The Kenyan and Ugandan governments handed over the money-losing colonial-era railway to Rift Valley Railways Consortium (RVRC) under a 25-year concession last year, and the company will pay an initial five-million-dollar fee to Nairobi and Kampala plus 11.1 percent of gross revenue.

RVRC said in a statement that it had invested 11.5 million dollars since it took control of the facility in November and planned to inject an additional 17.5 million dollars by June 2008.

The cash surpasses five million dollars that the RVRC must invest annually over the next five years in infrastructure upgrades under the leasing agreement between the firm and the governments.

The consortrium expects to reap benefits from the recently expanded East African Community -- Kenya, Uganda, Tanzania, Rwanda and Burundi -- and the creation of a customs union which opened up markets for 90 million people.

RVRC Chief Roy Puffett said 400 railway workers would be retrenched and paid off in full.

"It is important for the media to note that a bloated workforce is counterproductive to our efforts to restructure this organization thus the need to retrench and retain staff in core functions," Puffet said.

"We shall however be retaining the services for some of the retrenched workers as preferred suppliers as part of our commitment to boost local entrepreneurial capacities."

Conceived under the British mandate, the Kenya-Uganda railway began service on December 20, 1901 after more than a decade of planning and construction which was halted more than once by lion attacks on workers.

The line was widely known as the "Lunatic Express" or the "Iron Snake."

Derided by lawmakers in London for its enormous cost, the line runs some 900 kilometers (580 miles) from Kenya's Indian Ocean port of Mombasa, through Nairobi, and up the Rift Valley to Kisumu on the shores of Lake Victoria. From there, rail-steamer services go to Uganda, where a separate line runs.

Due to mounting financial woes, the East African Railways Corporation, as it was then known -- owned by Kenya, Uganda and Tanzania -- halted regional operations after the East African Community collapsed in 1977.

Its largest section was taken over by the government-owned Kenya Railways Corporation, but poor management, lack of maintenance and insufficient funds for the purchase of new engines forced it to cut back services.

RVRC is made up of Sheltam Rail Company of South Africa with a 61 percent share, two other South African firms, Comazar Limited and CDIO Institute for Africa Development Trust, with a total of 14 percent, a Kenyan company, Primefuels (Kenya) Limited, with 15 percent, and Mirambo Holdings of Tanzania with 10 percent.

The consortium's lead investor, the Sheltam Group of Companies, operates railways in South Africa, Mozambique and Zimbabwe while Comazar runs national railroads in Cameroon, Ivory Coast, Burkina Faso and northern Madagascar.