Transnet secures R5.86bn French loan in decarbonisation drive

Transnet and France, through Agence française de développement (AFD), have signed a €300 million loan agreement (valued at around R5.86 billion at the current exchange rate) in a bid to ramp up the state-owned ports and freight company’s decarbonisation drive.

The French development financier and Transnet announced the deal on Tuesday, saying in a joint statement that it is part of contributing to “a more resilient and efficient South African economy in the face of climate change”.

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With Transnet a key player in SA’s logistics network, AFD sees the group as an enabler in SA’s much-vaunted Just Energy Transition Investment Plan (JET‑IP).

The loan is aimed at improving Transnet’s operational efficiency, enabling a transition to a low-carbon operating model aligned with the JET-IP, and enhancing the company’s long-term financial sustainability.

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“The investments in freight rail recovery, port modernisation and transition minerals export corridors are a demonstration that South Africa’s economic competitiveness and decarbonisation goals are inseparable,” says Marie-hélène Loison, AFD’s regional director for Southern Africa.

Transnet, which operates the country’s main ports and rail freight lines, has been a major constraint to SA’s economic growth over the past decade.

While the company still has many challenges, its management is upbeat that the implementation of much-needed reforms will turn things around.

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Unlike traditional project finance, where loan proceeds are allocated to specific investments, this loan is said to give Transnet the flexibility to deploy funds across a widely defined programme, that will allow it “to respond dynamically to its evolving business needs”.

The loan conditions are dependent on what’s been termed as mutually-agreed milestones, including:

Modernisation of core transport operations to improve service quality and reliability. This will be achieved through the rehabilitation of 550 km of rail along the Cape and container corridors, improving reliability and enabling a shift of freight from road to lower‑carbon rail transport;
Enhancement of Transnet’s strategic business diversification (explore green hydrogen and transition minerals logistics to replace anticipated decline in coal volumes);
Preparation for procurement of 30 MW of renewable energy, to support the pathway to net-zero emissions; and,
Strengthening of Transnet’s ESG capacities.

“This funding will assist in achieving these objectives by enhancing energy efficiency and accelerate reforms,” says Transnet Group CEO, Michelle Phillips.

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