The African Development Bank Group (AfDB) has approved an R18.85-billion, or $1-billion, corporate loan to South Africa's State-owned freight transport and logistics group Transnet for its recovery and growth plans.

The 25-year loan is fully guaranteed by the government of South Africa. It will facilitate the first phase of the group's R152-8-billion, or $8.1-billion, five-year capital investment plan to improve its existing capacity ahead of expansion for the priority segments throughout the transport value chain.

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.

The recovery plan, launched in October 2023, seeks to rehabilitate Transnet's infrastructure and accelerate the relaunch of operations over 18 months, focusing on restoring operational performance and freight volumes to meet customer demand.

“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 Southern African Development Community region,” says AfDB private sector, infrastructure and industrialisation VP Solomon Quaynor.

“Our partnership will enable Transnet to execute a comprehensive recovery plan, addressing operational inefficiencies, particularly in the 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,” he adds.

Transnet CEO Michelle Phillips says the group appreciates the support demonstrated by the AfDB.

"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,” she adds.

In addition to the corporate loan, the AfDB is contemplating two targeted grants, including $750 000 in technical support from the Sustainable Energy Fund for Africa – a multidonor fund administered by the bank – to improve energy efficiency and associated measures, in line with Transnet’s net-zero plan.

The second grant funding comprises $1-million 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.