African Development Bank approves R18.5bn loan to Transnet

The African Development Bank (AfDB) has approved an R18.5bn loan to state-owned ports and rail operator Transnet to support its recovery plan. The 25-year loan approved on July 12 is guaranteed by the government.

“It will facilitate the first phase of the company’s R152.8bn ($8.1bn) five-year capital investment plan to improve its existing capacity ahead of expansion for the priority segments throughout the transport value chain,” the AfDB and Transnet said.

The AfDB said it was considering two additional grants to Transnet, including R13.6m from the bank’s technical support from the Sustainable Energy Fund for Africa and an R18m infrastructure project preparation facility of the New Partnership for Africa’s Development.

Should the bank approve these grants, they would be used to provide technical assistance to accelerate railway reforms and address structural and regulatory inefficiencies and to provide support for the rail operator’s net-zero plans.

Transnet, like other overly indebted state-owned entities (SOEs), was allocated no bailouts for 2024/25 as the Treasury maintains its “tough love” approach and moves to reduce government debt.

The Treasury, however, provided Transnet with a R47bn guarantee in December 2023 to support its recovery plan and to meet its debt obligations. The guarantee came with strict conditions to take specific actions to accelerate a turnaround, speed up reforms and encourage private sector participation.

Transnet’s recovery plan, which was released in October 2023, has clear targets for volume growth and the improvement of capacity over the next six, 12 and 18 months, “aimed at improving operational and financial performance and curbing expenses”.

One of the main highlights of Transnet’s turnaround plan outlined in 2023 was for its biggest division, Transnet Freight Rail, to ramp up volumes to 170-million tonnes in 2023/24 and to 193-million in 2024/25.

Transnet is fending off a potentially financially damaging civil claim by oil majors Sasol and TotalEnergies after the high court ordered the cash-strapped freight and rail group to pay R8.5bn to the companies in June, in long-running disputes about pipeline tariffs, a decision Transnet is appealing against.

Partnership

Transnet has initiated a process to open its rail network to private sector participants by publishing a draft network statement that details the rules, time limits, timelines, procedures, services, charging principles, and terms and conditions that would govern the agreement between Transnet Freight Rail and train operating companies.

“Our partnership will enable Transnet to execute a comprehensive recovery plan, addressing operational inefficiencies,” said AfDB vice-president for private sector Solomon Quaynor.

“It is aligned with SA’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,” Quaynor said.

Transnet CEO Michelle Phillips said: “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 SA economy.”

maekot@businesslive.co.za