Transnet secures USD 1B loan from AfDB for recovery and growth

SOUTH AFRICA – The African Development Bank Group (AfDB) has approved a ZAR 18.85 billion (USD 1 billion) corporate loan to aid Transnet, South Africa’s primary freight transport and logistics company.

The bank’s Board of Directors sanctioned the loan on July 12, 2024. This 25-year loan, guaranteed by the South African government, will support the first phase of Transnet’s ZAR 152.8 billion (USD 8.1 billion) five-year investment plan.

The funds aim to enhance existing infrastructure and expand priority segments in the transport chain.

Transnet has been grappling with numerous operational issues, particularly in its rail and port sectors. Challenges stem from underinvestment, theft, vandalism, and external factors like floods and the Covid-19 pandemic.

The company’s recovery plan, initiated in October 2023, focuses on rehabilitating infrastructure and ramping up operations within 18 months. This effort seeks to restore operational performance and freight volumes to meet customer demands.

Solomon Quaynor, Vice President of Private Sector, Infrastructure, and Industrialization at the African Development Bank emphasized Transnet’s vital role in South Africa’s economy.

“Transnet is the custodian of South Africa’s critical transport and logistics infrastructure. It ensures a competitive freight system and serves as a gateway to the Southern African Development Community (SADC) region,” he stated.

Quaynor noted that the partnership aims to address operational inefficiencies, especially in rail and port sectors, and aligns with South Africa’s strategic Roadmap for Freight Logistics System, overseen by the National Logistics Crisis Committee.

Michelle Phillips, Group Chief Executive of Transnet, expressed gratitude for the African Development Bank’s support. “The loan will significantly contribute to Transnet’s capital investment plan, stabilizing and improving the rail network, which is crucial for the broader South African economy,” she said.

Phillips added that grant funding accompanying the loan will aid Transnet’s energy efficiency efforts and infrastructure project preparation.

In addition to the corporate loan, the African Development Bank is considering two targeted grants. The first is USD 750,000 in technical support from the Sustainable Energy Fund for Africa (SEFA) to improve energy efficiency, aligning with Transnet’s net zero plan.

The second is a USD 1 million grant from the Infrastructure Project Preparation Facility of the New Partnership for Africa’s Development (IPPF-NEPAD) for technical assistance in accelerating railway reforms and addressing structural and regulatory issues.

Transnet employs over 50,000 people and is crucial for integrating South Africa with the global economy.

The company’s freight system is vital for South Africa’s economy and serves as key gateways for trade within South Africa and with landlocked countries in the region, including Botswana, Zambia, Zimbabwe, and the Democratic Republic of Congo through the Port of Durban.

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