The African Development Bank (AfDB) has just released the first tranche of the $1 billion (R18.85bn) loan granted to Transnet nearly five months after the loan was approved by the bank’s board of directors.
This disbursement is the first in a series of four tranches planned as part of this unprecedented financing designed to support the company’s turnaround plan.
“This Friday, the bank will disburse the first tranche of a series of four loans to Transnet,” the AfDB said today during their Market Days meetings in Rabat, Morocco.
“This is one of the few loans of this size granted by the bank to the private sector.”
The 25-year long corporate loan to Transnet for its recovery and growth plan is fully guaranteed by the South African government.|
The aid is aimed at turning around the operations of the South African conglomerate, which manages the country's ports, railways and pipelines, and improving the country's infrastructure.
The funding will enable Transnet to begin the first phase of its five-year, R152.8bn ($8.1bn) investment plan.
In July, the AfDB approved a non-sovereign loan of R18.85bn to Transnet and signed the loan agreement in September in Johannesburg.
Solomon Quaynor, vice president for private sector, infrastructure and industrialization at AfDB, said Transnet has been a client of the AfDB since the early 2000s.
Quaynor said it was vital that the bank supports Transet’s recovery because they are so important to the transport and logistics network that supports the private sector not only in South Africa but also in Southern Africa.
“And so the fact that they weren’t really performing to their best was really impacting the private sector in the SADC region. So that for us was the impetus to really support them in transforming and rejuvenating the railway network in particular, to really support the movement of freight and hence support the economy of Southern Africa,” Quaynor said.
“I’m not sure really what is the amount that’s going to be released tomorrow, but the overall capex program, which includes expansion, is going to be about $8bn equivalent. Ourselves and the New Development Bank are just supporting the immediate recovery, which is what would indicate whether the big recovery would be successful.
“So essentially we’re taking higher risk than those who are coming to fund the rest of the capex. And yes, we're going to disperse based really on agreed tranches and needs relative to the recovery program.”
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