Transnet secures R30bn loan for locomotives

Transnet yesterday concluded a R30-billion loan facility agreement with China Development Bank (CDB) for the funding of hundreds of locomotives the company is building with China South Rail and China North Rail as its build programme gathers momentum.

Transnet will be drawing the first tranche of R18 billion over four years. The loan between CDB and Transnet is part of a bilateral memorandum of understanding between South Africa’s President Jacob Zuma and his Chinese counterpart President Xi Jinping. The two heads of state signed a $5-billion MOU in December 2014, cementing bilateral relations between the two Brics partners. 

The proceeds of the loan will be used to fund the 232 diesel and 359 electric locomotives it is building with CNR and CSR respectively. These locomotives are part of Transnet’s 1064 locomotives acquisition programme.

Transnet will draw the second tranche of the loan subject to market conditions and funding requirements, based on the projects included in the company’s R337-billion investment programme.

Acting Group chief executive, Siyabonga Gama, and Li Gang, CDB’s vice president, signed the agreement on the sidelines of the World Economic Forum in Cape Town.

The repayment term of the loan is fifteen years with a grace period of four and a half years, while the locomotives are under construction. It is also a significant milestone in Transnet’s funding strategy as it represents 60% of the over R50 billion required for the 1064 programme, a spokesman said.

Including this agreement, Transnet has now secured 92% of the required funding for the 1064 programme.