The contract as set out was at best incompetent at worst...By breaking the part where Roy plays the pipe, calls the tune and does the singing; we can see what a more localised solution brings to the table. The deal is still 25 yrs with no real get out clauses (at least to my understanding). Thats not clever.
Clearly two things need to happen in short order insert get out clauses (after two yrs of underperformance as an example) and secondly to have a more robust oversight system that picks up when things are going wrong. This time we've wasted two yrs.
One worry I have about the use local solution providers, it'll be difficult to get them out. They know how to wine and down the powers that be. 2ndly and relatedly, they'll be unable to take the hard-headed decisions that will allow them to make money e.g. rationalising the employee population because they know how to play the game.
Showing posts with label RVR. Show all posts
Showing posts with label RVR. Show all posts
Thursday, November 20, 2008
Wednesday, July 16, 2008
RVR: rewind
18 months ago when this deal was sealed, several of us bloggers had a debate on pesa-tu's blog and its fair to say that I was probably the only one querying certain aspects of the deal. It was a deal that was written to fail and has only been rescued by an unusually vigilant railway regulator. 25 years is a long-time to give somebody to turn around a business even in such a capital intensive industry such as rail. Imagine all RVR had to do in the first 1 year was to maintain the same level of service as before and with headcount reduction it would have made good returns even with Jan's disruptions. Well well...
It's almost certain that this deal will have to be re-written, handed over to someone or incredibly be going back to square one. The tragedyof it is that we really need a functioning railway transport system. I'd go as far as to say that our economy is not going to grow consistently until we figure out and implement a comprehensive railway policy so that we have a transit system in the major towns and links to our neighbours and throughout the country.
Hopefully, the solution the PM-headed team who seems to have realised how important the cross-country links, will come up with a clear policy on the following:
It's almost certain that this deal will have to be re-written, handed over to someone or incredibly be going back to square one. The tragedyof it is that we really need a functioning railway transport system. I'd go as far as to say that our economy is not going to grow consistently until we figure out and implement a comprehensive railway policy so that we have a transit system in the major towns and links to our neighbours and throughout the country.
Hopefully, the solution the PM-headed team who seems to have realised how important the cross-country links, will come up with a clear policy on the following:
- Short-term goals: to get Kenya-Uganda railway to level that meets the cargo clearance levels at the Mombasa port. This will in turn generate the requisite revenue needed to meet...
- Medium-term goals: upgrade equipment (tracks, wagons) so as to bring them from 19th to 21st century. In turn generating returns to allow us to meet...
- Long-term goals: modern railway system for Nairobi and perhaps Mombasaas well as a system that successfully criss-crosses all our provinces so for example there would be a line to Lodwar, Meru, Kakamega and so forth.
Monday, May 26, 2008
Unravelling RVR deal
Not to say I didn't say, I did here. A 25-year deal to some unproven company is unheard of. Whether in Kenya, Singapore et al, you have to copy the best model for delivering good rail transport. In the UK as an example, rail is seeing aturn around because those tendering the business are being evaluated on pre-agreed measures regularly and several have seen non-renewal of their contracts due to non-perfomance.
I think its early enough but long enough to see that RVR has struggled to deliver so far. The deal should be cancelled and offered to several companies hwo can compete to manage the Nairobi to Mombasa route; Nairobi to Kisumu route and Kisumu to Kala routes seperately.
GoK can then think about tendering the same for routes in and out of Nai i.e.serving the sourrounding suburbs and near towns.
I think its early enough but long enough to see that RVR has struggled to deliver so far. The deal should be cancelled and offered to several companies hwo can compete to manage the Nairobi to Mombasa route; Nairobi to Kisumu route and Kisumu to Kala routes seperately.
GoK can then think about tendering the same for routes in and out of Nai i.e.serving the sourrounding suburbs and near towns.
Friday, April 18, 2008
Some good business news
As a self-confessed cheerleader of Equity bank, the confirmation of its ambitions to go regional is just awesome. Even at Ksh200, its still a steal if you know your stocks. In all honesty, it should also go for Akiba Commercial Bank if the TZ people will let it. And then start looking to move south to Malawi and Zambia. Go Equity!
A commodities market for Kenyan food produce has been overdue in my opinion. Its good news to see that the idea may finally be put into practice. If well implemented, it will revolutionalise agriculture in Kenya. Imagine a farmer being able to get maize futures alongside his shares, that way he could judge how much he was likely to get for his maize in 6 months time.
Finally, it was good to hear M7 retaliate how important Railway is/will be to East Africa's economic growth. My thinking is that we should go further and think about creating a Metropolitan Railway Plan with tenders for companies to build Africa's first underground railway system in Nai.
A commodities market for Kenyan food produce has been overdue in my opinion. Its good news to see that the idea may finally be put into practice. If well implemented, it will revolutionalise agriculture in Kenya. Imagine a farmer being able to get maize futures alongside his shares, that way he could judge how much he was likely to get for his maize in 6 months time.
Finally, it was good to hear M7 retaliate how important Railway is/will be to East Africa's economic growth. My thinking is that we should go further and think about creating a Metropolitan Railway Plan with tenders for companies to build Africa's first underground railway system in Nai.
Tuesday, April 10, 2007
RVR deal goes off the rails, NMG, CFC excite
When the Rift Valley Railway deal was announced, I said that i thought that a 25 year term was economically suicidal. Rail if handled as a business, could be a cornerstone of our economy's regeneration helping generate revenues and support the growth of the our landlocked neighbours, our productive Western and Rift Valley provinces that don't have roads to match their productivity and help ease the wear and tear rote on the Mombasa-Nairobi road by HGVs. To surrender the business away to entities some with dubious history and others that are entangled in messy legal entities for 25 years without any back-out clauses smacks of desperation and will cost us in the next few years. Already, the first results show that under the new RVR tutelage, KR is underperforming in various areas with KPA having to publicly complain about yet-uncollected rail cargo, RVR are still in court with their former partners and they off course haven't paid all the fees to GoK. It is messy and I forecast that the whole deal will have to be reviewed in the next 18 months. The other point to make is that there are very few of the big tenders in any sector that this govt has done well in and I wonder whether we need to call on our "partners" World Bank/IMF to help streamline the way we evaluate these deals so that we get the right candidates.
While I was away, various companies rushed in their results to comply with the end of March rule. Several stood out. NMG with a k12 dps was awesome and those wise enough to look at price growth potential as well as dps will have NMG's shares. For me, this is the only media company worth holding over the long-term given its expansion goals. CFC is one I expect to hear more of. The 06 results show that it can do well on a standalone basis; PAT grew by 68% driven by growth in customer loan book (30%), govt securities and fees and comms. As the only universal bank in Kenya today, CFC will show momentum in the 3-4 years as it streamlines its ops. Its likely merger with Stanbic to create a top 5 bank will be the icing on the cake for its shareholders. Finally, there are rumours that Express is eyeing an strategic international partner presumably to give it capital assistance that will expand its reach. From being a loss maker 3 years ago to an international business is quite some turnaround. ARM, ScanGroup are others that announced FY06.
While I was away, various companies rushed in their results to comply with the end of March rule. Several stood out. NMG with a k12 dps was awesome and those wise enough to look at price growth potential as well as dps will have NMG's shares. For me, this is the only media company worth holding over the long-term given its expansion goals. CFC is one I expect to hear more of. The 06 results show that it can do well on a standalone basis; PAT grew by 68% driven by growth in customer loan book (30%), govt securities and fees and comms. As the only universal bank in Kenya today, CFC will show momentum in the 3-4 years as it streamlines its ops. Its likely merger with Stanbic to create a top 5 bank will be the icing on the cake for its shareholders. Finally, there are rumours that Express is eyeing an strategic international partner presumably to give it capital assistance that will expand its reach. From being a loss maker 3 years ago to an international business is quite some turnaround. ARM, ScanGroup are others that announced FY06.
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