The African Development Bank has approved a Sh3.59 billion loan to finance the rehabilitation of the dilapidated Kenya-Uganda railway.
The loan is part of a five-year capital investment programme worth $246 million (Sh22.1 billion), aimed at improving railway transport in the East African region.
The money will be given to the Rift Valley Railways (RVR), the consortium that secured a 25-year concession to run the line in 2006.
Even though the two East African countries’ objective of bringing the private sector on board was to improve railway transport in the region, the sub-sector is still dogged by financial and management problems.
“In this region, it is estimated that on average eight per cent of goods are transported by rail compared to 92 per cent by road,” said the African Development Bank (AfDB) statement.
An East African Community policy that calls for a shift in the transportation of goods from roads to railways, is also far from being achieved due to the multiple constraints railways in the two countries face, among them, old equipment and infrastructure that is over 100 years old.
However, AfDB said RVR has the potential to significantly increase freight transport, with expanded capacity, faster trains and improved reliability of rail assets.
“The AfDB loan to RVR supports the region’s plan to shift from roads to rails to ease the burden on the roads, as well as enhance the Bank’s efforts to contribute to major infrastructure development in the region,” the statement added.
The refurbishment and operation of the RVR, the Bank said, is expected to simultaneously improve the quality and lower the cost of rail freight services in East and Central Africa.
The Bank projected that the volume of goods transported will more than double to 3.3 million tonnes per annum by 2015, with marginal costs dropping by up to 30 per cent.
“In the next 15 years, the project is expected to generate significant revenue for the Kenyan and Ugandan governments and have positive environmental effects by reducing the volume of goods transported by more polluting trucking services,” the statement added.
The bank said the project was in line with the Bank’s assistance strategies for both countries as well as its regional integration plan for Eastern Africa.