Development finance institution (DFI) the African Development Bank (AfDB) has released the first tranche of four of its $1-billion loan to State-owned Transnet as part of a financing arrangement to support Transnet’s business recovery plan.

The funding will allow Transnet to start the first phase of its ambitious R152.8-billion, five-year investment plan to upgrade existing infrastructure while enhancing key logistic chain segments.

This funding underpins a recovery plan to address pressing operational challenges of the company, while bolstering South Africa’s critical infrastructure, the AfDB says.

The efficiency of the disbursement reflects Transnet’s fulfilment of the bank’s rigorous requirements for governance, environmental stewardship and social responsibility, it notes.

“Following the September 2023 signing of the loan agreement between Transnet and the AfDB in Johannesburg, the bank committed to supporting Transnet’s recovery plan with targeted financing,” the organisation says.

Transnet has faced significant operational hurdles for several years, including under-investment, equipment theft, vandalism, flooding and the long-lasting impacts of the Covid-19 pandemic.

In response, the company has restructured and embarked on internal reforms to improve efficiency and management, while committing to decarbonisation and carbon footprint reduction initiatives, AfDB says.

“This swift disbursement shows the bank’s commitment to the private sector in Africa, which is essential for supporting sustainable economic growth,” says AfDB private sector, infrastructure and industrialisation VP Solomon Quaynor.

The AfDB commends the South African government’s dedication to restructuring Transnet and enhancing governance in the transport sector.

Transnet has notably improved governance practices, particularly in tendering procedures and financial management, as part of its broader reform efforts, it says.

Transnet has more than 30 000 km of railway infrastructure, which is the largest in any emerging economy, and plays a vital role in the region. Its railway network links South Africa’s ports with key regional partners, including Botswana, Zambia, Zimbabwe and the Democratic Republic of Congo, and supports operations at Durban, which is the fourth-largest container terminal in the southern hemisphere.

The AfDB’s support for Transnet is, therefore, crucial for improving South Africa’s competitiveness and strengthening the continent’s economic integration, while responding to the challenges of the logistics sector, which is vital for Africa’s development, the DFI says.

With this disbursement, the AfDB has once again demonstrated its agility in the financial support it provides to the African private sector, it adds.