AfDB makes US $250-million loan to state owned company Transnet in South Africa

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On December 18, 2014, the Board of Directors of the African Development Bank (AfDB) Group approved a US $250-million loan to South African state-owned logistics company Transnet. 

This loan, over 20 years, will enable Transnet to increase it goods capacity in order to meet the South African Government's strategy to transition goods transport from road to rail and ensure the viability of freight corridors. This assistance from the Bank will be particularly used to acquire locomotives in order to achieve a freight capacity of 176 million tonnes per year, against 80 million today.

Transnet has an ambitious seven-year investment plan (2013-2020) amounting to approximately ZAR 312.2 billion (US $27.5 billion) to repair, improve and develop its infrastructure, and to make South Africa efficient and competitive in its transport sector. Some 51% of the total investment will be used to repair or replace existing infrastructure and the rest will be used to acquire additional capacity.

The South African national transport policy advocates a modal shift from road to rail, in order to achieve a better balance between these two modes of transport in the freight sector and reduce logistics costs.

The 2014 declaration of medium-term fiscal policy also confirms the urgency to expedite the provision of essential services and infrastructure and, in particular, an increase in railway capacity.

Despite some economic uncertainties, the South African Government is determined to modernize the country's socio-economic infrastructure with the aim of promoting inclusive growth. Transnet fully adheres to the goals of the South African National Development Plan (NDP), namely, the promotion of more inclusive growth and improvement of working conditions in South Africa, in addition to the goal of a modal transfer towards a greater place for rail transport.

AfDB approved its first business loan, for US $400 million, to a South African state-owned company in 2010.

Although it is a state owned company, Transnet is legally and financially independent. It is responsible for ensuring that the South African bulk goods transport system meets international standards and the needs of the national economy. In addition to South Africa, Transnet is also the sole provider for southern Africa, including Swaziland, Mozambique, Namibia, Botswana, Lesotho, Zimbabwe, Zambia, DRC and Tanzania.