The Kenya Railways Corporation (KRC) entered a lopsided contract on the management of passenger operations for the Standard Gauge Railway line, exposing it to huge losses and fraud.
According to recently leaked documents in The Standard’s possession, directors of the KRC board were told of glaring anomalies in ticketing in a 2018 meeting.
Africa Star Railways (Afristar), the Chinese operator of the SGR line, ran largely unchecked operations where train cabins would routinely be artificially fully booked.
As a result, the Nairobi-Mombasa passenger train service appeared almost always packed – a situation chalked up to Kenyans’ excitement to ride the train – only for agents to later sell the tickets to desperate travellers at premium rates.
In instances where there were no buyers of the fraudulent tickets, the officials would report that there had been cancellations to generate refunds – as a result, their exposure to losses was nil.
According to documents, audits on the operations uncovered other instances of mega fraud involving bookings, including tickets being issued without names, meaning anyone could use them, the board heard.
Further, adults would be allocated the discounted child tickets, which before they were abolished, were being sold at half the regular price. Specifically, under a promotional tariff, adult tickets cost Sh700 against the Sh350 that a child would be charged for the same seat.
Additionally, in the shambolic ticketing scam orchestrated by employees of Afristar – which could be kicked out from managing SGR operations within the week if an advisory from the Solicitor General is heeded – passengers would find their seats had been reserved and paid for by multiple travellers.
But the shocker came in the form of supposed cancellations when the passenger train was actually full, the KRC board of directors noted in a past meeting.
“… management had detected inconsistencies in the number of tickets refunded and the actual number of passengers in each train. Management engaged police and other authorities to investigate the ticketing system,” a board meeting on December 4, 2018, was told.
Own cost
The directors were further informed of some Sh1 billion in bank deposits that could only be withdrawn in phases, with tranches extending over three years. This raised questions on transparency given that KRC has long been cash strapped.
KRC contracted Afristar, a subsidiary company of China Road and Bridge Corporation, in 2017 to manage SGR operations and maintenance.
The operator would be in control of passenger ticketing and revenue collection, while KRC marketed the service at its own cost to find customers. The corporation, however, was excluded from collecting revenues from sales.
“The contract places the commercial risk on Kenya Railways who has to ensure sufficient traffic of passengers and cargo are available for the operator to transport,” the board was informed.
Following the assessment of the contract, the directors indicated that Afristar as the contractor in the agreement should work under set revenue targets where in case of any shortfalls, penalties would apply.
“Directed management to determine the revenues lost through abuse of refunds and any other malpractice that the audit may reveal and lodge a claim from the operator for the entire loss since the inception of the SGR passenger services,” reads one of the board resolutions.
This would form the basis of a planned contract termination between KRC and Afristar, as the Sunday Standard exclusively reported yesterday.
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