Some of the locomotives imported by Rift Valley Railways (RVR) from National Railway Equipment Company (NRE) of Illinois, USA, after they had been off-loaded from the ship. PHOTO/FILE
By PATRICK MAYOYO
The World Bank has stopped another Rift Valley Railways (RVR) associated company from accessing its financial facilities for two years due to conflict of interest related issues.
In a press statement released from Washington, the global financial body announced the debarment of Africa Railways Logistics Limited (ARLL) for two years in connection with an employee’s attempt to improperly influence the customs and port clearance process for locomotives bought by RVR through financing by the International Finance Corporation (IFC), the World Bank’s investment arm.
The World Bank launched investigations into the purchase of locomotives 20 locomotives by RVR in 2015 following a loan it had helped arrange.
Investigations by Daily Reporter covering Kenya, Brazil and Egypt spotlighted a decision by the company to buy used locomotives and refurbish them instead of acquiring brand new ones. The contract signed between RVR and National Railway Equipment Company (NRE) of Illinois, USA, showed that locomotives model GE B23-7 were bought from NRE at $170,000 (Sh17.59 million) each and modified at a cost of $985,000 (Sh101.9 million) each.
Our investigations revealed the purchase of locomotives was one of the items under investigation by the World Bank. RVR bought used standard gauge railway locomotives Model GE-23 manufactured in 1977 and modified them for use on a metre gauge railway.
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Data from international suppliers of used metre gauge locomotives showed that a single unit of a used locomotive costs between Sh4.5 million and Sh11 million depending on the year of manufacture.
The money used in the purchase of the locomotives was part of the more than $164 million (Sh16.9 billion) loaned to RVR to improve efficiency, standardise its operations, increase market share for rail traffic and improve the company’s competitiveness.
The Sh16.5 billion capital financing package was provided in form of a series of loans by European Development Financial Institutions (DFIs) arranged by IFC, which gave $22 million (Sh2.2 billion). Development Financial Institutions (DFIs) are government controlled entities that often support private sector projects in developing countries using tax payers’ money.
The World Bank Group the debarment makes Africa Railways Logistics Limited (ARLL) ineligible to participate in World Bank Group-financed projects.
“It is part of a settlement agreement, under which the company acknowledges responsibility for the underlying sanctionable practices and agrees to meet specified corporate compliance conditions as a condition for release from debarment,” the statement said.
The debarment of ARLL qualifies for cross-debarment by other multilateral development banks (MDBs) under the Agreement for Mutual Enforcement of Debarment Decisions that was signed on April 9, 2010.
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The World Bank said two related companies – Africa Railways Limited (ARL) and Rift Valley Railways Kenya Limited (RVRK) – were sanctioned with conditional non-debarment, which means that they remain eligible to participate in World Bank Group-financed projects as long as they comply with their obligations under the settlement agreement.
“Otherwise, the conditional non-debarment will convert to a sanction of debarment with conditional release, and the companies then will become ineligible to participate in World Bank-financed projects until the conditions for release set out in the settlement agreement are met,” it said.
The IFC investments (Project No. 31102andProject No. 24766) included a loan to purchase locomotives, wagons, infrastructure, and cover other costs associated with railway concessions in Kenya and Uganda.
According to the facts described in the settlement agreement, an employee of RVRK, who also owned a subcontracted company, both failed to disclose his ownership interest in the company and attempted to improperly influence the customs and port clearance process for the locomotives, which is a corrupt practice. The employee was disciplined and subsequently terminated.
The settlement agreement provides for a reduced period of debarment in light of the companies’ cooperation and voluntary remedial actions.
As a condition for release from sanction under the terms of the settlement agreement, all three companies commit to develop an integrity compliance program consistent with the principles set out in theWorld Bank Group Integrity Compliance Guidelines.
They also commit to continue to fully cooperate with the World Bank Group Integrity Vice Presidency.
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