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Citadel Capital acquires stake in Kenya and Uganda’s Rift Valley Railways

Citadel Capital, a private equity firm in Africa and the Middle East, has acquired a 49 per cent stake in Sheltam Railways, the largest single shareholder and lead investor in Rift Valley Railways of Kenya and Uganda.

Sheltam owns 35 per cent of Rift Valley Railways, which has a 25 year concession to operate a century-old rail line with some 2,000 kilometres of track linking the Indian Ocean port of Mombasa in Kenya with the interiors of both Kenya and Uganda, including the capital city of Kampla.

The transaction gives Citadel Capital an effective ownership of 17.5 per cent of RVR.

“Citadel Capital will look to inject more than USD150m in Kenya Uganda Railways over the coming five years,” says 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. Going forward, it is our intention to acquire 100 per cent of Sheltam at the same time as we continue exploring other investments in Africa’s promising transport sector.”

Transport prices in East Africa are among the highest in the world, with transport to Uganda from Kenya presently costing more than USD0.13 per ton/kilometre due in large part to heavy reliance on trucking. A lack of operating capacity has resulted in rail capturing less than ten per cent of East Africa’s transport market.

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

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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