On January 11 this year, Uganda’s Prime Minister Apolo Nsibambi sat down to break bread with his Egyptian President Hosni Mubarak.
Mr Nsibambi had been invited by his Egpytian counterpart, Dr Ahmed Nazif, in what was billed as a five-day working trip in Cairo to smooth out bilateral issues, after a three-month period that saw a remarkable thawing of the historical tensions between Kampala and Cairo.
In November 2009, Uganda’s Daily Vision newspaper reported that Egypt’s assistant foreign minister Mona Omar, on a visit Uganda, denied that her country had denied Uganda from starting development projects on River Nile.
Two days later after the meeting with Mubarak, the two premiers announced that Uganda would allow Egypt to grow wheat on its fertile land. This was a far reaching deal in which Egypt would loan Uganda Sh350 million ($4.5 million) to build water dams.
Why would a nation built on patched land — and that survives on a mighty river that cuts through 6,700 kilometres, fed from tributaries and lakes shared among five nations — want to sign a deal to grow its most valued staple food with a country 3,000 kilometres away, and which has historically viewed it with suspicion?
It turns out that there was a lot at stake in the two months that relations between Cairo and Kampala were growing closer.
As the political track to strengthen the economic relations between the two countries was advanced, an even deeper and sophisticated corporate battle had been going on during this period, played out in Nairobi, Cairo, and London by two of the big private equity funds that focus on Africa, and a fast-rising investment group in Kenya.
The two PE shops are Citadel Capital, a powerful and tough talking firm based out of Cairo that is whispered to count among its investors sons of the most powerful politicians and political elite in that country, and Helios Investment Partners, a high-flying firm co-founded by one-time Texas Pacific Group executive Temitope Lawani, a Nigerian who counts among his many investors the once powerful US foreign secretary, Madeleine Albright; once the world’s most powerful hedge fund manager, George Soros; and a scion of perhaps once the world’s most powerful banking dynasty, Jacob Rothschild. The Kenyan investment group is Transcentury.
On December 17 last year, Citadel announced victory in the race to buy out the majority shareholding of Mr Roy Puffet in Rift Valley Railways International, the man who won the concession to run the Kenya-Uganda railways for 25 years.
“Over the past 16 months, RVRI has been amidst a highly abortive restructuring process with many false starts and structures envisaged,” wrote Citadel’s managing director Karim Sadek to Deputy Prime Minister and Finance Minister Uhuru Kenyatta.
The firm said it had figured out what to do with the deal and would invest $150 million to turn around the railway over the remaining two decades. Citadel had also negotiated to buy out all the other shareholders with the exception of Transcentury, with which it was locked in a very bitter battle.
Three days earlier, Mr Babatunde Soyoye, the managing partner of Helios, had written to the two governments and everyone involved that they were willing to invest $50 million in a combination of a loan and warrants.
Helios claimed to have convinced the IFC and KfW to release some $54 million in funds that the two institutions did not want to release to Mr Puffet’s management.
They were to work with America Latina Logistica, a Brazilian railway operator with $1 billion in revenues. This offer even included a promise to pay the governments a guaranteed insurance of Sh1.5 billion if they failed to meet targets. Transcentury had been negotiating with Mr Puffet since October, and he was asking for Sh750 million ($10 million) for his 35 per cent shareholding.
While the boardroom intrigues surrounding this fight for control of the concession have providing the narrative arch behind this saga, the entry of the Egyptians has stocked nationalistic passions in Kenya, and outlined the cleavage that defines how the country and Uganda define their strategic interests.
The boardroom conflict also underscores the shape the battle for Africa’s future will take, defined by the punishing geography of the Nile Basin countries, and access to vital resources such as water, energy, and minerals. It also highlights the leading actors that will drive the way that nations in the continent will relate to each other.
In the traditional mode, the conflict over what would define the national interests of the nine Nile Basin countries would be fuelled by politicians with expansionist ambitions, but in the current saga, corporate men in suits seated thousands of kilometres away are calling the shots from their plush private equity funds profits.
It will also be a battle in which governments will have to balance public and strategic interests against the short-term commercial objectives of corporate managers hired to extract maximum profits for their wealthy investors. In the RVR saga, we have Nigerian, American, Middle Eastern and some Kenyan capital vying for a major infrastructure opportunity.
With the kind of deals that private equity funds and African multinational corporations are taking up, the new scramble for Africa is entering a phase where private capital will be driving foreign policy on the continent.
This illustrates the positions Uganda, Kenya and Egypt may take on this deal. To the players involved, it is either the hunt for pure commercial profit or strategic interests. However, at a deeper level, whatever outcome stems from the RVR is a question of national interest.
From the pattern of deals to which Egypt has entered in Africa over the last two years, it is defining its strategic interests in terms of bolstering its food security.
Many hungry mouths
According to the UN Population Division data, Egypt’s population is likely to hit 111 million by 2050 under a low-case fertility scenario, or 156 million if it continues to grow at the current fertility rate. This means there will be many hungry, unemployed mouths living in the slum areas to feed on a land whose fertility might be falling. This could lead to population pressures and political instability in an authoritarian state.
It is therefore in Egypt’s strategic interest to manage the Nile well, and secure food and natural resources downstream. That is why Cairo would back Citadel in its bid to control the railway concession in East Africa in order to establish a logistics corridor that will not only help bring food home, but resources such as oil from Uganda and Southern Sudan.
Uganda wants much the same thing. It has historically been held hostage to the incompetence of successive Kenyan governments in running the railway that forms the gateway to their landlocked country.
The shareholding squabbles within RVR could only be of limited interest to them, compared to the need to export their oil to the world. This could be the reason that has motivated Kampala to seek a closer relationship with Cairo.