African Development Bank Grants $1 Billion Loan to South Africa's Transnet

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African Development Bank has approved a $1 billion (ZAR 18.85 billion) loan to Transnet, South Africa’s major freight and logistics company, for its recovery and growth plans.

The 25-year loan, fully guaranteed by the government of South Africa, will facilitate the first phase of the company’s $8.1 billion (ZAR 152.8) five-year capital investment plan to improve its existing capacity ahead of expansion for the priority segments throughout 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.” African Development Bank’s Vice President for Private Sector, Infrastructure and Industrialisation Solomon Adegbie-Quaynor, commented.

“This initiative signifies our commitment to enhancing national logistics capabilities and driving sustainable economic growth.” he added.

In addition to the corporate loan, the African Development Bank is contemplating two targeted grants, including $750,000 in technical support from the Sustainable Energy Fund for Africa to improve energy efficiency and associated measures.

The second one is a $1 million grant from the Infrastructure Project Preparation Facility of the New Partnership for Africa’s Development for technical assistance to help accelerate 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 had debts of 130 billion rand, and recorded a loss of 1.6 billion rand in the six months to September 30, following a decline in rail, port and pipeline volumes as well as high costs. It has further witnessed a decline in freight volumes to 150 million metric tons in financial year 2022/23 from 226 million tons in 2017/18.

Transnet’s seeks to restore freight volumes and return the company to profitability over a period of 18 months, as announced in their recovery plan in October 2023.

The plan includes splitting the freight rail subsidiary into two subsidiary into two, an infrastructure management company and an operating unit. It further aims at reducing port backlogs and plans another attempt to open up parts of its rail network to private operators after false start two years ago.