Ratio Magazine :: The Inside Track to East Africa’s Economies - Kenya: Press Releases: Citadel Capital Acquires Stake in Kenya-Uganda Rift Valley Railway

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Kenya: Press Releases: Citadel Capital Acquires Stake in Kenya-Uganda Rift Valley Railway

Monday, 22 February 2010

Citadel Capital (CCAP.CA on the Egyptian Stock Exchange), the leading private equity firm in Africa and the Middle East with USD8.3bn in investments under control, confirmed today that it has acquired a 49% stake in Sheltam Railways Company, the largest single shareholder and lead investor in Rift Valley Railways of Kenya and Uganda.

Sheltam owns 35% of Rift Valley Railways (RVR), which has a 25-year concession to operate a century-old rail line with some 2,000 kilometers of track linking the Indian Ocean port of Mombasa in Kenya with the interiors of both Kenya and Uganda, including the capital city of Kampala. The transaction gives Citadel Capital an effective ownership of 17.5% of RVR.

“Citadel Capital will look to inject more than USD150m in Kenya-Uganda Railways over the coming five years,” said Citadel Capital Managing Director Karim Sadek. “This is the first of several investments we are exploring in East Africa and is a natural extension of our proven interest in the continent’s transportation and logistics sector.”

“Kenya Uganda Railways is a storied line with immense potential waiting to be unlocked by the smart deployment of capital and management talent, two things Citadel Capital would bring to the table,” added Sadek. “Going forward, it is our intention to acquire 100% of Sheltam at the same time as we continue exploring other investments in Africa’s promising transport sector.”

Across its core African footprint, Citadel Capital sees transport costs being a major impediment to economic growth: High costs and systemic inefficiency greatly reduce the competitiveness of African businesses, as East African Community reports clearly underline.

Transport prices in East Africa are among the highest in the world, studies show, with transport to Uganda from Kenya presently costing more than USD0.13 per ton/kilometer (the standard industry metric) due in large part to heavy reliance on trucking. A lack of operating capacity has resulted in rail capturing less than 10% of East Africa’s transport market.

“An efficient rail network could, in time, bring East African transport costs down by as 50% due to the operational and fuel efficiency of shipping by rail,” said Citadel Capital Managing Director Amr El-Barbary, noting that, “Kenya Uganda Railways hauls just over 1m tons per annum today out of an existing market of 16m tons being handled in Mombasa Port today. New investment and a fresh approach to management could see that figure grow to 5m tons per annum within five years.”

Citadel Capital has a proven track record of working hand-in-hand with existing management teams to recruit globally experienced consultants and additional management talent at all of its platform investments. Citadel Capital fully supports Rift Valley Railways in its ongoing discussions with América Latina Logística (ALL) on the finalization of a technical agreement, noting that ALL’s capacity and expertise complement Citadel Capital’s know-how.

Citadel Capital’s other investments in Africa’s transportation and logistics sector include Egypt’s National River Transportation Company and Sudan’s Keer Marine. Both companies operate environmentally friendly, fuel-efficient river transport networks and are developing supporting river ports/logistics hubs.

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