RVR defiant as Uganda takes over rail business

Rift Valley Railways (RVR) Uganda has threatened legal action against government despite its concession having been terminated.

The troubled rail operator, majority owned by Egyptian Qalaa Holdings, has strongly protested the “illegal takeover” of its operations by the government agency, Uganda Railways Corporation (URC).

Since last Monday, URC has been running about three cargo trains a day after announcing that it had taken control of “all freight and passenger operations that were being carried out by RVR”. It is yet to start passenger services.

The announcement, published in local media last week, said URC ended its agreement with RVR on January 25 and that all assets and operating rights had been reverted to the agency.

But RVR has said it has not repudiated its obligations under the concession agreement and has “put URC on legal notice and warning”.

“RVRU is the only legal entity permitted to operate railway business inside the Republic of Uganda according to the Concession Agreement signed between the Government of Uganda and Rift Valley Railways,” it said in a statement.

The rail operator further said since the government withdrew its notice of termination of the contract in November “status quo remains”.

Not in-charge

But the Ministry of Finance spokesperson Jim Mugunga says “the statement is their opinion” and that URC is now in-charge.

“As far as I know, GOU took over operations to manage railway transport in Uganda, and in effect RVR lost control,” said Mr Mugunga.

Prior to the RVR statement, the company, through its lawyers MMAKS Advocates, wrote to the Finance minister, the Attorney-General and URC warning of legal action over the manner in which the concessionaire was kicked out.

Before taking over operations, the government agency had advised freight customers and clients to “deal directly with URC” warning that RVR “or its agents are not authorised to carry on railway services in Uganda.”

The heavily indebted rail operator has struggled to stay on track, a situation worsen after its business of the Kenya section was legally and formally terminated in April last year. The Kenya RVR head office controlled the revenues and bank accounts, but upon winding up left Uganda in the lurch, with all services grinding to a halt.

The Uganda followed suit terminating the 25-year concession in June the same year but RVR rushed to court for arbitration and successfully halted the process that was to conclude on September 5.

On November 22 – a day before the expiry of an injunction, which the court had extended several times – the government withdrew its notice of termination so that RVR could continue operating.

But despite being handed a lifeline, the railway operator has been weighed down by debt to staff, suppliers and financiers, disputes over concession fees and vandalised tracks in places.

“The concession agreement defines the process of termination. Our withdrawal [of the notice of termination] was based on RVR meeting certain conditions of the contract. But they were not able to meet these conditions,” said URC Managing Director Charles Kateeba.

By press time, The EastAfrican had not established whether RVR had filed a petition in court to challenge URC’s takeover as it had claimed in its statement.

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