Transnet granted R18.85 billion loan

The African Development Bank Group has approved a R18.85 billion ($1 billion) corporate loan to Transnet for its recovery and growth plans.

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-19 pandemic.

“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,” Group Chief Executive of Transnet Michelle Phillips said.

The 25-year loan, which was approved by the African Development Bank Group’s Board of Directors on 12 July 2024 is fully guaranteed by the government of South Africa.

It will facilitate the first phase of the company’s R152.8  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.

“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,” a joint statement by Transnet and the African Development Bank said.

Recovery Plan

In October 2023, Transnet launched its recovery plan, which seeks to rehabilitate infrastructure and accelerate the relaunch of operations over 18 months, focusing on restoring operational performance and freight volumes to meet customer demands.

“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 Southern African Development Community (SADC) region.

“Our partnership will enable Transnet to execute a comprehensive Recovery Plan (RP), addressing operational inefficiencies, particularly in rail and port sectors. It is aligned with South Africa’s strategic ‘Roadmap for Freight Logistics System,’ and overseen by the National Logistics Crisis Committee, chaired at the Presidency level.

“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 Quaynor said.

Transnet has been a client of the African Development Bank since 2010. The company employs more than 50 000 people and plays a critical role in integrating and connecting South Africa with the global economy.

The company’s freight system’s activities contribute significantly to South Africa’s economy.

Its operations serve as key gateways for trade within South Africa and with landlocked countries in the region, such as Botswana, Zambia, Zimbabwe, and the Democratic Republic of Congo through the Port of Durban.