RVR sold but Uganda rail still not secure

By Patrick Kagenda

Four years after the two East African governments concessioned their 100 year old 900 kilometer railway line to the Sheltam group headed by Roy Puffet, Sheltam has sold part of its shares to the Ambience Ventures Ltd of the Citadel group of Egypt.

Sheltam managed to outwit its fellow shareholders in the new deal because the concession agreement it signed with the governments of Kenya and Uganda put total control of the board of the company in it hands.

Under the concession documents, Sheltam was granted the upper position of lead investor, guaranteeing the South African company a minimum shareholding of 35 percent which was not to be diluted throughout the concession.

This meant that the remaining shareholders could not put any substantial amount of money into the company as this would dilute Sheltam and breach the 35 % minimum rule.

After it became clear that the Sheltan Group neither had the money nor the expertise to run RVR, the governments of Kenya and Uganda decided that it should quit.

They wanted its place to be taken over by a new company that would be known as the Kenya Uganda Railways (KUR).

It was hoped that the remaining shareholders would inject US$ 50 million in proportion to the stakes in the company. This move collapsed because the concession agreement granted the South Africans too much power vis avis the interests of the two countries.

Sheltam had a 35 % stake in RVR followed by Trancentury’s 20 %, Tanzania’s Mirambo Holdings 15%, Prime Fuels of Kenya 15%, Babcock Investments Holdings of Australia 10% and Centum Kenya Ltd 5%.

Roy Puffet`s Sheltam group has sold 49 percent of its shares to the Egyptians in collaboration with the other shareholders. None of the companies is either Ugandan or Uganda-based.

Sheltam`s selling of part of its own shares to the Ambience Ventures ltd means it has given the Egyptians indirect interests in the company and allowed the Cairo based group to appoint directors to the board. Under the new deal, Roy Puffet retains majority control of Sheltam.

The issue was top of the agenda when a meeting of the joint inter-ministerial committee in which both Uganda and Kenya are represented assembled in Nairobi on Jan. 8 to discuss the recent development in the railway concession.

Sheltam needed US$150 million to inject into RVR, to offset outstanding concession fees to both the governments of Uganda and Kenya, and to purchase locomotives, among other commitments needed to make the railway function.

Since the 2005 agreement was signed with the governments of Uganda and Kenya, the shareholders and directors of the RVR concession have been involved in endless disputes the consequence of which is that the railways performance has almost collapsed save for the Kenyan part of the line which is also limping.

Very little money has been invested in the company as stipulated in the concession and the RVR owes the two governments millions of shillings in accumulated concession fees.

Sheltam`s move with the other group members minus the Transcentury has raised temperatures in the concession agreement with Transcentury which is politically endowed in Kenya lobbying to block the takeover by the Egyptians. Transcentury Ltd has been trying to solely take over RVR.

The Ambience Ventures Ltd mother group, the Citadel group, is a listed company on the Egyptian stock exchange valued at US$8.5 billion.

It has pledged to invest US$150 million of fresh capital into RVR to offset outstanding concession fees to both the governments of Uganda and Kenya, and to pump money into the purchase of new locomotives and rehabilitation of the track.

The entry of the Egyptians comes when the international lenders who include the International Finance Corporation of the World Bank (IFC) and KFW of the Netherlands withheld a capital injection of some $100 million.