The International Finance Corporation (IFC) and KFW of Germany had pledged to provide the money to be invested in the rail network in the first five years of operation.

RVRC was supposed to raise Sh3.4 billion that would be used to upgrade and modernise the aged locomotive engines. The lenders are, however, likely to approve the crucial funding next week when the IFC board meets in Washington.

Extension agreement

Due to the financing delay, the consortium has asked the Kenyan and Ugandan Governments to extend the date for handing over the assets currently owned by Kenya Railways Corporation and the Uganda Railways Corporation to October 31.

According to an earlier programme, the RVRC led by Sheltam of South Africa was set to takeover the 2,350km railway line from Mombasa to Kampala as well as locomotive engines and wagons on Tuesday.

"The three months will enable the consortium to finalise financing arrangements," said Transport minister Mr Ali Mwakwere.

Speaking at Transcom House when he signed an extension agreement between the Government and the consortium on Monday, Mwakwere said the two governments are committed to handing over the railway system to the private operators.

New conditions

The minister denied claims that the Government was frustrating the investors by demanding that they take in more workers than they needed.

"The Government is ready to hand over the assets even if it was tomorrow," Transport PS Mr Gerishon Ikiara said.

RVRC managing director Mr Roy Puffett revealed that the two lenders had imposed new conditions that the two governments must address before they could approve the loans.

He said they wanted all pending issues on workers, especially the proposed retrenchment of excessive workers finalised.

The IFC also wants people who live close and operate businesses along the railway line in Kibera and Mukuru slums to be relocated before August 7, when the IFC board meets in Washington to approve the project.

"IFC is relying on support of the World Bank to ensure that its safeguard policies are met, while retrenchment and other social mitigation of railway staff in Kenya, as well as the relocation of people and businesses that have encroached on the rights-of-way in both Kenya and Uganda," said a statement released by IFC.

Transitional measures

The lender is holding both governments responsible for enforcing environmental and safety procedures though it has pledged financial support to help them cope up with the situation.

According to the agreement, the consortium is expected to pick employees to be retained and forward their names to the relevant government agencies at least 14 days before the official handover.

Puffett revealed that the company had completed the exercise in Uganda while the extended period would enable it to complete recruiting staff in Kenya.

"The period will enable both governments to implement country specific transitional measures as well as finalise core labour related issues including settlement of terminal benefits," said Mwakwere.

Finance Permanent Secretary, Mr Joseph Kinyua, said the Government had secured $45 million (Sh3.2 billion) from the World Bank to pay the retrenched workers.