Cape Town — South Africa’s state-owned transport and freight company, Transnet, received an R18 billion loan from the African Development Bank Group, in a bid to boost recovery and growth plans.
Transnet and the African Development Bank released a joint statement that revealed the loan is fully guaranteed by the South African government and will facilitate the first phase of Transnet’s five-year, R152 billion capital investment plan. This plan will improve existing capacity ahead of the expansion of key segments.
“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,” it said.
Transnet is committed to addressing challenges of the past and enhancing efficiency in the organisation, with reforms in key areas such as operational performance and financial management.
Solly Quaynor, African Development Bank’s vice president for the private sector, infrastructure, and industrialisation, emphasised the significance of the support.
“Our partnership will enable Transnet to execute a comprehensive Recovery Plan (RP), addressing operational inefficiencies, particularly in rail and port sectors,” Quaynor said.
“This initiative signifies our commitment to enhancing national logistics capabilities and driving sustainable economic growth,” he added.
[Media Statement] The African Development Bank Group has approved a R18.85 billion ($1 billion) corporate loan to Transnet, South Africa’s major freight transport and logistics company, for its recovery and growth plans.
The 25-year loan approved by the Bank Group’s Board of… pic.twitter.com/mRiHJJyJ4s
— Transnet SOC Ltd (@follow_transnet) July 18, 2024
Transnet CEO, Michelle Phillips, emphasised the importance of the support from 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,” Phillips said.
The 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 the progress made in rolling out its compliance and governance improvement programme as well as its decarbonization and energy efficiency plans in line with its Net Zero Emission Strategy and Green Freight Strategy.
According to The Citizen, Jan Havenga, professor of logistics at Stellenbosch University, said it would cost up to R80 billion and 10 years
reckons it will cost R80 billion and take 10 years to fix Transnet’s core rail network of 5 000km.
“I applaud what the new management at Transnet is doing but the problem is much bigger than them. This R18.5 billion load is a drop in the ocean. I think it is a R200 billion problem that we have to confront if we are going to fix the ports and rail systems and get the economy moving in the way it should.”
Fixing the rail network will add 0.5-1% a year to GDP, says Havenga. This does not count the economic benefits of a properly functioning port system.
“Transnet’s new management has done a great deal to fix the more obvious short-term problems that previous management neglected to do, such as prioritising investments and essential maintenance. Now we get to medium and long-term, and that’s where it gets more tricky.
Follow African Insider on Facebook, Twitter and Instagram
Picture: X/@tyson_929
For more African news, visit Africaninsider.com
Compiled by Matthew Petersen
