by George Turner
The World Bank has in recent days sanctioned three companies for corrupt practices at the Rift Valley Railway. Africa Railways Logistics Limited, Africa Railways, and Rift Valley Railways Kenya Limited.
The Rift Valley Railway was the subject of an investigation co-ordinated by Finance Uncovered in 2016. It was published by De Correspondent (Netherlands), The Daily Reporter (Kenya), The Observer (Uganda) and MO (Belgium).
Our “Lunatic Express” developed information received by Patrick Mayoyo, an award-winning Kenyan journalist who attended a Finance Uncovered four-day training in 2013. Journalists from Belgium and the UK were part of the team.
We discovered that a $287m modernisation programme had not resulted in the purchase of new trains as claimed by the owners of the railway.
Documents we obtained showed that supposed new trains were in fact second-hand locomotives from the United States. These locomotives were a fraction of the cost of new trains. International development finance institutions funded by taxpayers had provided $144m towards the overall $287m cost of the upgrade.
The difference between money given to RVR to pay for new locomotives, and what they spent, has never been explained.
We also showed that despite the upgrade, trains were regularly breaking down.
And we revealed that a World Bank investigation was looking at alleged embezzlement: the removal of funds unlawfully from the company which also saw large sums flow to a related company in management fees.
As seems to be standard practice where the World Bank has uncovered instances of serious fraud involving public money – few details are provided by the Washington-based institution. Its investigative reports tend to be heavily redacted. The World Bank’s Rift Valley Railway report has not yet been put on its website.
However, the World Bank’s recent press release on its Rift Valley corruption probe makes no mention of “embezzlement”.
Instead, the focus of the World Bank action appears to be one employee of Africa Railways Logistics Limited, who was accused of attempting to bribe customs officials over the import of locomotives. It is not clear what the purpose of the bribe was.
Highlighting what appears to be a relatively small issue may shift attention away from larger problems that affected the railway.
Hit the buffers
The RVR link between the port of Mombassa and Kampala in Uganda was privatised in 2006. But its then owner, Sheldon Rail, neither had the money nor the expertise to run the railway. Traffic plummeted, losses mounted and infrastructure deteriorated. In 2011, the line was taken over by Qalaa Holdings, an Egyptian-based private equity fund.
Qalaa managed to corral a large group of development finance institutions to pump money into the project. But the railway continually missed its targets, and faced competition a new faster railway built by the Chinese that opened last year. In August 2017, the Kenyan High Court ordered that the concession be returned to the Kenyan government.
So where has the money from the development institutions gone?
The capital expenditure programme approved by the Development Finance Institutions in 2011 amounted to $144m, with Qalaa expected to raise a further $143m from the private sector and the re-investment of the profits of the railway. Each of the 20 locomotives purchased by RVR cost $1m alone.
Today Qalaa’s latest published accounts value the RVR at EGP3.2bn ($180,000).
Africa Railways Logistics (ARL) is the company that suffered the most serious punishment. A two year “debarment” prevents it from participating in any from World Bank Group projects during that time. But ARL is a shell company based in Mauritius. The Rift Valley Railway appears to have been its only project. A “conditional debarment” for the two other companies is unlikely to have much impact.
The railway’s parent company, Qalaa, the majority shareholder, confirmed in its latest annual report that no action is being taken against it.
Qalaa can continue to bid freely for World Bank sponsored finance, and has several ongoing projects supported by development finance institutions.
Our Rift Valley Railway investigation was part-funded by journalismfund.eu