The Board of Directors of the African Development Bank (AfDB) has approved a USD 40-million loan to finance the Rift Valley Railways (RVR). The five-year USD 246 million capital investment program involves two concessions over a rail network running from Mombasa in Kenya to Kampala in Uganda.
In this region, it is estimated that on average 8% of goods are transported by rail compared to 92% by road. While the East African Community transport policy calls for a transition from roads to rail in goods transportation, the railways in Kenya and Uganda face multiple constraints, including old equipment and infrastructure – as the railway is over 100 years old. The Rift Valley Railways has the potential to significantly increase freight transport as a result of expanded capacity, faster trains and improved reliability of rail assets. The AfDB loan to RVR supports the region’s plan to shift from road 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 refurbishment and operation of the RVR is expected to simultaneously improve the quality and lower the cost of rail freight services in East and Central Africa. For example, the volume of goods transported is expected to more than double to 3.3 million tons per annum by 2015, while marginal costs are expected to drop by up to 30%. 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 loan to support the rehabilitation of the Rift Valley Railway is a top development priority for both Uganda and Kenya. The project aligns explicitly with the Bank’s assistance strategies for both countries as well as the Bank’s regional integration strategy for Eastern Africa. It is in harmony with the Bank’s strategic priority to expand Africa’s economic infrastructure as well as current efforts to increase financing from the Bank’s private sector window in low-income countries.
The Bank led the environmental and social impacts due diligence on behalf of the lenders group. The Bank also provided substantial technical guidance to RVR in developing the Environmental Health Safety Audit Report, the Resettlement Action Plans, and other measures/initiatives for improving RVR’s environmental and social performance and sustainability.
To date, the Bank has approved more than 30 private sector operations amounting to approximately USD 500 million in East Africa. This is the second private sector regional project in the area after the East African Submarine Cable (EASSy) Project.