The African Development Bank has sanctioned a $1 billion (ZAR 18.85 billion) loan to Transnet, South Africa’s leading freight and logistics corporation, to support its recovery and growth initiatives.
The 25-year loan, fully backed by the South African government, will fund the initial phase of Transnet’s $8.1 billion (ZAR 152.8 billion) five-year capital investment strategy, aimed at enhancing its current capacity before expanding key segments across the transport value chain.
“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. This initiative signifies our commitment to enhancing national logistics capabilities and driving sustainable economic growth.” African Development Bank’s Vice President for Private Sector, Infrastructure and Industrialisation Solomon Adegbie-Quaynor, commented.
Besides the corporate loan, the African Development Bank is considering two specific grants, including $750,000 in technical assistance from the Sustainable Energy Fund for Africa to enhance energy efficiency and related measures. The second grant is a $1 million allocation from the Infrastructure Project Preparation Facility of the New Partnership for Africa’s Development, intended to provide technical support to expedite railway reforms and address structural and regulatory inefficiencies.
“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 its energy efficiency efforts and with Infrastructure Project Preparation initiatives,” said Michelle Phillips, Group Chief Executive of Transnet SOC Ltd.
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Transnet has faced debts amounting to 130 billion rand and recorded a loss of 1.6 billion rand in the six months leading up to September 30, due to a decline in rail, port, and pipeline volumes coupled with high costs. The company has also seen a decrease in freight volumes to 150 million metric tons in the financial year 2022/23 from 226 million tons in 2017/18.
Transnet aims to restore freight volumes and return to profitability within 18 months, as outlined in their recovery plan announced in October 2023. The plan includes dividing the freight rail subsidiary into two separate entities: an infrastructure management company and an operating unit. It also aims to reduce port backlogs and make another attempt to open parts of its rail network to private operators after a previous unsuccessful effort two years ago.