AfDB Approves $1 Billion Loan for Transnet's Ambitious Recovery Plan

The African Development Bank has approved a $1 billion loan to aid South Africa's Transnet in its recovery plan. The state-owned logistics firm has faced significant challenges due to equipment shortages and maintenance backlogs, impacting the economy. The loan aims to support Transnet's five-year capital investment plan.

The African Development Bank (AfDB) has sanctioned a substantial $1 billion loan to aid South Africa's state-owned logistics firm, Transnet, in its comprehensive recovery plan, the bank and company announced on Thursday.

For years, Transnet has grappled with chronic equipment shortages and maintenance backlogs, significantly affecting the efficiency of freight rail and port services, thereby hampering commodity exports and other critical sectors like manufacturing and retail. This downturn has further weakened Africa's most advanced economy.

In a joint statement, Transnet and the AfDB revealed that the 25-year loan, fully guaranteed by the South African government, would fuel the initial phase of Transnet's extensive ZAR 152.8 billion ($8.1 billion) five-year capital investment strategy aimed at enhancing current infrastructure ahead of anticipatory expansions within the transport sector.

Facing debts of 130 billion rand, Transnet has reported a loss of 1.6 billion rand for the six months ending September 30, attributed to declining volumes across its rail, port, and pipeline operations coupled with rising costs. Freight volumes plummeted to 150 million metric tons in the 2022/23 fiscal year from a high of 226 million tons in 2017/18.

In response, Transnet's recently announced 18-month recovery strategy, unveiled in October 2023, aims to revert the firm's freight volumes and restore profitability. Key elements of the plan include restructuring the freight rail division into two separate entities—an infrastructure management company and an operating unit, addressing port backlogs, and reinitiating efforts to open sections of its rail network to private operators after a previous attempt two years ago.

(With inputs from agencies.)