The African Development Bank (AfDB) Group has approved a R18.85 billion 25-year long corporate loan to Transnet for its recovery and growth plans, which was fully guaranteed by the South African government.
The AfDB today said the corporate loan will facilitate the first phase of the state-owned freight and logistics firm’s R152.8bn 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-19 pandemic.
The company is committed to addressing past challenges, fostering integrity, and enhancing efficiency within the organisation. It has made progress in some key areas including reforms in governance procurement and financial management.
The recovery plan, 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.
Solomon Quaynor, the AfDB’s vice-president for private sector, infrastructure and industrialisation, emphasised the significance of this support.
“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,” Quaynor said.
“Our partnership will enable Transnet to execute a comprehensive Recovery Plan, addressing operational inefficiencies, particularly in the rail and port sectors. It is aligned with South Africa’s strategic ”Roadmap for the 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,” he said.
Transnet has been a client of the AfDB since 2010. The company employs more than 50 000 people and plays a critical role in integrating and connecting SA with the global economy.
Transnet’s freight system’s activities contribute significantly to SA’s economy. Its operations serve as key gateways for trade within SA and with landlocked countries in the region, such as Botswana, Zambia, Zimbabwe, and the Democratic Republic of Congo through the Port of Durban.
Michelle Phillips, group CEO of Transnet, expressed appreciation for the support the AfDB had shown to the group over the years.
“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,” Phillips said.
“The accompanying grant funding to the loan will also greatly assist Transnet with its energy efficiency efforts and with infrastructure project preparation initiatives,” she added.
The AfDB board commended the government of South Africa for its vision and commitment to reforms in Transnet as well as the country’s entire transport and logistics sectors.
It also applauded Transnet for progress made in rolling out its compliance and governance improvement programme as well as its decarbonisation and energy efficiency plans, in line with its Net Zero Emission Strategy and Green Freight Strategy.
In addition to the corporate loan, the AfDB said it was contemplating two targeted grants, including $750 000 (R13.6 million) 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 $1 million from the infrastructure project preparation facility of the New Partnership for Africa’s Development (Nepad), for technical assistance to help accelerate railway reforms and address structural and regulatory inefficiencies.
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