Ports Shipping and Logistics (Commonwealth Union) – The African Development Bank Group has sanctioned a $1 billion corporate loan to Transnet, South Africa’s primary freight transport and logistics company, to support its recovery and growth initiatives.
The Banks corporate loan will help to fund these growth initiatives, positioning Transnet for long-term success and contributing to the broader development of Africa’s logistics and transport sectors. The loan for Transnet’s business recovery plans the company has the ability to overcome its current challenges and emerge as a stronger, more competitive player in the global logistics market but will have to focus on business growth with the loan repayment in mind. By providing financial backing and expertise, the African Development Bank Group is helping to ensure that Transnet can continue to play a vital role in driving economic growth and development in South Africa and across the African continent.
The Bank Group’s Board of Directors approved the 25-year loan on Friday, 12 July 2024. Fully backed by the South African government, this loan will fund the initial phase of Transnet’s ZAR 152.8 billion ($8.1 billion) five-year capital investment plan aimed at enhancing its current capacity ahead of expansion in key areas of the transport value chain.
Transnet has encountered operational difficulties, particularly in the rail and port sectors, due to inadequate infrastructure investment, equipment shortages, theft and vandalism, as well as external disruptions such as floods and the impact of the COVID-19 pandemic.
The company has indicated its dedication to overcoming past challenges, promoting integrity, and boosting efficiency within the organization. It has made strides in crucial areas including governance reforms, procurement, and financial management.
The recovery plan, initiated in October last year, aims to restore infrastructure and expedite the resumption of operations over an 18-month period, with the revival of operational performance being center stage and freight volumes to meet customer requirements.
As the approval was done, African Development Bank’s Vice President for Private Sector, Infrastructure and Industrialization Solomon Quaynor, stressed on the vital nature of this backing “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.”
He further said “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.”
The Transnet engagements with the African Development Bank go back to 2010. With over 50,000 employees, the company is vital for integrating and connecting South Africa to the global market. Its freight operations significantly boost South Africa’s economy, acting as crucial trade hubs both domestically and for neighboring landlocked nations, including Botswana, Zambia, Zimbabwe, and the Democratic Republic of Congo, via the Port of Durban. This further demonstrates the significance countries with ports play for the neighbouring landlocked countries. Similar examples have been seen in Central Asian nations that are heavily reliant on nations.
Responding to this development, Michelle Phillips, Group Chief Executive of Transnet, expressed her gratitude for the support provided by the African Development Bank. She indicated that the loan provided by the bank will greatly aid Transnet’s capital investment plan, aimed at stabilizing and enhancing the rail network, thereby contributing to the broader South African economy. Additionally, the grant funding associated with the loan will significantly assist Transnet in its energy efficiency initiatives and Infrastructure Project Preparation efforts.
Alongside the corporate loan, the African Development Bank is considering two specific grants. One of these includes $750,000 in technical assistance from the Sustainable Energy Fund for Africa (SEFA), a multi-donor fund managed by the Bank. This funding aims to enhance energy efficiency and related measures, aligning with Transnet’s net zero objectives.
