S. Africa’s Transnet set to receive $1bn ADB loan

South Africa’s Transnet is set to receive a ZAR18.85bn ($1bn) corporate loan from the African Development Bank, providing much needed funding for the troubled state-run company to improve its rail operations.

The 25-year loan fully guaranteed by the government of South Africa was approved by the bank’s board of directors earlier this month.

“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, “said Transnet CEO Michelle Phillips.

Last year, Transnet sought more than ZAR100bn ($5.3bn) from the Treasury to settle its ZAR61bn ($3.2bn) debt and a ZAR41bn ($2.5bn) equity injection or a subordinated loan that can be converted to equity to deal with its dilapidating infrastructure, idle locomotives, theft and vandalism that hampered shipments of coal and other minerals.

South Africa’s Finance Minister Enoch Godongwana agreed to only inject funds into the SOE after it presented a roadmap for a recovery plan.

Transnet’s turnaround plan also includes increasing shipments on the main iron ore line to 66 mt from 61.5 mt last year.

“Our partnership will enable Transnet to execute a comprehensive Recovery Plan (RP), addressing operational inefficiencies, particularly in rail and port sectors,” said The African Development Bank’s Vice President for Private Sector, Infrastructure and Industrialisation Solomon Quaynor.

“It will facilitate the first phase of the company’s ZAR 152.8bn ($8.1 bn) five-year capital investment plan to improve its existing capacity ahead of expansion for the priority segments throughout the transport value chain,” said the African Development Bank Group.