Transnet in R2.8bn loan deal with KfW

Transport and freight logistics giant Transnet has signed a R2.8 billion loan deal with Germany’s KfW Development Bank to fund part of its locomotives acquisition programme. Transnet said it would use the loan to fund the acquisition of 240 electric locomotives. The locomotives would be built by Bombardier, one of the world’s largest manufacturers of planes and trains, at Transnet’s manufacturing facilities in Durban as part of the state-owned company’s 1 064 locomotives acquisition programme. Transnet acting chief executive Siyabonga Gama described the deal with KfW Development Bank as a confirmation of its solid financial position and the attractiveness of its projects to international investors.

“The agreement is evidence of Transnet’s focus on agility and innovation in raising the required funding to execute its seven-year rolling R336bn infrastructure investment programme – the Market Demand Strategy,” Gama said. “The loan will mature in 15 years, with a five-year grace period in which Transnet will only be paying interest.” Transnet’s latest transaction comes in the wake of a R30bn loan agreement it signed with the China Development Bank almost three weeks ago to fund its long-term programme aimed at renewing its ageing locomotives. The company said at the time that the loan would be used to fund the 232 diesel and 359 electric locomotives it was building with China North Rail and China South Rail respectively.

It would draw the first tranche of R18bn through a grace period that would be perched on the US dollar with a protection programme over the next four years should the rand lose its ground. Transnet awarded CSR Zhuzhou Electric Locomotive and Bombardier Transportation contracts to build 599 electric locomotives, while General Electric Technologies and CNR Rolling Stock would build 465 diesel locomotives. The latest deal with KfW Development Bank was signed at Transnet’s Carlton Centre headquarters yesterday in a ceremony that was also attended by the German ambassador to South Africa, Horst Freitag. Freitag said the deal emphasised the solid trade relations between South Africa and Germany. “South Africa is Germany’s largest trading partner in Africa,” he said.

Transnet chief financial officer Anoj Singh signed the deal with KfW head of infrastructural division Southern Africa Dr Jan Martin Witte at the ceremony. Gama said: “Agreements like this are an affirmation of Transnet’s successful efforts in strengthening its financial position and confirm that the company is on the right track. They are an attestation of the attractiveness, commercial viability and bankability of Transnet and its projects from reputable international investors.” Gama told Business Report that the deals were part of Transnet’s ambitious programme to expand its railway infrastructure to create capacity and to increase cargo volumes. He said the company wanted to be able to optimise its capital portfolio to build a world-class capital execution function and leverage capital procurement and localisation.

Gama said all but 70 of the locomotives would be built at Transnet Engineering’s plants in Koedoespoort, Pretoria and Durban. “The locomotive build programme is critical for the implementation of the Market Demand Strategy and is intended to modernise our fleet,” Gama said.