Unmasking the faces of the troubled railway line

International Development Financial institutions (DFIs) that loaned Rift Valley Railways (RVR) US$ 164 million.
In this second part of the LUNATIC EXPRESS FILES, we reveal the directors of Rift Valley Railways (RVR), how it was formed and how international financial services provider, Deloitte, is helping firms investing in Africa to dodge taxes through the Mauritius tax haven.
The railway company that is in the eye of a storm over suspected embezzlement of billions of shillings from international development financial institutions started as a tiny firm operating from the backstreets of Nairobi.
Rift Valley Railways Holdings Ltd, the parent company of both Rift Valley Railways Kenya Ltd and Rift Valley Railways Uganda Ltd, operators of the Kenya-Uganda railways, was originally called BlueBell Holdings Ltd.
Records at the Registrar of Companies indicate that Rift Valley Railways Holdings Ltd was incorporated on November 27, 2005 after changing its name from BlueBell Holdings Ltd, whose directors were Mr Philip Loseno Kingai and Mr Julius Mwangi Ng’ang’a. They each held one ordinary share of Sh100 in the company.
BlueBell had a nominal capital of Sh100,000 divided into 1,000 shares of Sh100 each.
On November 4, 2005, Mr Kingai and Mr Nganga sold their ordinary shares of Sh100 each in BlueBell to Sheltam Rail Company of South Africa. On the same day, they resigned from the company and ceded their positions to Mr Roy Puffet and Mr Wesley Kruger of South Africa after the name of the company changed to Rift Valley Railways Holdings Ltd.
On December 2, 2005, Sheltam Trade cc of South Africa, beleived to be a sister company of Sheltam Rail Company of South Africa, transferred one ordinary share of Sh100 to Rift Valley Railways Investments (Pty) of Mauritius. On the same day, Sheltam Rail Company sold one ordinary share of Sh100 to Paras Vinod Shah of Kenya.
How Rift Valley Railways (RVR) was formed and those listed as directors of the company.
On August 1, 2007, the following people were listed as the new directors of Rift Valley Railways Holding Ltd: James Mungai Gachui (Kenya); Antony Kamau Wainaina (Kenya); David Kim Labuschagne (South Africa); Charles Christian Church (South Africa); and Peter Mwangi Kingori (Kenya).
Others were Trevor Garth Karg (South Africa); Terry Regis Antoine Harold Chellen (Mauritius); and John Lindsay Clarel (Mauritius).
Disclaimer: Some of the people listed above as directors of Rift Valley Railways Holding Ltd could have been representing TransCentury on the company’s board. TransCentury has since sold its stake in RVR.
On February 22, 2010, Qalaa Holdings, then Citadel Capital, a leading private equity firm in Africa and the Middle East, with $8.3 billion in investments, announced that it had acquired a 49 per cent stake in Sheltam Railways Company, the largest single shareholder and lead investor in RVR.
Sheltam Railway owns 35 per cent stake in RVR, which has a 25-year concession to operate the century-old Kenya-Uganda rail line with some 2,000 kilometres of track stretching from the Indian Ocean port of Mombasa to Uganda’s capital, Kampala City. The transaction gave Qalaa Holdings a 17.5 per cent stake in RVR. (See the link http://tinyurl.com/ztvq35j)
Since then the ownership, shareholding and management of RVR has continued to change, its operations becoming more intriguing.
The initial shareholding structure of RVR included Qalaa Holdings, trading through Africa Railways Ltd and Ambience Ventures Ltd, which had 51 per cent shares; TransCentury Kenya, trading through Safari Rail and Safari Rail Company Ltd, which had 34 per cent shares and Bomi Holdings of Uganda trading through Bomi Holdings Ltd, which had 15 per cent shares.
It is intriguing that although RVR Kenya Ltd, Kenya-Uganda Railways Holdings Ltd, and East Africa Railways Handling Ltd are listed in Qalaa Holdings financial accounts as registered in Kenya, their files could not be traced at the Registrar of Companies.
What is clear is that over time, the RVR shareholding structure has completely changed following the emergence of new shareholders after TransCentury sold its shares in the railway firm.
In April of 2014, Africa Railways acquired an additional 34 per cent stake in RVR from TransCentury Limited, a Nairobi-listed infrastructure company, raising its total stake to 85 per cent, with the remaining 15 percent held by Bomi Holdings.
A joint statement by Qalaa Holdings (then Citadel Capital) and TransCentury shows that Africa Railways—the lead investors in the Kenya and Uganda railways—concluded a deal that saw it buy a 34-per cent equity stake in RVR from Safari Rail Company, a wholly-owned subsidiary of Nairobi-listed TransCentury.
The transaction brought Africa Railways’ total ownership of RVR to 85 per cent, up from 51 per cent, following acquisition of TransCentury’s entire equity stake.
Containers being offloaded from a ship at the Mombasa port to be loaded on wagons to be delivered to its owners.
In January 2014, TransCentury announced that its subsidiary, Safari Rail Company, had exercised an option that would result in a change of its shareholding in KU Railways Holdings Limited (KURH). This triggered a 60-day deadline under which Qalaa Holdings had to divest its majority shareholding to TransCentury or buy it out. Qalaa Holdings chose the latter option.
However, according to Karim Sadek, Qalaa Holding’s then managing director for Transportation Investments, Africa Railways shareholders include leading global institutions, the International Finance Cooperation (IFC), African Latin American and Caribbean Fund, LP (ALAC) and a private equity fund managed by the IFC Asset Management Company, LLC.
Others are Dutch development bank, FMO; German development finance institution DEG; FISEA, a vehicle dedicated to investment in Sub-Saharan Africa owned by France’s Agence Francaise de Developpement and managed by its subsidiary Proparco; and the IFC. (http://tinyurl.com/zc9p2gh)
The RVR management team has been frequently changing since it signed a management and technical services agreement with a Brazilian rail management firm in November 2010.
The management agreement with Brazilian company América Latina Logística (ALL) was signed with Rift Valley Railways Investments (Pty) Ltd (RVRI), a company registered in Mauritius. The pact entrusted ALL with providing key support to RVRI’s five-year three-point rehabilitation—an investment programme for delivering long-term improvements in the safety and efficiency of rail operations across Kenya and Uganda.
ALL was also to provide RVRI with key management and operational staff and oversee the transfer of its proven technologies.
Under the programme, RVRI was to tackle the problem of derailments by replacing worn-out rails in key areas, while ALL would help RVRI roll out a comprehensive programme to address back-due maintenance on locomotives to improve reliability and enhance hauling capacity.
Thirdly, the rehabilitation programme entailed substantial investment in information technology (IT) systems including establishing a trains monitoring computer system. (http://tinyurl.com/hphvw63)

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