The African Development Bank Group (AfDB) has approved a 25-year, $1 billion (ZAR 18.85 billion) loan to Transnet, South Africa’s state-owned freight and logistics company, to support its recovery and growth, focusing on the rail and port sectors.
This strategic funding, fully guaranteed by the South African government, received approval from AfDB’s Board of Directors on Friday, July 12, 2024, according to a statement on the AfDB’s website on Thursday.
The statement noted that the loan will finance the first phase of Transnet’s comprehensive $8.1 billion (ZAR 152.8 billion) five-year capital investment plan, which aims to enhance Transnet’s existing capacity and prepare for future expansions in critical segments of the transport value chain.
“The African Development Bank Group has approved a ZAR 18.85 billion ($1 billion) corporate loan to Transnet, South Africa’s major freight transport and logistics company, for its recovery and growth plans.
“The 25-year loan approved by the Bank Group’s Board of Directors on Friday, 12 July 2024, is fully guaranteed by the government of South Africa. It will facilitate the first phase of the company’s ZAR 152.8 billion ($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,” a portion of the statement read.
The statement also indicated that Solomon Quaynor, the African Development Bank’s Vice President for Private Sector, Infrastructure, and Industrialisation, highlighted that the partnership would enable Transnet to implement a comprehensive Recovery Plan (RP), addressing operational inefficiencies, particularly in the rail and port sectors.
“Our partnership will enable Transnet to execute a comprehensive Recovery Plan (RP), addressing operational inefficiencies, particularly in rail and port sectors,” Quanyor stated.
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The statement further noted that besides the $1 billion corporate loan, the African Development Bank is considering two specific grants. The first is $750,000 in technical support from the Sustainable Energy Fund for Africa (SEFA), a multi-donor fund managed by the Bank, aimed at enhancing energy efficiency and related initiatives.
The second grant includes $1 million from the Infrastructure Project Preparation Facility of the New Partnership for Africa’s Development (IPPF-NEPAD) for technical assistance to expedite railway reforms and tackle structural and regulatory inefficiencies.
What you should know
Transnet has encountered significant operational challenges in its crucial rail and port sectors due to underinvestment in infrastructure and equipment, theft and vandalism, and external shocks like floods and the impacts of the COVID-19 pandemic.
In October 2023, Transnet initiated a recovery plan aimed at rehabilitating its infrastructure and speeding up the relaunch of operations over the next 18 months.
This plan focuses on restoring operational performance and increasing freight volumes to meet customer demands.
