The African Development Bank Group has approved a ZAR 18.85 billion (USD 1 billion) corporate loan to Transnet, the South African freight transport and logistics company, for its recovery and growth plans.
The 25-year loan approved by the bank’s Board of Directors is fully guaranteed by the government of South Africa.
“Transnet, the custodian of South Africa’s critical transport and logistics infrastructure, plays an indispensable role in the economy of the country, ensuring a competitive freight system and serving as a gateway to the SADC region. Our partnership will enable Transnet to execute a comprehensive Recovery Plan (RP), addressing operational inefficiencies, particularly in rail and port sectors,” said African Development Bank’s Vice President for Private Sector, Infrastructure and Industrialisation Solomon Quaynor.
The loan will facilitate the first phase of the company’s ZAR 152.8 billion (USD 8.1 billion) five-year capital investment plan to improve its existing capacity ahead of expansion for the priority segments throughout the transport value chain.
Transnet has faced operational challenges mainly in the critical rail and port businesses resulting from underinvestment in infrastructure and equipment, theft and vandalism, and external shocks such as floods and the effects of the Covid pandemic.
The company is committed to addressing past challenges, fostering integrity, and enhancing efficiency within the organization. It has made progress in some key areas including reforms in governance procurement and financial management.
The recovery plan of the South African freight transport, launched in October 2023, seeks to rehabilitate the infrastructure and accelerate the relaunch of operations over 18 months, focusing on restoring operational performance and freight volumes to meet customer demands.
“We appreciate the support demonstrated by the African Development Bank, the loan extended by the bank will make a significant contribution to Transnet’s capital investment plan to stabilise and improve the rail network and to contribute to the broader South African economy. The accompanying grant funding to the loan will also greatly assist Transnet with to its energy efficiency efforts and with Infrastructure Project Preparation initiatives,” Michelle Phillips, Group Chief Executive of Transnet said.
In addition to the corporate loan, the African Development Bank is contemplating two targeted grants, including USD 750,000 in technical support from the Sustainable Energy Fund for Africa (SEFA) – a multi-donor fund administered by the bank – to improve energy efficiency and associated measures, in line with Transnet’s net zero plan. The second grant funding comprises USD 1 million from the Infrastructure Project Preparation Facility of the New Partnership for Africa’s Development (IPPF-NEPAD), for technical assistance to help accelerate railway reforms and address structural and regulatory inefficiencies.
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