New Development Bank approves two multibillion-rand loans for SA’s freight rail and water sectors

The New Development Bank (NDB) this week announced two multibillion-rand loans that will benefit South Africa’s logistics and water sectors.

The first loan, of R5-billion, will go to Transnet to improve and modernise the freight rail sector. This means that over the last five years, the NDB will have approved loans of R9.5-billion to the state-owned enterprise (R3.5-billion in 2021, R1-billion in January and R5-billion at the weekend).

Unlike the R3.5-billion Transnet loan that the NDB approved in 2018 and only signed off on in 2021, the R5-billion loan was signed off this week by  Transnet CEO Michelle Phillips and NDB President Dilma Rousseff. The NDB also granted Transnet a R1-billion loan in January to facilitate a “rail sector improvement programme”.

The latest loan will go towards renewing the rail network infrastructure and wagon fleet and overhauling locomotives. The programme is expected to restore freight rail volumes in South Africa.

Transnet posted a loss of R5.7-billion last year. The dismal state of the logistics sector (largely Transnet failings) over the last few years has been cited as one of the headwinds holding back SA’s economic growth.

Read more: Transnet’s critical operation and financial situation extends from bad to worse

This year, Daily Maverick journalist Ray Mahlaka pointed out that Transnet had debt of more than R20-billion to settle between calendar years 2024 and 2025, with even bigger debt to settle after that.

In response to Mahlaka’s query about how Transnet planned to deal with upcoming debt redemptions, Andre Pillay, the group treasurer, said Transnet would tap into “its normal funding programme”.

In July, the African Development Bank (ADB) announced an R18.85-billion corporate loan to Transnet. That loan — structured over 25 years — has been fully guaranteed by the government. The ADB loan will facilitate the first phase of Transnet’s R152.8-billion five-year capital investment plan to improve its existing capacity.

At the time, the ADB’s vice-president for private sector, infrastructure and industrialisation, Solomon Quaynor, noted that 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 SADC region”.

In addition to the R18.85-billion corporate loan, the ADB was in July “contemplating” two targeted grants:

• $750,000 in technical support from the Sustainable Energy Fund for Africa — a multi-donor fund administered by the bank — to improve energy efficiency and associated measures, in line with Transnet’s net zero plan.


• A second grant of $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.

Read more: Transnet could stage one of the greatest turnarounds in business history

Commenting on the R5-billion NDB loan, Phillips said it was an important development, coming as Transnet accelerated its recovery plan and economic reforms.

“The modernisation programme will enhance our operational capabilities and contribution to the growth and competitiveness of the economy,” she said.

Rousseff said the loan underscored the NDB’s commitment to supporting sustainable development and economic growth in South Africa.

“By modernising the freight rail sector, we aim to facilitate more efficient logistics operations that will benefit the entire region and align with our goal of investing in a sustainable future,” she said.

Loan to finance water infrastructure

A loan of “up to $1-billion” will be used to finance water and sanitation infrastructure development under the Municipal Infrastructure Grant (MIG). MIG is a conditional grant allocated to municipalities to reduce infrastructure backlogs and ensure the provision of basic services to poor households.

Finance Minister Enoch Godongwana welcomed the funding commitments.

“They will go a long way in assisting us with the funding challenges faced by some of our programmes and parastatals. Every cent is welcome. Of course, many of our broader plans for infrastructure pipeline development and funding will be unpacked during the Medium-Term Budget Policy Statement in October,” he said. DM