How plan to privatise railways became Kenya’s public sector reform nightmare

• Desire to save face traunched the reality that Kenya and Uganda were handing over a national asset in a fundamentally flawed deal

The company’s finances were in bad shape, with debts exceeding assets to the tune of Sh1.25 billion. Most importantly, the company was not meeting the operation performance targets set by the government.

In 2008, the problems continued to mount. With the company failing to meet revenue targets, finances continued to worsen and the investment programme to upgrade the railways and trains set in the concession agreement was falling behind. The governments were unhappy. For instance, RVR incurred a loss of Sh1.8 billion in 2008, compared to Sh477 million in 2007 on revenues of Sh3.7 billion.

These mounting problems threatened the concession, and this was making shareholders uncomfortable, but what triggered their action was the realisation that the Sh2.1 billion ($29 million) that was supposed to be used for five years had been spent in two years.

“Roy says it wasn’t his fault the money disappeared, but because the IFC loans were never fully drawn down,” said one person familiar with the details.

It was with this in mind that Transcentury started canvassing other shareholders to support its bid to engineer a boardroom coup that would remove Mr Puffet as the manager of the business and replace him with a local.

Transcentury believed that the Sh2.1 billion of equity the shareholders contributed was wasted on hiring South African expatriates, among other things, and they pushed for Mr Brown Ondego, formerly of Kenya Ports Authority, to be hired to replace Mr Puffet.

Some of the shareholders did not support this move, but Transcentury pushed its agenda through and got Mr Ondego. Some within the Transcentury group believe that Mr Ondego has achieved much than Mr Puffet did with Sh2.1 billion.