The South African rail, port, and logistics company Transnet is taking out a US$1 billion (R18.26 billion) loan to help fund its business recovery plan.
The loan is being issued by the African Development Bank (ADB) and will be paid back over a period of 25 years.
Turning South Africa’s rail network around
South Africa’s rail network has been in dire straits for years owing to a lack of maintenance, vandalism, and theft, which has forced most of the country’s businesses, including carmakers, to shift to heavy trucks to transport their wares.
Transnet, which has been a client of the ADB since 2010, is responsible for South Africa’s freight network, including its railways and ports, and is estimated to employ more than 50,000 people.
The state-owned company attributed the rail division’s shortcomings to a lack of investment, as well as external shocks experienced during the Covid-19 pandemic lockdowns.
The new Minister of Transport, Barbara Creecy, recently spoke about the Department of Transport’s (DoT) agenda for the next five years, where one of the key goals mentioned was to bring Transnet back to its former glory to reduce the bottleneck on South Africa’s logistical corridors.
“Areas of focus include key logistics corridors handling commodities that are essential to the export market and economic growth (such as coal and iron ore), addressing backlogs and congestion at strategic border crossings such as Komatipoort and Beitbridge, combatting congestion in key national highway corridors such as the N1 and N3, as well as interventions to combat cable theft and maintenance backlogs at Transnet,” said Creecy.
The new Transnet loan, which was approved by the African Development Bank Group’s Board of Directors this July, will contribute towards a R152-billion capital investment plan to expand the rail network’s capacity over the next five years.
“We appreciate the support demonstrated by the African Development Bank,” said Group Chief Executive of Transnet Michelle Phillips.
“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 loan is guaranteed by the South African government, meaning that it will be on the line for the funds if Transnet defaults on its payments.
Transnet launched its recovery plan in October 2023, involving the DoT and the National Logistics Crisis Committee to rehabilitate its existing infrastructure to relaunch freight operations over the next 18 months.
Recovering South Africa’s railways
While Transnet is attempting to turn its freight prospects around, the Passenger Rail Agency of South Africa (Prasa) is already reporting an impressive recovery following operating challenges brought about by the pandemic.
Former Transport Minister Sindisiwe Chikunga previously reported that the theft and vandalism of Prasa’s assets had cost it approximately R7.64 billion over a period of five years.
Despite these setbacks, Prasa managed to transport a total of 40 million people for the financial year ended in March 2024, reflecting a 167% improvement compared to the year prior.
It also revived 31 out of its 40 passenger rail corridors and refurbished as many as 263 stations thanks to a R12-billion investment intended for infrastructure improvements.
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