Traders query RVR on costs

KAMPALA, UGANDA – A cross section of Ugandan businesspeople are querying the Rift Valley Railways (RVR) concession claiming that its operations have not helped in reducing transport costs.
RVR currently runs the Kenya and Ugandan rail networks after winning the concession more than seven years ago.
Importers, manufacturers and clearing agents say that it was a mistake for the government to grant RVR management of the crucial railway network.
They say that RVR is not living up to its promise and as such many have resorted to using road transport which has proved costly.
Kassim Omar, the National Chairman of the Uganda Clearing Industry and Forwarding Association (UCIFA) says that right from the beginning, Uganda got a raw deal.
“This was one of the biggest mistakes that government of Uganda made. First the concession looked like it was to be handled by a South African firm but it has instead turned out to be a Kenyan company.
“So privatizing the railway line only meant that even the infrastructure we had was handed over to Kenya. So even the wagons we had in Uganda were taken and are being used in Kenya,” he said.
When contacted for comment, Brown Ondego, the Executive Vice Chairman of RVR told the East African Business Week that RVR doesn’t view the railways network on a country basis but as a seamless operation.
“In railways business, the further you move goods, the more profitable and efficient you are. It only makes business sense for RVR to move goods as far as possible into Kampala.
Investment in terms of overhaul and rehabilitation is being made based on the assets that were in existence (with Uganda Railways Corporation and Kenya Railways Corporation) at the concession takeover.”
He said that the railways system is expected to become much more reliable and efficient after RVR’s investment, having suffered decades of neglect without significant investment.
Omar, in a telephone interview last week, said that the URC performance in 1984/85 averaged 34% while RVR’s performance is currently at less than 7% and yet the target is 39%.
“To safe guard our roads, we need a fully functional railway, but RVR has not added anything onto what they found, instead even the little we had has been taken to Kenya.”
Everest Kayongo the Chairman of the Kampala City Traders Association (KACITA) backs Omar’s view saying that when they met with RVR management, they were informed that “…in terms of return on investment, some routes in Uganda were not as lucrative as those routes in Kenya. So they are now mostly rehabilitating the routes in Kenya,” he said.
He says that there is need for a policy review on some of the privatized entities so as to enable players move away from just looking at the commercial aspects, but strike a balance with service provision as well.
“This is one of the mistakes of privatization, government perspective is long term while these people (RVR) are mainly looking at making a return on their investment,” Kayongo said.
Ondego said that a significant portion of the capital being injected into the company will go towards rehabilitation and repair of the rail infrastructure which has been neglected for decades with a backlog of necessary investment. Importers and exporters will with time feel the difference.
“But it will not happen overnight as the investment is being made in a phased approach.
The capital injection is done in phases with the first tranche of $49.1m disbursed in December 2011 and the second tranche of $42m received in Feb 2013. With this investment, improvements have already been registered,” he said.
Kayonga said, “So as a business community, it becomes tricky for us since rail is one of the cheapest means of transport. So we are asking for the East African Community to prevail over this situation so that they (RVR) stop only being economically focused, but also provide a service.”
Ssebagala Kigozi the Executive Director of the Uganda Manufacturers Association (UMA) said that as manufacturers, they had anticipated to have a fully functional railway line that would go beyond Kampala.
“I don’t want to say yes (that the concession was ill-advised), but the truth is that it is not good either. It is very unfortunate that up to now we still don’t have a functional rail transport for both goods as well as passengers.
Our people are incurring high transport costs and we think it is really not good,” he said.

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