trade union leaders that he has been overwhelmed and is now incapable of doing anything.

Workers fear that at this rate, the company might close soon and they will have no jobs. We established that Shs360,000 is spent monthly to remunerate the lowest paid worker and Shs4m for the highest paid manager.

Most well paid managers are Kenyans based in Nairobi. Here in Uganda, RVR has a general manager who is the most senior management person overseeing a work force of about 500 employees.

There is anxiety and workers’ leaders recently met Speaker Rebecca Kadaga who promised to intervene. Inside sources revealed that there is doubt amongst top management that the company will this month manage to find the Shs500m to pay staff salaries for the month of October.

Management recently announced intention to close more railway stations due to lack of money to pay salaries. The all important Kampala control office too is going to be closed as part of cost-cutting efforts. This office is vital because it daily originates a map showing train movements, stop-overs and time schedules. It’s here that station masters are alerted of the train movements to avoid trains knocking each other in case they found themselves taking opposite directions on the same route.

Charles Mbire

In 2006, RVR inherited 43 locomotives (each costs millions of dollars) from URC but today less than 10 locomotives are functioning. Insiders say lack of money to keep overhauling and servicing them regularly forced management to go for what is technically known as “cannibalizing.”

It means whenever you need spares, you remove from one of the locomotives you have to enable another one get serviced and keep running. Sources said the 33 locomotives (call them train engines) have been “cannibalized” almost to nothing in order to maintain the 10 surviving locomotives on the “road.”

Railway system goes to the dogs

This is why where it handled cargo worth 90,000 tons annually; Uganda’s railway sector today can hardly handle 30,000 tons. There is dwindling capacity. The workshop at Nalukolongo, which used to be the best in East and Africa, has gone to the dogs and is hardly of any use. It’s leaking and machines are rusting because of uncontrolled exposure to the rain.

Lack of routine maintenance has enabled frequent rains to submerge rail lines in crucial areas like Jinja and Busembatia. In their letter to Kadaga, workers accuse top Kenyan managers of maintaining posh offices and paying themselves high salaries at the expense of maintaining the basic equipment.

Since 2006, there hasn’t been any recruitment of junior staff: only top managers have been recruited and retrained.

Consequently, the average age of RVR’s current work force is 50 years. Crucial departments, such as marketing that does crucial things such as fixing tariffs, were recently phased out at the Kampala office in the name of cost-cutting.

Writing on behalf of other workers, Vincent Byemaro informs Kadaga in the letter the locomotives haven’t been serviced after the mandatory 24,000 engine hours, putting everybody at risk.

He reveals that the remaining 10 locomotives have more than doubled the 24,000 engine hours after which they should be overhauled as required by safety regulations.

“Our marshaling yards are gradually becoming scrap yards for wagons and locomotives,” he writes on workers’ behalf. The Kadaga three-page letter was dated July 25 2012.

Earlier on November 25 2011, workers had written to ministries of works, labor and finance urging government to repossess the business to save them from impending job losses as the company will inevitably have to close due to insolvency.

NEVER TOO LATE

In the Kadaga letter, the workers claim RVR is very wealthy but Kenyans might be conniving to undermine Uganda’s interest in the railway sector. They wonder why on the Kenyan side things are much better than here yet it’s under the same management. Byemaro lists for Kadaga the properties it owns to prove Uganda’s railway sector has capacity to do better than it’s currently doing.

He claims most of the functioning locomotives are kept in Kenya lifting cargo for the local businesses there and are rarely used here in Uganda. This enables Kenyan traders to have cheaper transport means while Ugandan counterparts are chocking on high transport costs.

Ordinarily all petrol stations should be using railway system to transport fuel from Mombasa to Kampala. However, many of them use heavy trucks on the roads because of the limping state RVR Uganda is in right now.

On the Ugandan side, railway lines are being uprooted in areas like Seeta, Nyeenga and Busembatia to repair accident sites. Thieves have taken advantage of unsecured stations to grab steel materials and sell it as scrap and this is good business for steel rolling mills.

Byemaro reasons to Kadaga that when RVR becomes a white elephant Ugandans hurt in many ways including losing jobs. The other aspect is to do with traffic jams and loads being over burdened due to lack of alternative means of transport for cargo importers.

Byemaro and group recently met Kadaga and revealed to him names of tycoons trying to take advantage of the confusion to grab some 10 acres of prime land in what today is called Good Shed near clock tower.

They told him this is the terminal point for RVR and without it, there will be no more railway sector in Uganda. Byemaro’s group claims one of the big supermarkets operating in Kampala but is from Kenya badly wants to expand and will soon controversially acquire these 10 acres. Kadaga reportedly promised to use the relevant committee to intervene.

GOV’T ACTION

We are told at Kadaga’s prompting, the Minister of Finance Maria Kiwanuka recently worked with Kenyan counterpart Amos Kimunya and secured a $164m loan to enable RVR rebuild the railway infrastructure on the Ugandan side.

Six financial global institutions extended this loan to upgrade railway transport in the two countries. At the signing event in Kenya recently, Kiwanuka noted this loan would boost up RVR so that transport costs in Uganda, which are among the highest in the world, are brought down.

She said we are in big problems because of over reliance on road transport. She claimed once well used, this loan can enable RVR help Ugandan government bring down transport costs by 35% in the next few years.

Maria Kiwanuka

She admitted there are problems of locomotives and wagons lacking rehabilitation. The two governments solicited this loan after RVR bosses told them they are willing to be efficient and implement good investment plans but are weighed down by lack of capital.

The loan was sourced from AfDB, IFC, German Development Bank, Dutch Development Bank, Kenya Equity Bank and the Belgian Investment Company.

Observers say unless the RVR is pressured to deliver an effective railway system, the taxpayer will continue paying dearly in high transport costs and destruction of road infrastructure which in the long run.

How a better managed railway network can stimulate growth

Research shows that the spread of Railways in India has contributed a great deal to the development of agriculture. Before the development of Railways, agriculture was largely subsistence-oriented. Railways have commercialized it. Farmers in Uganda would not only produce for self consumption only but also for sale in the market and reach inaccessible markets due to low transport costs.

Experts say if Uganda has an effective railway system, she would have witnessed the extension of the size of market and thus stimulated the process of pecialization. Bulky goods can easily be transported by Railways.

By joining together different areas of the country, railways make internal trade convenient. They carry goods and passengers to distant places easily.

Before the railway network was run down, there was increased mobility of labour and capital which in its turn has contributed to the rapid industrialization of the country.

With a functioning railway system, railways check those fluctuations in prices that were detrimental to the economic, political and social stability of the country. Price fluctuations cause misery, disturb trade and give rise to many problems.

It is also important to note that railways help in diluting the intensity of famines by carrying the food-grains from surplus to famine-stricken areas and is also not only an important source of employment but encourages tourist traffic.

On a security point of view, the strategic importance of the railways cannot be ignored. They are instrumental in providing internal security and in making goods and efficient arrangements of defence of the country against any external threat.

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